US Intel

It’s ridiculous. It’s so easy to find VC funding for software but heaven forbid you try and make agricultural innovations. Biotech is slightly better but still a struggle. Hardware only counts right now if it’s defense tech but even then people would rather have another SaaS.

Yeah seeing the innovations DJI is making in agriculture makes me wonder why VCs do not want to fund other startups like it. I know the margins are worse and it takes way more capital to fund hardware companies, but that has to be better than funding another chat-gpt wrapper. I guess that is why I am not a VC though lol.

They're just hard. What is the US robotics startup that you would use as an example of success? iRobot? It barely broke even.

A16Z gets a lot of guff for their bad politics, but their "American dynamism" portfolio, if a little defense heavy, seems great

How is boston dynamics doing? They do very cool stuff but it feels like they struggle commercializing their technology. I remember they were once bought by google I think? And then spat out...

South Korea got to it: https://www.hyundai.com/worldwide/en/brand-journal/mobility-...

The infrastructure to rapidly iterate and manufacture just isn’t here anymore, so everything costs significantly more to the point where we’re noncompetitive. Even VCs with no experience see the top line numbers for hardware startups and nope out.

Contrast this with biotech venture capital which has been doing well for decades, often investing more capital in a year than software VCs. The difference is that all the research, clinical trial, and manufacturing expertise is already here and concentrated in a few localities like South San Francisco, San Diego, and Boston.

only in software there's a clear, tried and tested multiple times path for 1000x ROI for an investor. thermodynamics themselves limit ROI for anything physical.

I'd say that VC funding may be an inappropriate tool for that. VCs want you to either grow fast, or fail fast. Not necessarily to bring profit fast, but to visibly capture the market (see Uber). Move fast, break things, rework things every week, trigger that wave of sign-ups.

Agriculture is much slower, every iteration may be is a year, or (in tropical climates) half a year. Microelectronics is comparably slow, and even more unforgiving about making mistakes. Building robots does not scale ls easily as producing chips, let alone software.

These areas need a different model of investment, with a longer horizon, slower growth, less influence of fads, better understanding of fundamentals. In some areas, DARPA provided such investment, with a good rate of success.

You forgot the most important thing about A16Z portfolios: they look great at the beginning of a bubble, and then... https://www.wsj.com/articles/andreessen-horowitz-went-all-in...

To fund a software start-up you need 5 people and 5 laptops to get to tens of millions of value.

To fund a similar sized hardware start-up you need a full lab andddd already the proposition is dead.

Yeah that makes a lot of sense. Way easier to iterate when you have access to a machine shop vs having to upload a CAD file and have a part shipped from another country.

Anduril?

It's about risk / reward, and patient capital. Within 10 years I am probably going to sell my SaaS business a very rich man, and I am going to self-fund a new company in hardware and / or manufacturing. America has made so many talented people wealthy very quickly over the past 2 decades, and as the low-hanging software fruit is ever-harder to find, the skilled entrepreneurs will look for new things do to, and more of us will get into hardware.

It shouldn’t be that way though. Venture capital is only for SaaS? It should be for technology in general. But the IRR demands are too much so it concentrates to SaaS.

We need regulation around how VCs work. They are in a house flipping game and nothing more, slapping on a bad kitchen remodel and then handing the hot potato onto the next sucker.

Yeah, it's almost as if prioritizing returns on investment over EVERYTHING!!! else has bad side-effects for the economy as a whole.

Skild, Physical Intelligence

So many of the VC's doing the funding got rich of software and web stuff.

They don't know anything else.

Too bad Hyundai is betting on hydrogen... Thats basically dead in the water.

There isn't even anyone here competing with eg JLCPCB just for PCBs let alone all the other prototyping stuff. It makes sense, somehow China is able to do it for less than the materials cost.

I think that's why most people just aren't that upset about tariffs. It would be nice to be able to participate in our own economy other than by grifting off real estate or software.

