Deeptech/Analysis/

Acquisitions are at an all-time high in European industrial tech startups

The economic downturn is not stopping investment growth in the industrial tech sector

By Clara Rodríguez Fernández

Marie-Helene Ametsreiter, General Partner at Speedinvest

VC investment globally is down 53% this year — but funding for European industrial tech is on the up.

So far in 2022, industrial tech startups have raised $4.8bn — already almost as much as was raised in the whole of 2021 ($4.9bn), a boom year for investment generally. By the end of the year, investment is predicted to rise 28% on last year, according to a report published today by early-stage European VC Speedinvest and intelligence platform Dealroom. 

Investment in businesses that sit at the intersection of industry and climate tech is also on the up, as are acquisitions of industrial tech startups. 

“Industrial tech and climate tech are ‘painkillers’ not ‘vitamins’ — they are fundamental and a prerequisite for Europe’s long-term economic prosperity,” says Marie-Helene Ametsreiter, general partner at Speedinvest. 

The industrial sector is facing some big headwinds — disruptions to the global supply chain, talent shortage, unstable international prices and the energy crisis — and an increase in environmental, social and governance (ESG) regulations.

This, combined with the digitisation boost provided by the Covid pandemic, is driving the uptick in investment, says Ametsreiter.

Investment in European industrial tech is up

VC investment in the European industrial tech sector is expected to hit $6.1bn by the end of 2022 — an increase of 28% compared to 2021. Corporate investment into the sector (coming mostly from bigger industry players) is also expected to grow by 23%, up to a total of $1bn. 

So far this year, the areas that have received most investment are logistics, robotics and energy.

The country that has attracted most funding this year, by far, is Germany. That’s not such a surprise: 26% of Germany’s GDP comes from the industrial sector. 

“There is a direct correlation between the number of established industrial players and the number of industrial tech startups,” Ametsreiter tells Sifted.

Megarounds beat a record

The European industrial tech sector has seen 10 megarounds (over $100m) in 2022 so far. These rounds account for 53% of the total funding in the sector — a record amount. 

In comparison, there were 10 megarounds in the whole of 2021, and only one of them was more than $250m. In 2022, there have been four rounds of more than $250m so far. 

The biggest round  (€500m) went to Relex Solutions, a Finnish company providing retail and supply chain planning solutions. The round made Finland leapt into third place for total funding so far this year. 

Celonis, a German process mining company, and Exotec, a French warehouse robotics startup, also raised rounds of more than $300m.

Massive drop on public market valuations

Meanwhile, the public market valuations of industrial tech businesses are down by 50%, compared to 2021. 

This drop is one of the highest seen this year across the public market, second only to a huge 66% drop seen in the education sector. 

The good news? The total market value of the sector in 2022 is still more than double its 2020 levels. 

London-based blockchain startup Arqit has been hit the hardest, with shares down by 75%. Finland’s Spinnova and Sweden’s Renewcell, which both make renewable clothing materials, have seen shares drop 67% each.

More exits, but no IPOs

The European industrial tech sector has already seen a record number of exits this year — 34 in 2022 to date versus 32 in 2021. 

However, the exits are smaller this year. Only two exits in 2022 were worth more than $100m — London-based software provider Forterro and German 3D printing company SLM Solutions. In comparison, there were seven exits worth more than $100m in 2021.

What’s more, none of the exits this year have been IPOs — hardly a surprise, given the global IPO market has come to a halt in 2022 after a record year in 2021. 

In 2022 to date, four companies in the European industrial tech sector have become unicorns: Exotec, a French robotics startup; Einride, a Swedish company that makes electric and self-driving freight trucks; Finland’s Relex Solutions; and Scandit, a Swiss startup providing businesses with smart data capture.

Climate startups take over the industrial tech sector

Climate tech is increasingly a focus for industries across all sectors. VC investment at the intersection of industrial and climate tech is expected to grow by 25% in 2022, according to the report. 

The total raised by climate-focused startups in 2022 makes up 23% of the funds raised in the industrial tech sector. Most of these funds go to companies in the logistics, energy and advanced materials sectors, but climate-focused startups can be found in virtually all industrial tech sub sectors. 

The majority of the funds raised in 2022 so far went to megarounds. Some notable examples are Forto, a German company providing digital logistics services; H2 Green Steel, a Swedish startup that has developed a fossil-free steel manufacturing process; and Green Yellow, a French company that supports businesses through the transition to solar power.  

When looking at the future of the sector, Ametsreiter says “machine learning and artificial intelligence entering the shop floor, logistics and supply chain transparency and prediction, recycling tech and dynamic pricing tools are just some examples. We will also see more hardware-enabled products, especially in the climate and energy tech sectors, in response to the need for infrastructure changes.”

Clara Rodríguez Fernández is Sifted’s deeptech correspondent, based in Berlin.

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