2Q24 – No Signs of the AI Wave Cresting

"Everything new is old again, and everything old is seemingly new again." 2Q24 saw similar dynamics to the first quarter of the year. Artificial Intelligence dominated the news cycle, and financial markets continued to soar to new all-time highs. Bitcoin and crypto are back in the news, reaching new highs as proponents assure skeptics it's different this time. NVIDIA briefly nudged out Apple to become the world's most valuable listed company, topping off the surge of investor enthusiasm in all things AI.

Venture Capital is also seeing a modest rebound in 2024, and Momenta has been increasingly active (more on this below). According to Bain, global venture capital funding in the first quarter of 2024 reached $89 billion across 4,600 deals, marking an approximate 16% increase from the fourth quarter of 2023. Despite the rebound, the overall pace of dealmaking represented a 21% decline over the previous year, putting quarterly funding at 2017 levels, according to CB Insights. Generative AI continues to dominate the venture capital landscape, with foundation and large language models seeing the most funding given their capital-intensive nature.

Along with the improvement in public market sentiment, the IPO market appears to be on the rebound from the drought of 2022-23. In the US, 76 IPOs raised $15 billion in proceeds through May 31, compared to 68 IPOs raising $9 billion in proceeds in the same period in 2023. Despite a growing backlog of IPO registrations, the bar for software companies remains high, with roughly $500 million in recurring revenues needed to attract interest from large investment firms, according to Jai Das of Sapphire Ventures. As a result, software firms continue to seek private equity and strategic buyers for financial.

Source:  2024 State of Manufacturing by Fictiv

Electric Vehicles Poised for Recovery, but Trade Wars Loom

The decelerating growth in sales of Electric Vehicles has been a significant headwind for automakers that have invested heavily in manufacturing capacity and expansion. Over the past year, the market correction has been painful. While EV startup Fisker recently filed for bankruptcy, Volkswagen announced plans to invest up to $5 billion in EV maker Rivian. According to The Information, headwinds are extending to the construction of battery giga-factories; of 37 giga-factories planned for construction in the West, more than half are now categorized as uncertain or unlikely to be built. EVs are also remerging as a critical front in geopolitical trade wars, with European and US carmakers worried about an onslaught of low-priced Chinese electric vehicles. The US slapped a 100% tariff on Chinese-made EVs, and the EU is investigating the extent of Chinese subsidies for its EV industry. The price cuts across the industry, led by Tesla and exacerbated by Chinese competitors, have nevertheless been good news for consumers, who are finally starting to see prices for used EVs decline.

Momenta's Venture Investments Leverage AI for Industrial Impact

Momenta remains committed to fostering industrial impact from emerging technologies and entrepreneurs, and in 2Q24, investments were informed by advanced application of AI. One of the most promising and under-addressed areas ripe for innovation lies in applying AI to industrial process engineering. In early May, Momenta led the seed round for Composabl, a San Francisco-based startup founded by ex-Microsoft engineers and led by Kence Anderson, recent author of the acclaimed O'Reilly book Designing Autonomous AI. Composabl helps create real-time process optimization, and AI agents, driving toward autonomous operations, and is designed to help industrial process engineers build production-ready AI with a no-code tool kit of intelligent software building blocks.

AI is also transforming bioprocess development for the biopharmaceutical industry. Momenta recently led the Series A investment round for DataHow, a leader in AI-powered bioprocess development and manufacturing solutions. DataHow has pioneered the development of hybrid models for bioprocess development, providing process engineers with richer process insight when developing complex manufacturing processes requiring less data. The company's DataHowLab offering is designed to help process scientists benefit from advanced hybrid modeling technology without data-science knowledge, helping accelerate development across all stages and increase manufacturing productivity. DataHow is the second company to receive investment from Momenta's Digital Industry Fund IV, anchored by Rockwell Automation.

Source: DataHow.ch

AI is also helping to transform the application of coatings and paint in manufacturing, processes that can often be subject to inconsistencies and imperfections. Momenta led a Series A Investment Round in SprayVision, an Ostrava, Czechia-based leader in process control and simulation of paint coating operations. SprayVision employs digitalization, automation, simulation, and analysis of spray patterns to help support paint lines with process control, wet paint thickness measurement, and optimal parameter settings. The company's technology reduces time, scrap, paint waste, and emissions by leveraging simulation prediction with an accuracy of over 98%. SprayVision aims to accelerate customers' transition from automation to autonomous operations.

In early June, Momenta, focusing on enhancing Industrial Impact in machine control, announced a lead investment in Luffy AI, a Cambridge, UK-based leader in adaptive AI for industrial control. Luffy has developed an Adaptive Intelligence Framework based on neuroplasticity that optimizes computational efficiency in developing and deploying industrial control applications at the edge. The company's technology employs digital twin models with self-optimizing neural networks to enable control systems to learn and adapt continuously within petrochemicals, manufacturing, chemicals, metals and mining, and aviation applications.

Combining Organic and Artificial Intelligence

At Momenta, we remain committed to investing and cultivating Industrial Impact through talented entrepreneurs with great ideas. Looking into the second half of 2024, enthusiasm for AI continues to drive innovations in manufacturing, autonomous vehicles, supply chain, logistics, agriculture, and technology. As we look forward to 3Q24, the AI wave shows no signs of slowing as powerful breakthroughs emerge in manufacturing, autonomous vehicles, supply chain, logistics, agriculture, and technology. As author William Gibson reputedly said, “The future has arrived; it’s just not evenly distributed yet.”

Momenta is the leading Industrial Impact venture capital firm, accelerating digital innovators across energy, manufacturing, smart spaces, and supply chain. For over a decade, our team of deep industry operators has helped scale industry leaders and innovators to improve critical industries, the environment, and people's quality of life.

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