VC capital is like a detonator. It seeks explosives, and when it finds them, produces spectacular fireworks that illuminate the entire industry, or even the entire world. It also ends up with a lot of duds, but it's OK by them.

What VC capital is not interested in is regular fuel, which can burn steadily and expand gradually, without a shock wave. Such companies can be quite important. Say, GitHub was such a company for many years, before it took a large VC investment and got acquired MS. Investing in such companies requires much more diligence and foresight, maybe too much predictive power to work at mass scale.

VCs' math only works because a single 1000x hit easily pays for a hundred of duds. If ROI per hit is 2-3x, and research required is 10x more deep, the prospects likely start to seem too bleak for folks with billions seeking return.

Thermodynamics is also the limiter in AI these days.

It seems really unlikely so many elements of American society decided to prioritize returns simultaneously… but more like those who didn’t… eventually couldn’t compete anymore and left the market.

Leaving behind only those completely focused on returns.

I'd reframe that slightly. There is a vast foundation of stable, optimized businesses that are in commoditized/low-growth ares. They function as the underpinnings of the American economy.

When turning the spotlight to capital that is seeking returns, it is true that these areas may be mediocre places to deploy fresh capital, but it doesn't mean that these players aren't competing, and they will probably be cranking out sheet metal and port cargo logistics optimization well after 90% of the AI startups fold.

The caveat is of course Private Equity, which is about 10 trillion in assets. They can derive high returns from these areas, but it requires leverage.

Why not just let it play out in their own arena? We already had the major unwind with the interest rate hikes. The tide went out and the players with their pants off were exposed for the most part.

That said, allowing VC into 401ks and such I would agree is an abominable idea, because this stuff isn't marked properly until it is in distress. Actually, that area could use better regulation. Volatility laundering is already a systemic risk. Many of these vehicles have creative ways to not mark to their market value, which makes pension fund managers and leered participants happy because it greatly improves the perceived risk metrics and performance, at the equal expense of cloaked fragility.

But perhaps just let them have a thunderdome, and if they want to breach the walls and enter areas like retirement funds where society agrees standard are higher, there is a strong set of filters/regulations that must be adhered to.

VCs are happy to send a vast majority of their investments in search for billion-dollar company. There is no chance to get an agricultural startup to billion dollar valuation, agricultural innovations don't scale at a click of a button.

They should plan more long term. In an economic downturn like after 2000, all these nonsense valuations for vaporware are going to go to the center of the earth. And all signs point to another downturn for the next decade.

https://www.currentmarketvaluation.com/models/s&p500-mean-re...

They also have battery electric cars. The Hyundai Ioniq and Kia EV vehicles are quite popular.

  It was also the Korean automaker’s best July sales month since launching its first vehicle in 1986.

  The growth was mainly driven by electrified vehicles, including EVs and hybrids (HEVs).

https://electrek.co/2025/08/01/hyundai-ioniq-5-shatters-us-s...

Not necessarily the real limiter, right now, is finding a combination useful and profitable application. Simply charging money for generalized AI access is never going to be the ideal profit center.

People in this thread act like VC is the only way to raise capital. Ever heard of getting a business loan? Even a lot of companies in the Valley could probably get one more easily than they might think, if they're profitable. You don't have to give up equity either.

>Simply charging money for generalized AI access is never going to be the ideal profit center.

Exactly. Margins are dropping rapidly: https://ethanding.substack.com/p/openai-burns-the-boats

I don't see any reason in principle why a $1B+ exit wouldn't be possible.

This YCW18 ag company was acquired less than 3 years in by John Deere for $250M: https://techcrunch.com/2021/08/05/john-deere-buys-autonomous...

Fully agree.

I feel like anything relevantly practical is denied investment.

