AI Capital, a Colorado-based venture capital firm investing in early growth stage enterprise AI software companies, is selling its portfolio company, Link3D, to Materialise just over a year after investing.
Alongside the exit, the firm has closed its North America (NA) Fund I and is now launching NA Fund II. The firm expects to launch its European Union (EU) Fund I later in the year.
Based near Boulder, CO, Link3D offers additive manufacturing execution systems (MES) workflow software to help organisations scale their digital manufacturing strategy and workflows. Additive manufacturing (AM), commonly known as 3D printing, is poised for massive growth as manufacturing and supply chain management are reconfigured due to the Covid-19 pandemic. As global supply chains across industries were disrupted, the delivery of critical goods and services was severely impacted including parts for complex machinery such as valves for ventilators. AM was able to quickly produce these types of mission-critical parts to not only save business orders but save lives. Neville Teagarden, co-founder and Managing Partner of AI Capital stated, “The planned Link3D exit is a validation of AI Capital’s investment focus on applied AI software companies that focus on the digitalisation of society and business.”
“Our investment thesis didn’t waver during the pandemic; in fact, it was strengthened as COVID exposed the severe shortcomings in how businesses access and deliver critical goods and services,” said Mr. Teagarden. “Our experience and astute advisory team enabled us to quickly identify the severe limitations in legacy software that underpins how these goods and services are delivered and how that impacts businesses and society in a crisis. We made a deliberate decision to focus our investments across six verticals: Food Supply, Health Care, Life Sciences, Manufacturing, Energy, and Public Safety. Public Safety overlays all the others through cybersecurity, an increasing risk accelerated by widespread digitalisation that grew dramatically during the pandemic.”
During the early days of the pandemic supply chains from overseas manufacturing ceased to operate, many farmers couldn’t bring food supply to market, and grocery shelves went empty. Across industries, traditional software that keeps commerce humming failed to respond to the rapidly changing circumstances because it could not adapt without the input of new code – code typically written by armies of highly compensated programmers. Businesses lacked enough people to keep pace and manually fill in the gaps in the dynamically changing environment. To contrast, AI enabled software creates resiliency by learning and adapting to changing circumstances as it ingests new data from a variety of sources.
With the pandemic following on the heels of the sudden passing of Zane Heninger, one of the firm’s founding partners, AI Capital was pleased to close its North America Fund I (“Pilot Fund”) alongside a great planned exit in the portfolio. The exit of Link3D is expected to generate more than double AI Capital’s target gross Internal Rate of Return (IRR) for its limited partners (LPs) in just over 16 months of investment. Another AI Capital portfolio company recently raised a financing round and provides a markup in the Pilot Fund of more than five times the targeted gross IRR.
AI Capital began planning its USD100 million Fund II shortly before the pandemic as the Pilot Fund proved out the thesis, building a high-performing team of AI experts alongside experienced investors and operators. AI Capital operated in a pledge fund mode and raised capital sufficient to meet the plan and establish a track record prior to reaching full capacity. The firm is currently evaluating additional portfolio companies for the Pilot Fund, NA Fund II and EU Fund I. AI Capital boasts incredibly strong deal flow and close partnerships with leading universities such as MIT and Berkeley, as well as a strong investment team and partners.
Teagarden says: “We couldn’t have done this without the incredible support of our limited partners who enabled us to launch the firm and prepare to open NA Fund II and EU Fund I. The burgeoning VC and start-up environment in the EU post-Brexit and emergence of Amsterdam as the region’s premier financial center makes this an ideal time for AI Capital to bring our unique skill set and investment strategy to the European market.”
David Kolsrud, co-founder of South Dakota based Farmers For Innovation (FFI), the largest investor in AI Capital’s Pilot Fund, says: “These are challenging times. The pandemic has placed stress upon the American economy unlike any other since the Great Depression. At the same time, the pandemic has inspired a reevaluation of America’s security and the country’s interests in the global economy. Our security and our capacity to produce critical goods and services and ensure our supply chains are resilient has become inextricably linked. It is time to bring these capabilities back to America and to invest in innovative solutions that will perpetuate our own success as farmers by making our work more effective and more efficient.”