Brian Li 🍊👾
@bli.eth
Spent the weekend talking to dozens of founders at YC alumni reunions and realized that we’re in the middle of an inflection for hard-tech companies. (10% of the recent batch of 240 startups are in hard-tech) Sharing some thoughts on why this is happening below ⬇️
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Brian Li 🍊👾
@bli.eth
💥 Global conflict including wars are causing significant policy shifts - Defense tech has broadly been “uninvestible” at the startup level due to the dominance of existing oligopolies, but Palantir and Anduril have broken through as flag bearers for innovation. - LPs at funds are now changing their perceptions around weapons due to wars and are loosening restrictions for what VCs can and cannot back. - Deglobalization is resulting in a focus on domestic manufacturing through both tariffs and subsidies. This enables manufacturing startups that would otherwise be uncompetitive at a global level to emerge through government support.
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Brian Li 🍊👾
@bli.eth
🧠 Improvements in compute and novel AI models - AI reduces the barrier to entry for startups in capital intensive industries like pharma where they can bring the cost of developing viable drug candidates from $1b to tens of millions. Pharma companies are willing to commit to large contracts and foot the R&D bill of these startups for the potential payoffs. - Powerful foundational models like AlphaFold are now capable of generating viable synthetic data for training new models, creating an explosion in training data that can be purchased at affordable prices. - New models like o1 with advanced reasoning capabilities can synthesize complex scientific papers/concepts, making it easier for motivated founders to gain the technical knowledge needed for hard-tech. - AI is creating massive new demand for energy and chips that outstrips supply, creating market opportunities for profit and innovation in industries that had previously been relatively competitive and commoditized.
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Brian Li 🍊👾
@bli.eth
☁️ A realization of limits in software startups - Revenue slowdowns have hit startups in many software categories where markets were not as big as projected. Productivity gains from AI are further eating into the growth of those markets. - Many hot SAAS startups raised too much money at too high valuations during low interest rate environments. Though they are flush with cash, they are not positioned to IPO or return capital to investors. - SPACs proved largely unsuccessful and the bar to IPOs have increased, all while the FTC has increasingly barred big tech from acquiring startups in niche areas. Basically, exit opportunities are drying up across the board.
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