But when it comes to anything flashy and hip, a train of dump trucks filled with cash couldn’t deliver money as quick as the VC dollars that flow into to startups with no business model and no hope of being profitable…

Yeah, I get that startups should invest profits and not actually make profits for a while… But when they’re on their 4th round of funding with thousands of employees… shouldn’t they at least try to be a bit more financially responsible?

Yeah, but how does one get a business loan, with real stuff at stake, when VCs are burning money like there’s no tomorrow?

I especially dislike the way VC funded startups use VC dollars to effectively be a “loss leaders” for years to choke out the rest of the market.

Who wants to risk their own capital or privately pooled funds against THAT?

>how does one get a business loan, with real stuff at stake

Show them your finances and collateral to demonstrate that you'll be able to pay off the loan.

>I especially dislike the way VC funded startups use VC dollars to effectively be a “loss leaders” for years to choke out the rest of the market.

It's a fair point, but it's a point which does not apply to the industries we are discussing, which do not receive VC investment.

I actually really like your point about Masayoshi Son-style investments which are just an attempt to entrench a monopoly. I'm no socialist, but if socialists called for identifying and taxing such investments, I wouldn't object. The trick is to distinguish between the WeWorks of the world, and the Boom Supersonic type companies which genuinely need gobs of capital for breakthrough innovation.

Letting them have their own thunderdome is regulation. It means they don't get to pee in our pool. I am all for a freemarket, but it needs to be kept in a cage match.

You're completely ignoring the vast amounts thrown into a marketing funnel in an attempt to acquire customers for their usually meh products.

And engineering teams usually scale up with revenue as well.

I feel like your numbers are the myth that gets told not what actually often happens

Hyundai is a massive conglomerate doing a ton of different things. Having a side bet on hydrogen isn't bad, especially considering it's potential potential in applications such as aviation.

Because, despite all the belated narratives from a lot of people perusing this very website, Venture Capitalism is not a driver of innovation. It's an efficiency filter to supercharge capitalism and speed up the concentration of wealth into the pockets of the VCs themselves. Software is nimble, has less overhead, can be optimized for profit faster, can be recombined, pivoted, repurposed way faster. Ergo, the market economics of VC are terrible at naturally selecting for innovation with a societal benefit, because that’s absolutely not in their firmware.

AI is two things.

- The chatbot people have a personal attachment to

- The processing tool.

In the second, you only care about the result. Something like Claude Code can call any other provider if that's cheaper and visa-verse. Once I have the result, my dependency / lock-in is no more than a brand of toilet paper. The providers will have to do the 'capitalism thing' and compete.

It's almost like WeWork's, valuated at IT levels by being in the style, only for investors to eventually figure out the marginal production costs are not reducible to near 0, and you can't just bully out competition / network-effect to get a monopoly.

And this applies to any company that wraps and re-sells AI.

Something the tech-VC world is so unfamiliar with, it's scrambling to present the truth of what is 'econ-101' for the rest of the world.

Okay, "logistics optimization"???

In the US there have been a few, i.e., apparently less than 20, universities with an applied math program up to date in and teaching optimization.

Sooooo, anyone at all seriously interested, long, for decades, would, could, should visit some of those math programs, meet some of the profs, get recommendations for their former students, call them, chat, and offer a job better than their current lawn mowing, fast food restaurant kitchen cleaning, or car washing. Instead of just the US, might also consider Waterloo in Canada. Actually the Chair of my Ph.D. orals committee specialized in optimization in logistics. After sending 1000+ beautifully written resume copies and hearing back nothing, can begin to conclude that optimization is not a hot field and for highly dedicated optimizers who want to sleep on a cot in a single room, forgo bathing, most days eat bread, other days peanut butter, have no children, wife, or family contact, don't own a car, and must get any needed medical care from some of the last resort special clinics. Ah, real optimization!

Early on, with a good technical background, I guessed that, of course, the key to success in technology was some good technology but soon discovered that VCs just want to make money, a lot of money, quickly, and otherwise will hear from the investors in their fund.

