Hard Tech Revival
Obsession should be instigated by a fear that if you do not build something for the world, nobody will, or if they do, it will be without you. Your mission must mean something to you spiritually.
Building insane, Jetson-esque companies is cool again — like cigarettes and rolled-up white T-shirts in the 50’s. The hype makes sense — the next micro improvement on B2B saas was tired, crypto is plagued by its unserious inhabitants, and venture capitalists are excited to back something they can throw their newfound patriotic ambitions towards.
History of Hard Tech
There is no better time to build an industrial base than war, and that's exactly where this story begins: World War II. When the United States had its hand forced into the war, the American industrial base was called to action. Automotive plants shifted gears from cruisers and V8s to tanks and aircraft engines; Electronic companies switched the channel from building products for Sunday Cartoons to cutting-edge radar; you get the picture. In essence, every facet of American production had to lace up their boots and optimize every aspect of the manufacturing floor to keep up with the heavy demand of the U.S. Military — literally building planes as they fall.
At the peak of performance, 1 in 3 Americans made their morning commute to the production plant — we were firing on all cylinders. Through the late 70s, Big Brother was throwing money at infrastructure projects, the GI Bill introduced competent education and training for a wave of employment seekers, scientists were exploring literally any chance they could to use nuclear energy to superpower the United States, weather was being modified to appease our needs, and as all great technology began, the D.o.D. was issuing RFPs that bolstered the frontlines and eventually found their way onto consumer shelves.Â
~ Then the pause button got pressed on sci-fi-inspired technology ~
The multi-decade WWII economic victory cruise started seeing a dip in dominance as comfort and complacency from lack of competition swept our economy. Foreign countries began to make strides in manufacturing capacity, and NAFTA was signed, setting the precedent that we no longer needed to solve our cost problems by placing a bandaid on it with cheaper imported goods not domestically produced. Policy began stomping the breaks, demanding a hard stop on technological advancements in nuclear, geoengineering, carbon-based fuel, and various medical applications.
Modern Renaissance
"Hardware isn't venture scalable," "Hard tech doesn't have the margins that saas has", you know the V.C. drill. Unless your hardware company was building the next fitness tracker, Uber with delivery drones or robotics, your startup probably wasn't that sexy to most investors before a16z released their Introduction to American Dynamism.
—— First, let me add that this should never be a reason not to build a company. Reference this video for the rationale that I can only regurgitate ——
It's hard to argue that all of their rationale is meritless. For example, one investor buddy claims his firm passes on several deals because "the amount of capital required to scale it gives the company less room for error relative to the runway. Also introduces more variables for them to manage across the supply chain, which isn't always in their control". Even from a founder's point of view, a friend native to the space is hesitant to unanimously advocate for all builders to join the movement because "Regardless of the vertical you look at within Hard Tech, each market is highly insular and comes with a high level of navigational understanding to be successful.".
He's got a fair point, but I'll have to push back against his reasoning as the insularity of, for example, the defense industry is the exact reason why the conglomerates have failed to innovate rapidly. The U.S. has become fearful of innovation that appears to have been impossibly achieved; the risk profile has diminished; the risk propensity to seek orders of magnitude advancements has been hindered by overregulation, tendencies to advocate for zero-sum game policy (i.e., trying to improve climate change by killing Carbon-Based Fuel innovation), imposing fear-based limitations on technology, based on a lack of understanding rather than seeking logical validation.
But those days are over. Founders who balk at risk aversion and with the technical chops to take on the challenge are throwing caution to the wind and taking matters into their own hands. This might explain the fervor around El Segundo, inspired with reckless abandon and unapologetic ambition; it's like watching Babe Ruth step up to the plate for the first time after the career of Frank Baker. Sure, Frank was a classic, but when Babe took a hack at the plate… now that is something you got up out of your seat for.
There are two approaches to the same goal: reshoring and accelerating American production capacity.
"Software would only be deployed at America and western allies if it was proven on the battlefield" (Alex Karp)
"Hard Tech, or Die" (anyone with an office in El Segundo, CA)
For bits, there is a stretch for all software to be battle-tested. It's important to consider the intention of this in the same way production facilities were able to support military requirements during World War II, not that they must be intended for wartime, but that they can support the surge of demand and technical challenge necessary. The actual point is that we must be building software that 10x manufacturing production, 10x team processes, 10x the speed of product deployment, is a 10x improvement for communication, or improves agile execution at a 10x rate — it's a matter of building the unimaginable, not another "This for That."
For atoms, the founders are accelerating to restore the American production capacity and building the unimaginable. There has been a massive surge of new-age defense startups inspired by Anduril's success at being one of the first incumbents to bully its way into an industry that was formerly impossible to wedge into unless you had a seat at the "Last Supper" of the defense industry. It's still an uphill battle for defense founders. From my conversations with folks at Northrop Grumman and Raytheon, they still view the charge as noncompetitive to winning large Primes. That said, defense is a subcontractor-dominated industry, heavily relying on competent subs to make up for public defense contractors' speed and operational deficiencies.
