The Positive Impact of Industrial Design on Our Planet
Start-ups disrupting the industrial value chain is a win-win-win — for engineers making cool “stuff”, for customers with access to that stuff, and for the planet
Have you ever wondered why objects look the way they do? Why is the building outside your window shaped the way it is? Or why Deutsche Bahn trains are designed the way they are? (so that they are always on time, of course…)
The answer is as simple as it is complex. Industrial objects look the way they do, and are the way they are, because engineers have designed, optimized and constructed them accordingly. The conceptualisation, design and optimization process of objects is at the core of every manufacturing process. Improving these processes is thus one of the greatest levers when it comes to improving effectiveness and efficiency of the industrial value chain.
Based on this underlying thought, we wanted to showcase how we see the industrial design space, our investment hypothesis driving our interest in this sector, and why we believe that the democratising access to quality industrial design tools can play a part in reducing emissions and climate impact.
Earlybird has been passionate about IndustrialTech since our founding:
- Firstly, many of our investment team’s background lies in industrial engineering
- Secondly, we have been fortunate ourselves to be backed by leading OEMs and manufacturers
- Last but not least (and this is the focus of this blog post), we consider the industrial design process an attractive opportunity, both in expected return cases for our funds as well as the opportunity the tech stack presents to positively impact climate crisis
A non-connected tool stack being reshaped by emerging technologies
The industrial value chain is shaped by five key steps. As all great things do, industrial objects begin with an idea and are currently initially conceptualized and designed by industrial designers. Before they are ready to enter production, they go through relentless iterative cycles. Once they are deployed, there is also the need for continuous operation and monitoring.
Across the entire process, various tools, softwares and programmes are used to bring an industrial object, a building, a small component, or a computer chip (let’s call it “stuff”) in one way or another. This happens with every imaginable product. Behind every great hardware “stuff” and its market, lies the opportunity of actually making that “stuff”. Resultantly, there is a huge market opportunity when looking at the industrial design space — especially when considering the underlying technology stack.
In the conceptualisation and design steps alone, this software market size is estimated to be over $10bn globally. However, this market can be structured into silos, with specialised software tools each focusing on special parts of the industrial value chain. You probably have heard about the traditional engineering software stack, which is dominated by players such as Ansys, Altair or Dassault Systems. They offer traditional, on-premise Computer Aided Design (CAD) and Computer Aided Engineering software (CAE). Both CAD and CAE are being used in the first two value steps (namely conceptualisation and design) and the engineering profession would be fundamentally different without them (back to pen and paper, anyone?).
The challenge behind the traditional software stack is mainly fourfold. Since most of the stack is run on-premise, it requires a high-performance computing stack, has high fixed costs (>$50k per seat per software alone), requires special education due to the technical complexity of the specialised software and does not offer connected workflows, especially integrations to the other value chain steps.
Luckily, start-ups are addressing these problems by enabling more flexible software solutions. One particular approach of flexibilization is offered through cloud computing and has seen a growing adoption within the industry. Although it feels strange to say, cloud computing is just at its inflection point within the industrial and manufacturing industries. SMEs and big corporations alike have just begun to see the value of computing infrastructure flexibility. Earlybird has always shared the opinion that the cloud will disrupt traditional software stacks. Especially in industrial design, we think the opportunity for start-ups is attractive, since aforementioned market adoption rates are high. Moving the industrial design stack to, amongst others, the cloud enables many more use cases beyond design.
The use cases underpinning the varying steps of the value chain are depicted in the graphic above. As you can see, the use cases are becoming increasingly interdependent, which however is hindered by the cumbersome software tools used along the value chain.
Without going into detailed explanation of each use case, the message is that we’ll finally see and need integrated, end-to-end collaboration workflows in the industrial value chain to unlock the full potential of new ways of manufacturing. However, this be all end all solution is currently still missing.
Building an integrated industrial software workbench of the future
Given Earlybird’s background and experience in the industrial space, we have been looking at this problem for quite some time. In 2014, we led the Seed round in the Munich-based engineering simulation start-up SimScale. Ever since, we have been sure that Simscale will not only disrupt the traditional design engineering space through bringing CAE to the cloud, we are convinced that there is an opportunity to offer a full-stack workbench for each use case of the industrial value chain. To read more about our journey with Simscale and their recent €28m Series C in which we co-invested with Insight Partners, Union Square Ventures, and industry experts (Axel and John), check out our blog post here.
Based on this great vision, we sat down with David Heiny and Jon Wilde from Simscale to talk about the company’s role in addressing the climate crisis. Given our focus on climate and sustainability, if Simscale will be the workbench for the industrial value chain, how can we exploit this technology to address our climate crisis in the industrial and manufacturing industries that play such a crucial role in this?
The climate impact of democratised access to better engineering simulations
With the EPA saying that 22% of US CO2 emissions are industrial, while 12% arise from residential and commercial properties, there is a large share of the pie that even the slightest fraction of a percent in efficiency in the industrial space could have on our global GHG emissions.
Simscale has two fundamental aspects that enable an improved impact of the industrial value chain on the climate: democratised access to simulations and better quality simulations:
- Simscale democratises the access to high-quality simulations. Requiring no hardware and costing only $5,000 per license (as opposed to $50,000 typical amongst competitors), industrial SMEs and engineers of any kind will be able to run thermal simulations, aerodynamic simulations, simulations of energy efficiency, and much more in the cloud
- Secondly, they are able to simulate better and more than various on-premise solutions. This means more companies producing better, more environmentally friendly products
Particular areas of impact here include lightweight manufacturing, in the construction sector and in energy generation. For instance, better simulations allow products to be made lighter by removing substance where it is unnecessary. Research has shown that lightweight product design could offer mass savings of up to 30% in some products — be it food cans or steal beams in construction. This combined with other process efficiency improvements could lead to global demand for steel and aluminium to be reduced by up to 50%, which is a significant impact, given that up to 9% of industry CO2 emissions come from steel alone. Similar effects can be expected across other manufacturing components and materials. Furthermore, with over 50% of building energy being consumed by cooling and heating systems (read a great article by the Economist on ACs here), there is great potential in saving in this regard too, by Simscale allowing more engineers and architects to simulate the thermal distribution within buildings. There is a lot of opportunity to tap into the potential savings of 4.9 gigatonnes of CO2 that could be achieved by pursuing low-carbon and energy-efficient buildings strategically (see the UN’s report on the topic here). Beyond that, Simscale achieves 20–30% efficiency gains when designing and simulating energy generating assets (be it water or wind turbines, etc.).
We’re in luck…
… because Simscale is not alone. A whole range of entrepreneurs, start-ups and corporations are innovating in the industrial software technology space to create value for both businesses and consumers. With automatically generated designs, collaborative simulations and additive manufacturing enablers, the space promises to offer great investment opportunities driven by fundamental value propositions. That’s not only great news for VCs, industrial players and strategic partners, but also for the planet, our climate, and the customers who will have access to more, better, cooler “stuff”.
At this point we want to thank David and Jon from Simscale again — not only for the great product with great climate impact they are building, but also for taking the time to sit down with us for this blog post.
If you are an entrepreneur, start-up, or corporate looking to disrupt the industrial space, get in touch at paul@earlybird.com.