Just heard of Palmer Luckey. Hmm! Money? No big staff, not much equipment, essentially just one person?? $1B+, quickly? Example: Taylor Swift. Did she ever hear of Linux???

Probably because the US let software be a breeding ground for monopolies. People invest there because they understand that's the best sector to, if the company works out, get unreasonable returns. As an example, the current AI valuations make no sense if the industry doesn't solidify around one or two companies.

If you have money, the returns you'll get elsewhere are much less attractive, and can only be justified if they're very safe investments.

It limits token generation, but not token utility.

What country are you thinking when you say that? It doesn't sound like the US. Through the zero-interest rate era they've been absurdly tolerant of companies offering no- to little- returns on investment. They've basically been operating investor-led charities.

It is still unsettling seeing Uber turning a profit, but even with that they're not turning a net profit over the lifetime of the company yet and won't be for a few years. Hopefully no-one pops up to compete with them now the sector has profits in it.

Not only leverage, but also destabilizing those optimized businesses to harvest the capital assets from their balance sheets to pay for the leverage, while destroying the underlying business.

PE is arguably much worse than VC. VC's business model is well understood and by taking VC funding, you are committing to their expected returns.

PE is, usually, unsolicited and is designed to exploit what appears to be a "lazy" balance sheet, but which is actually a stable business producing output and providing a reasonable ROI.

PE has very few redeeming features.

I've seen US startup people deal with manufacturing. There is a class gap that leaves no real space for skilled blue-collar work to exist and also be business critical, and fully integrated into the team. That is how a three-week turnaround for a milled prototype part ends up being tolerated.

...and to quote a classic, "your margin is my opportunity".

Their sentiment and their phrasing ("it's almost as if... ") is a Reddit-level meme I see all the time on that site that's then blindly upvoted, so I don't think they're thinking of any country besides the US in particular when they say that.

PE played a part in manufacturing leaving the US. Often the buyouts were of sick companies, and it was just the optimum way to monetize their death. But without PE not all of them wouldnhave eventually died, and it would have given policy makers more time to react to what was happening.

Wouldn't being aggressive about antitrust chill auch investments in the first place? Uber wouldn't have been so eager to overcome lyft if it knew that it would mean getting broken up or fined into unprofitability.

Nobody will give you a regular business loan if you need the cash to R&D your (especially non-software) product in the first place. Even more so without personal liability or in the amounts to compete for engineers in VC-funded companies.

That's another approach. However, I think it's worth distinguishing if a company acquires market dominance because of merit, vs because it got a big infusion of cash.

I somewhat dislike antitrust because it requires judgement calls on the part of regulators. I prefer simple, elegant rules. Just like in software development. Law should ideally be elegant, just like code.

They're very much yin and yang. PE's operating model is to take businesses that are operating inefficiently, squeeze all the inefficiencies out, sell off assets that would be more productive under other management, and basically strip the company bare. If it kills the company, that creates fertile ground for new startups funded by VC.

Think of PE as the decomposers of capitalism, and VC as its seeds. Most people don't like to think of it that way because they don't like to be reminded that death is a part of life. But if you view capitalism as a living ecosystem and your role within capitalism as someone to accelerate growth and then accelerate death so that new growth can take its place, it all makes sense. And you can probably profit pretty handsomely from it, because most people don't view capitalism like that and instead seek stability in the dying parts.

It’s just natural that nobody wanted to pay for outdated machines and tooling in developed countries.

Labor costs, permits, fees, etc., means that buying used just doesn’t make sense unless it’s almost free.

Whereas developing countries were willing to pay a lot more, sometimes as much as 50 cents on the dollar compared to brand new equipment and they would send a team to rip it out too.

I’ve heard that applied to almost everything too heavy to move by forklift during the 80s, 90s, and 2000s.

Addition: Omitted the reports that Swift is worth $1B from her singing.

Surely this company was 80%+ software.