Startup funding sees dip, but quality over quantity prevails – SOLIDWORKS experts

Despite a funding downturn, SOLIDWORKS experts foresee a promising shift towards more mature startups with tech prowess in manufacturing.

Start-up funding saw sluggish movement in 2023, amidst venture capital investors remaining cautious, leading to the lowest investment levels since 2018. Onward looking, the evolving landscape of startup growth drivers, particularly in Asia, may fluctuate. Yet, a positive trend towards more mature and tech-savvy startups in the manufacturing industry is seen to pick up momentum in the coming years, according to SOLIDWORKS experts.

“Funding figures have decreased, but that might not be such a discouraging factor. This means that funding has gone towards more driven companies,” Abhishek Bali, director for startups at SOLIDWORKS, told Manufacturing Asia.

“Overall, we see a high volume of applications coming our way at SOLIDWORKS. And these companies are more evolved with using technology and artificial intelligence,” said Bali.

Global startup investment in 2023 amounted to $285 billion, which declined 38% year-on-year from the $462 billion invested in 2022, Crunchbase data showed. The decline affected all funding stages, with early-stage funding dropping by over 40%, late-stage by 37%, and seed funding by just over 30%.

Despite the downturn, funding in 2023 was down by less than 20% compared to pre-pandemic levels from 2018 to 2020. The venture markets continued to grapple with the aftermath of the funding boom in 2021, with the fall in tech stocks and a slowdown in the IPO market since early 2022 contributing to a more cautious environment. Valuations set in 2021 did not hold up in 2023, leading to flat and down rounds for many promising companies.

Startups adapted to the challenging funding environment by focusing on unit economics and tightening their belts, resulting in deeper tech layoffs throughout 2023. Investors became more selective, raising the bar at each stage and favouring funds over startup founders in the current funding environment.

It was the AI sector that saw an increase in funding, reaching close to $50 billion in 2023, up 9% from the previous year. Semiconductors and battery tech also experienced increased investment. However, Web3, which had seen significant growth in 2021 and 2022, saw a steep decline of 73% in 2023, whilst other sectors like financial services, e-commerce, shopping, media, and entertainment also experienced notable declines.

Looking ahead, with increased company funding in recent years and tightening funding markets, more closures are expected in 2024, making it challenging for founders in a funder’s market.

SOLIDWORKS startup programme

For early-stage companies venturing into product development, the cost of essential software tools like SOLIDWORKS for Startups can be prohibitively expensive, a concern pointed out by Jillian Friot, senior manager of the 3DEXPERIENCE Lab & Accelerator, in an interview with Manufacturing Asia.

However, SOLIDWORKS for Startups, a pioneering initiative by Dassault Systèmes, has been breaking barriers since its inception in 2017, providing invaluable support and resources for startups worldwide.

The programme offers a three-year plan, with the first year being entirely cost-free, followed by 70% and 50% discounts in the subsequent years, respectively. This structure, coupled with relaxed eligibility criteria — companies under $1 million in funding and less than three years in business — ensures that startups can leverage SOLIDWORKS without financial constraints.

Beyond providing software, SOLIDWORKS for Startups distinguishes itself by fostering a supportive ecosystem.

Friot emphasises the programme’s commitment to amplifying startup narratives through various channels

“We often feature them on our blogs and our podcasts, putting them on mainstage at 3DEXPERIENCE World,” Friot said to the magazine.

Moreover, startups gain access to a network of accelerators and ecosystem supporters, facilitating crucial mentorship and business connections. Friot’s passion for nurturing startup success is palpable as she recounts success stories from the programme.

Startups not only benefit from software but also thrive through collaborative opportunities facilitated by SOLIDWORKS. Through the 3DEXPERIENCE Lab, selected startups receive intensive support, enabling sustainable growth aligned with the United Nations Sustainable Development Goals.

With a staggering 30,000 startups having applied since its launch, SOLIDWORKS for Startups boasts an impressive success rate.

“Around 35% of the startups end up succeeding, which is quite high compared to the typical startup rate considering most it’s usually a one-in-ten chance that survival for startups is just the average statistic,” said Friot.

One of the programme’s key strengths lies in its ability to foster collaboration among startups. Contrary to fostering competition, SOLIDWORKS for Startups encourages knowledge-sharing and synergy among participants.

Accepted startups are equipped with their own essential tools. “[Startups] get access to tutorials, training, content, and connection with a local reseller, who teaches them how to collaborate within the teams,” Bali told Manufacturing Asia.

This infrastructure enables seamless collaboration among team members, irrespective of geographical barriers. Bali cites examples of startups leveraging the platform to connect with vendors and ensure data integrity across dispersed teams.

Notably, SOLIDWORKS for Startups transcends geographical boundaries, with a global reach spanning diverse startup ecosystems. From Silicon Valley to Seoul, the programme seeks to empower innovators worldwide, with dedicated efforts to expand its footprint in burgeoning startup hubs like Asia.

What lies ahead for startups?

Friot identifies AI as a pivotal opportunity for startups in the coming years. With AI becoming increasingly accessible, startups can leverage this technology to enhance productivity, differentiate their solutions, and streamline operations.

She also emphasised the shifting investment landscape, with a renewed focus on hardware startups, addressing sustainability concerns.  “What we’re starting to see is investment is going towards the combination of our digital world and our physical world. We’re starting to see a big swing in our software in the last 10 to 15 years,” stressed Friot.

Amidst the opportunities, challenges persist for startups, notably in achieving product-market fit. Bali underscored the importance of complementary skills, urging founders to venture beyond their technical expertise and prioritise market understanding.

He then acknowledged the role of AI in streamlining processes but emphasised the criticality of aligning technology with market needs.

“AI is solving a lot of things, of course. But it's also confusing the people, yet it depends on how you use the technology right? However, the product-market-fit, or the absence of it, will persist to be the most important challenge,” Bali said.