What We Believe After a Year of Deep Tech Investing
Last year, we laid out some 2018 ideas and thoughts about our new firm, Blue Sky Capital, and the industry at large. What we’ve found is that everything we discussed in our first Medium post has become quite sticky.
What we’ve been up to
In 2018, we looked at nearly 200 deep tech companies focused on component electronics. 200 companies might not sound like a lot when you consider similar sized venture funds look at more than a thousand companies a year, but launching our fund with focus and conviction has whittled down the universe of opportunity pretty quickly for us. We don’t spend any time scouting for or talking to founders in the consumer space, pure software players, or anyone generating apps.
In 2018, we looked at nearly 200 deep tech companies focused on component electronics. 200 companies might not sound like a lot when you consider similar sized venture funds look at more than a thousand companies a year, but launching our fund with focus and conviction has whittled down the universe of opportunity pretty quickly for us. We don’t spend any time scouting for or talking to founders in the consumer space, pure software players, or anyone generating apps.
From the relationships we’ve established at research universities and labs, we’ve begun receiving leads on companies we’re really excited about. Founders whose fundraising opportunities were once limited to SBIR or government grants, like NSF and DARPA, are eager to learn more about and corroborate our thesis.
These are the founders who’ve been so busy in their labs, they can’t get out to pitch night and compete with the kid in the hoodie bragging about how he’s created the next billion dollar social network. Deep tech isn’t as sexy a dating app. These founders might not be as visible, but their hard research is bringing forth technology that will be difficult to miss. These are the people we believe in and put our investment dollars behind.
Since these founders are unlikely to be found by reading Engadget or on the startup event circuit, we’ve been introduced to them by universities’ office of tech transfer or university entrepreneurship centers have connected us to companies, post-doc researchers or faculty that they know are working on specific kinds of projects. Our engineering and sales teams at Samtec are also beginning to facilitate introductions to interesting companies and founders they’ve encountered in their roles for the company.
All that said, founders like us and Blue Sky Capital’s funnel is expanding. Now, that we’ve laid the groundwork for our pipeline, we’re looking ahead to what we plan to accomplish in 2019 and the trends evolving in the industry.
Where we’re headed — market drivers that get us excited.
Now that we’ve established the kinds of projects and companies that interest us, we’re honing in on the market drivers behind these initiatives.
Autonomous Machines
We believe that core technology for autonomous vehicles is still caught up in the hype cycle.
This is a good thing.
Because there’s still massive amounts of work to be done at the component level, the chip level and the sensor level, there’s no end in sight for investment opportunities into startups in this arena.
Some might argue one of these LIDAR companies is going to “win out in this space,” but we see this playing out like the early days of the personal computer industry and nobody stopped developing new PCs once Altair 8800 came out.
Autonomous vehicles and robotics are creating so much demand there are thousands of companies that still need to be founded to make the future possible. And among those endeavors should be chip companies, sensor companies, and core architecture development in existing technologies like LIDAR, SONAR, and RADAR.
And among those endeavors should be chip companies, sensor companies, and core architecture development in existing technologies like LIDAR, SONAR, and RADAR. And we’re looking forward to meeting these founders.
Cloud Infrastructure
Before you roll your eyes at the mention of the Cloud, consider this: Once merely a buzzword, it has now become table stakes in computing architecture. This means more data centers using astonishing amount of energy and an insatiable need for more data transport speeds. These two things mean one thing: More heat. Managing the heat is essential to fulfilling power consumption and processing power demands otherwise a bottleneck will form around the core technology necessary for advancements deep tech like AI, robotics, blockchain or supercomputing.
Before you roll your eyes at the mention of the Cloud, consider this: Once merely a buzzword, it has now become table stakes in computing architecture. This means more data centers using astonishing amount of energy and an insatiable need for more data transport speeds. These two things mean one thing: More heat. Managing the heat is essential to fulfilling power consumption and processing power demands otherwise a bottleneck will form around the core technology necessary for advancements deep tech like AI, robotics, blockchain or supercomputing.
To handle the heat generated by these demands, you can cool a data center by not creating the heat in the first place or you can attempt to cool the data centers that are already up and running. We think new companies will emerge to do both.
So, we’ve started researching technologies at the rack level. Mainly hyper scale switches that use less power. We need to make data centers more energy efficient right out the gate. But we’re also looking at technologies that would traditionally be defined as industrial like developments in HVAC that can cool the data centers we have today and improve the data centers of tomorrow.
The End of Moore’s Law
What replaces silicon in the end of Moore’s Law? Discussions about this have been happening for the past five or ten years, but we are just now entering the post-silicon technologies era.
Silicon semiconductors cannot be made any smaller and, so now, we look beyond silicon to other materials like gallium nitrate, diamonds, sapphires — really any carbon or alternative — to unlock technology’s potential to provide the processing power needed for highly demanding applications.
We’re seeking out founders in this space. One of the companies in our portfolio that we’re looking forward to sharing more about is J2 materials. Their man-made diamond process and intellectual property allow them to create pure diamonds faster, making diamonds a more competitive replacement for silicon. The end of Moore’s Law is ushering in some truly incredible human ingenuity.
We’re seeking out founders in this space. One of the companies in our portfolio that we’re looking forward to sharing more about is J2 materials. Their man-made diamond process and intellectual property allow them to create pure diamonds faster, making diamonds a more competitive replacement for silicon. The end of Moore’s Law is ushering in some truly incredible human ingenuity.
Other reads…
We’ll delve deeper into each of these topics over the course of the next year. In the meantime, we’d like to share who we’re reading and following in this space. MIT Media Lab, you can also follow them on Twitter. And for more topical reads, we’re huge fans of Nellie Bowles from the NY Times, who is also super active on Twitter.
