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The rapid emergence of hard-tech – TechCrunch

When I joined the team at SOSV’s HAX, a venture capital program designed to help early stage computer hardware founders, my tech friends shook their heads. Hadn’t I learned yet that the material is too hard? What they haven’t seen is a rapidly evolving hardware scene contrary to its icy reputation. The old hard-knocked hardware playbook has given way to a new, much more exciting; emerge to respond to opportunities at the civilization level, such as climate, that software can solve on its own.

Today, when I work with the founders of the HAX program, it makes sense to build incredible (but achievable) plans to “reduce global energy use by 10%” from Seppure, “Eliminate all waste in the clothing supply chain” at Not spun or “make the global recycling of batteries 5 times more profitable” with Li-ion green.

Ambitions like these reflect emerging megatrends in the global economy centered on demands for decarbonization, modernization of infrastructure, securing supply chains and the full digitization of traditional industries.

The tools and technology to move forward – from machine learning to sensors to nanomaterials – are more powerful and affordable than ever, allowing for higher ambition and much shorter time to market. fast. Visionaries like Bill Gates and Elon Musk have taken note, institutional giants like Blackrock are pushing climate neglect, and we have seen the rise of like-minded communities of HAX, The Engine, New Lab and Greentown Labs. .

The perimeter of this new world is indeed so broad that we no longer define HAX’s thesis around “hardware”; we call it Hard technology, both because it’s difficult, as in difficult, as well as because it goes way beyond the initial reach of personal hardware devices of the early 2010s and home IoT.

What emerges all around us is a new generation of founders, investors and hard-tech technologies with some early signals for the coming hard-tech tidal wave.

If “software eats the world”, hard tech gives it bite

The last three decades have been defined by “software that eats the world” and feasted on the lowest fruit. But our digital world on screen and on server is increasingly limited to marginal gains in niche markets. As our friends at Ubiquity Ventures say, it’s time for “Software Beyond the Screen”.

Affordable robotics, AI-driven sensor fusion, uninterrupted connectivity and supermaterials are merging in the tech stack to unlock massive new slices of value for customers. Many HAX companies operate over 80% of gross margin businesses that industry experts said not so long ago that only SaaS companies could do. Plus, the hardware + software combination can solve bigger problems in any industry than software alone ever could.

Learn from Tesla: Take big photos in big industries

When industry experts seek to explain Tesla’s unexpected rise over the past 10 years to become a mass-production automaker, they point to Tesla’s “software-driven” approach. The truth is, Tesla’s rise is centered on intense hardware innovation in batteries, motors, models manufacturing and distribution.

This same equation plays out in dominant multi-billion dollar industries such as energy, construction and agriculture. Investors looking for opportunities in these categories will need to be bold, but will find disproportionate returns if they include hard technology. To move the world forward, we’ll have to take big hits like Commonwealth’s Fusion Energy nuclear fusion reactors, Boston Metal’s emission-free steel or Deepspin’s Low cost MRI. Much like Tesla and transportation, software can launch opportunities, but industrial revolutions come from innovation in the physical world.

New doors open for B2B sales

Tackling these huge opportunities requires partners and customers on an industrial scale. Startups can’t afford to go it alone. The traditional advice to startups is to avoid business partners because they are creepy, slow beasts that can’t keep up with the startup pace. The reality is that large companies have significantly increased their appetite for emerging hard tech startups, and many have set up pipelines to engage in riskier and more complex technologies. In recent years, the number of companies that venture business more than doubled and many more are bracing for the industry-wide upheavals already underway.

This allows startups to enter enterprise and B2B markets faster, which is why many B2B hard-tech startups are reaching millions in revenue at a rate once limited to their software-only peers. This also explains the increase in venture capital for these same companies as well as the change in the composition of HAX. Since our launch in 2012, the HAX B2B portfolio has grown from 10% to 70% of our total investments, and that includes a majority of the fastest growing start-ups.

Equipping hard-tech companies is easier and cheaper

The technologies and strategies for creating early stage hard-tech startups have advanced by orders of magnitude in less than a decade. The price of 3D printers has gone from $ 20,000 to $ 200. PCBs are shipped worldwide in just a few days (even when there is a savage shortage in supply chains). Hundreds of thousands of suppliers exist online, ready to manufacture and ship components overnight. It makes sense for an early stage founder on a small budget to build an impressive, revenue-generating prototype. As a result, hard-tech founders can focus on their basic technological development and take many things once considered really “difficult” for granted. Similar to the rise of APIs, AWS, and no-code that sparked new applications for software, similar revolutions are the backbone of the new world of hard technology.

Doctorates are icons of the future

Because the commercialization of hard technologies is no longer a pipe dream, more and more doctoral and post-docs are registering to create businesses. It is common for a HAX startup to have a PhD founder, or one who has spent years working on a doctoral thesis (more than 40% of SOSV Climat 100 companies have at least one doctoral founder). They respond to more entrepreneurial impulses directly from universities, but are also inspired by the call for great technological challenges at the level of civilization, such as the climate.

This is not an easy path for investors because, almost by definition, the work of a university lab will be very advanced, somewhat speculative, and without a proven market. In other words, hard-tech startups are usually in very deep waters, and the leadership and insight of the experts is invaluable. As a result, many VCs choose scientists and engineers for their investment teams, lest they risk missing out on the next generation of great founders and changing startups. We are at the start of a golden era of opportunity for our best minds in science and technology.

These highlights of the emerging rise of HAX Hard Tech are not a prediction of the years to come, but a reflection of what the HAX team sees happening in our portfolio every day. We are amazed by the quality of the ideas, the ambition of the founders and the speed of execution in the face of projects which, not so long ago, were considered impossible. Of course, it’s always difficult, but more and more entrepreneurs and investors are turning to hard technology as it becomes an inevitable force for decades to come.

Disclosure: Former TechCrunch COO Ned Desmond is now a senior partner at SOSV.

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