A founder I spoke with laid out an interesting dichotomy for dynamism tech: "Defense tech is super sick, necessary, and fun to build. But I'd rather build things that enhance human life rather than take it away." Enhancing human life is inherently a much larger market and range of approaches; for one, it is not fixed to the defense expenditure approved by POTUS, and two, there are many more people to improve life than enemies of freedom. For example, high output, sustainable energy through nuclear fission, or supercharging agriculture with geoengineering and weather modification are a few approaches in hard tech that meet the requirements for a highly innovative and materially manufactured approach to improving human life.
Either bits or atoms, the same founder also said, "I think it's much easier to start in software. The pace of iteration is faster, cheaper to build, and can be done from anywhere. When I decide what to work on, it's a function of how excited I am about the idea & how well I know I can execute on it." There is undoubtedly a massive overhead for founders with no experience in hard sciences, either academic or professional, who have to break into nuts and bolts versus syntax and semantics.
Side thought: although the symbiosis between AI and robotics is an incredibly vogue topic (Figure x OpenAI), there is a chain reaction to explore the Automation or Augmentation of human capacity using the technology.
Discussions
[A huge thank you to the friends who took my calls and took the time to respond with sincere consideration]
While thinking about deep tech, I had conversations with founders and investors to get their thoughts around their experience building in the space, what they looked for when investing, and generally, why they care enough to do so. I figured those conversations would be worth sharing:
Founder: "Deep tech is awesome, and I think every founder has a desire to build something with a physical instantiation. Personally, I want to help humanity settle other planets and utilize the untapped resources of our solar system. That's the 50-year plan.
I'm sure I will build something with a physical product eventually. I'm interested in anything that augments human intelligence like new kinds of interfaces / wearables as well as expanding energy production (mining, refining, solar, resource discovery, etc. — on earth and in space)."
VC: "1. founder temperament / 2. policy vs. technical moat (example: is your moat innovation or a matter of policy, like China tariffs) / 3. how dependent are you on foreign supply chains? / 4. how much value would your company unlock for your ideal target customer? (This is TAM adjacent—e.g., a better battery means Figure's robots last 2x longer on a single charge, thus having the capacity of n+1 man hours vs. n man hours) /How much of a regulatory fight will this product be
VC:Â "I think the pro is that it's critical for America to rebuild its manufacturing base. We need to be able to self sustain and not be fully reliant on adversaries like China. We also need to go back to leading the world in deep tech productivity-enhancing technologies like nuclear and rockets etc. The common con is that it's more expensive than software/internet businesses, but I don't think it's that lopsided."
Founder & Investor:Â "You have to know the customer extremely well if you're going to offer software to enable hard tech or manufacturing - especially if you're selling into traditional/established businesses. Often they are highly skeptical or incompetent with new tech, highly sensitive to perceived security, and incredibly skeptical of anyone living, from, or associated with California."
VC: "Anything disrupting very antiquated systems or wherever there isn't currently a software solution so any pen and paper bullshit that causes time issues or mistakes thats where I'd dig in. We're very bullish. I led a deal into a B2B us manufacturing marketplace biz we were fired up on but they pivoted entirely away from it as it's tough to sell to blue collar workers stuck in their ways. I'd love to see good evidence and understanding of those types of customers and their pain points and good connection to be able to sell to them."
Founder: "Everything online is highly memetic. The industry is highly insular and proprietary, and incumbents don't play nice; you will get throttled if you don't know how to succeed. If you're selling software, engineers are the hardest to sell to, are skeptical and slow to use anything new, and if you're manufacturing something, you better know what you're doing and how to sell what you're doing. A good litmus test for young founders in hard tech is to ask, "What is the average age of the people getting hired at the company?"
Vantage Point
It's a challenge any way you slice it, bits or atoms; if you don't have experience building in or for hard tech companies, the odds are stacked unreasonably against you. But, that is no reason not to take on a challenge. Instead, it just emphasizes the importance of the level of obsession needed to scale your personable ability to reach the baseline that industry experts operate at. Your vision must be backed by absurd conviction paired with hyper-focused competence. If you're going to manufacture something, make sure you can do it on your own first; if you're going to sell to manufacturers, spend time with them, camp out in their plant, speak their lingo, hell, go work on the plant floor; knowing the customer will be much more challenging.
Manufacturing things is hard, selling software into blue-collar domains is damn near impossible, product development yields a longer road to launch, and navigating regulatory burdens can make even God-touched mulleted founders shake their heads. These aren't a deterrent to build by any means, but they all tremendously reinforce the theory of Founder Market Fit. A bit of background operating in a highly successful environment, a great rap sheet of experienced friends, and a history of manual labor in your youth would do any aspiring founder some good.
I know one man you’ll make happy with this - Reshoring Initiative Harry Moser. He’s been beating the Reshoring drum 15 years at least.
https://reshorenow.org/