Venture investors are pumping capital into 3-D printing startups. Here’s why

Investors are drawn to these companies because they are on the verge of being able to use their technology to manufacture components at scale for critical sectors such as semiconductors and aerospace. For many, that would mean transforming from being a niche product manufacturer to being a mass producer, investors say.

Some of these startups say that a White House initiative launched in May that encourages legacy industrial companies to use 3-D printing startups as suppliers is providing a boost.

And some investors are drawn to startups that are applying the technology to innovative uses, such as engineering food.

Known as additive manufacturing in the industry, 3-D printing is the process of creating things by building them up from scratch in layers. It differs from traditional manufacturing, or subtractive manufacturing, which takes a piece of metal, for instance, and reduces it and shaves off layers to reach the final product.

Last year, venture investors pumped $2.84 billion into additive manufacturing startups globally, a 14% increase from 2021, according to analytics provider PitchBook Data Inc. So far this year, not including a recent $50 million deal for the 3-D printing startup Fabric8Labs Inc., these startups have raised $65 million.

Venture firms are dedicating more resources to the sector. For instance, AM Ventures, a Starnberg, Germany-based investment firm, raised a $100 million fund last summer to target industrial and commercial 3-D printing technology.

“There are major dollars in the market for these startups," said Ehsan Toyserkani, a professor and Canada research chair in additive manufacturing at the University of Waterloo.

Investors are also attracted to these startups’ ability to provide industrial companies with a simpler supply chain, which could help them address parts shortages amid geopolitical challenges and reduce dependency on foreign suppliers, Prof. Toyserkani said.

Additive manufacturing startups also say their methods can help companies cut costs and have lower environmental impacts because less waste goes into producing things, he added.

San Diego-based Fabric8Labs uses its additive manufacturing technology to build components for a variety of sectors including aerospace and for data centers. For instance, the company can make products used in the cooling of equipment in data centers.

Fabric8Labs uses what it calls an electrochemical process, which differs from traditional additive manufacturing in that it uses a chemical reaction-based process to create components as opposed to using inputs like lasers and electron beams, Fabric8Labs chief executive and co-founder Jeff Herman said.

The company’s recent $50 million Series B round was led by venture-capital firm New Enterprise Associates, with participation from investors including Intel Corp.’s venture division Intel Capital, Belgium-based venture fund Imec.xpand, SE Ventures, TDK Ventures and Lam Capital.

“Our investment in Fabric8Labs is a part of a longstanding conviction behind additive manufacturing as a disruptive category," said NEA venture partner Greg Papadopoulos.

Mr. Herman said Fabric8Labs, which was founded in 2015, had a relatively smooth fundraising process that began in June and finished in September. That stands in contrast to many startups that struggled to raise capital last year as investors broadly reduced deal making in response to the macroeconomic environment.

Investor interest in the funding round was in part due to the Biden administration initiative, Mr. Herman said.

Last May, the White House said its Additive Manufacturing Forward initiative would aim to spur growth of additive manufacturing companies and said these companies could reduce U.S. reliance on foreign supply chains for parts and help to bring manufacturing back to the country.

The program relies on voluntary commitments among a handful of large manufacturers and their smaller U.S.-based suppliers to support their adoption of new 3-D printing technology.

The commitments include agreements to purchase additively-produced parts from smaller U.S.-based suppliers, train the workers of their suppliers on new additive technologies and provide technical assistance to support their suppliers’ adoption of 3-D printing tech.

For VulcanForms Inc., a Burlington, Mass.-based additive manufacturing startup, the company’s growth is due to its growing ability to mass produce, said Martin Feldmann, co-founder, president and CEO of VulcanForms. He says its technological advancements, such as the use of more powerful lasers, have helped it grow. He also says the startup has hired people who helped mass produce products at other companies outside the 3-D printing sector.

“Our business is about scale," Mr. Feldmann said.

VulcanForms raised a $250 million Series C funding round in 2021 in a deal led by D1 Capital Partners.