This is some text inside of a div block.
Open Call
The venture capital world has lost touch with its deep tech roots, and it’s high time for a renaissance.
That said, there are plenty of lessons learned from modern venture capital that can help better support deep tech founders today. Newer investment models, like the venture platform model, have proven immensely valuable for founders. However, applying this to the world of deep tech requires an entirely different approach when dealing with atoms and not bits.
When software took Silicon Valley by storm back in the 2000s, investors got addicted to the hit of quick wins from capital-light tech plays and SaaS – but this wasn’t always the case. And it certainly wasn’t the case when Silicon Valley got its start.
Back in post-WWII America, the big gnarly problems of the day looked more like the space race to the moon, the existential threat of nuclear war, and the global socioeconomic power transfer that computers and emerging technologies could unleash. When Eisenhower launched DARPA in the 1950s, this funneled multiple billions of dollars of funding into computer research, with nearly all of it going to research conducted in the Bay Area. There, the semiconductor industry flourished, and the VC industry of the newly christened “Silicon Valley” came into its own.
Semiconductor and computer businesses are not your capital-light startups that dominate Silicon Valley today. These companies are built on foundations of breakthrough science, fundamental R&D, and atoms – not just bits. It takes more time and capital for these technologies to emerge from R&D into the market, and investments in them are inherently risky.
From the rise of this massive industry and complete technological paradigm shift, some of the most successful venture funds emerged – Sequoia, Kleiner Perkins, and New Enterprise Associates – by taking risky bets on technologies that rang in a new generation of innovation. This origin story ought to sound wildly familiar to those investing in climate tech and critical tech startups today.
Yet, as Silicon Valley evolved over the next few decades, the Cambrian explosion of computers led to more opportunities for SaaS startups to take the world by storm. This shift toward capital-light business models with faster pathways to shipping product and a “fail fast and break things” mentality has since become the norm of entrepreneurship, seemingly distantly related to startups of previous generations.
From 1991 to 2001, investment dollars in VC grew from $1.5B to $90B, only to skyrocket from there and hit $621B by 2021. The number of VC funds increased by 300% from 2010 to 2022, largely driven by the fact that it became much cheaper to launch a startup; software plays were abundant, and more micro-funds were popping up and cutting small checks in exchange for a piece of the pie.
The venture platform model originates in the early 2010s, around the same time Marc Andreessen famously declared that “software is eating the world." Things were already getting crowded in VC, and it became harder to differentiate funds from one another.
VC firms began to compete, bringing new value-added services to the table: recruiting teams to help portcos with hiring, developers to work on their products, and even biz dev/marketing support. Based on a study by VCplatform.com and Zendesk, funds saw a significant uptick in talent, portfolio ops, and business development roles from 2000 to 2022.
In tandem, the platform model strategy also demonstrated a clear impact on overall fund performance:
While the venture platform model proved immensely helpful for more conventional SaaS-style portfolio companies, it falls short for hardware-intense, capital-intense companies, leaving a major gap in support for deep tech founders.
This is because the resources and support deep tech founders need fundamentally differ from those relevant to most SaaS companies. Deep tech founders often operate in long R&D cycles with regulatory hurdles to overcome and major scientific and technical uncertainty to de-risk. They are usually building real, capital-intensive solutions to the big, hairy problems of the world today – the climate crisis and unprecedented biodiversity loss, geopolitical destabilization, the threat of nuclear war (still), and the brave new world of AI and its societal consequences.
The venture platform model has the potential to revolutionize the kind of support available for deep tech founders – but it has to look wildly different than anything that has existed before. After all, we’re dealing with atoms, not bits.
At Newlab, we’re building a venture platform for deep tech startups. Over the years, we’ve helped founders access the resources, infrastructure assets, piloting partnerships, and capital they need to scale.
As of 2024, we’ve launched over 110 pilots with deep tech startups and over 50 public-private partners to open up pathways to commercial scale. We’ve helped founders unlock accelerated regulatory permits for emerging technologies, launch pilot demonstration projects with Fortune 100 industry incumbents, and get access to public infrastructure assets to deploy autonomous vehicle systems. We provide the lab space and manufacturing facilities that founders need so they don’t have to waste all of their capital on lab equipment and warehouse space and can instead focus on building, testing and shipping product.
We’re addressing a critical gap in the venture platform model, and we’re just getting started.
Want to get the New/Letter and other Newlab updates delivered straight to your inbox? Sign up here.
