The State of Technology & Culture:

A Return to Hard Tech

We back founders at the heart of those movements who are building category-defining companies across sectors. From our base in California, we invest globally, partnering early and staying hands-on for the long haul.

Our portfolio spans more than 100 companies in AI, enterprise software, digital health, fintech, and hard tech. We support both builders reimagining the digital backbone and those engineering the physical world. As disciplined generalists, we view it as our fiduciary duty to give LPs diversified exposure to exceptional businesses.

We periodically publish deep-dive reports on the structural shifts reshaping global markets. Each edition highlights domains we believe offer exceptional potential for growth, breakthrough innovation, and attractive investment. Informed by the front-row visibility of our current portfolio and reinforced with rigorous market research, these reports deliver actionable industry insights.

This report is about that kind of future. The one we could have had, and the one we still might. It traces the technological revolutions that reshaped civilization and the hard tech breakthroughs that made them possible. Then it asks: why did we stop? And what could we build if we started again?

Imagine if America’s shipbuilding surge in the 1940s never slowed. At its peak, we built 9,000 vessels and sustained a Navy of 6,700 ships. Today, we have fewer than 300. Imagine if nuclear power kept scaling after the 1980s, when 25 plants came online globally each year. Or if the Concorde marked the beginning—not the end—of commercial supersonic flight. Or if we hadn’t offshored our industrial base, when 20 million Americans worked in factories before globalization hollowed it out.

Had we kept going, the world would look radically different: abundant clean energy; permanent lunar settlements; same-day global shipping; and a manufacturing base resilient enough to absorb shocks or deter conflict. But instead, momentum faded, regulation crept in and capital got cautious. We optimized instead of built.

Electricity. Mobility. Communication. Energy. Every system that defines modern life was born in the physical world; built on the back of semiconductors, engines, rockets, power grids, and machines. Civilization advances through hard tech, rooted in breakthroughs in hardware and deep science. Software follows, refining and scaling what those foundations make possible.

And yet, for too long, these technologies were dismissed. Too slow. Too capital intensive. Too hard. Or so the thinking went. But the pendulum is swinging back. A new generation of builders is returning to the physical world with software in their toolbelt and ambition in their bones. They’re not just building products; they’re creating systems that connect intelligence with atoms and code with infrastructure, laying the groundwork for entirely new industries.

This is the new frontier. Not hardware in isolation, but hardware fused with deep science, software, and intelligent systems. These companies don’t just disrupt markets. They create them.

At MaC Venture Capital, we believe the next wave of transformational value will come from reimagining the physical world and investing in the hard technologies that hold civilization together and drive it forward. These companies are harder to build, but once established they endure and unlock new worlds.

This report is our call to return to the physical frontier. To fund what’s next. Not just to imagine a better future but to build it.

To access a PDF version of this report please click here.

Mike Palank

General Partner

MaC Venture Capital

mike@macventurecapital.com

Today, hard tech accounts for 26% of our deployed capital and over $2.7 billion in combined company valuation. These are long-cycle, high-conviction investments in sectors most investors avoid, but they’re exactly where the next industrial leap is taking shape.

We backed Stoke Space to rethink launch from first principles, building fully reusable rockets for rapid, resilient access to orbit. Starfish Space is creating the autonomous infrastructure of space: satellite servicing, debris removal, and in-orbit logistics. Wyvern and NUVIEW are unlocking new layers of Earth intelligence, using hyperspectral and LiDAR imaging to reveal what’s long been hidden. Xona Space is augmenting fragile GPS with a secure, high-performance navigation system engineered for autonomy. Volta Space is powering our future lunar economy.

Back on Earth, hardware meets intelligence. Chef Robotics is reinventing food production with adaptive automation. Flyby Robotics is reimagining programmable drone technology that decouples our reliance on their foreign made counterparts. Raise Robotics is automating construction in the most physically demanding environments. Cosmic Robotics accelerates the build-out of critical infrastructure with AI-driven construction technology, starting with solar.

And in energy, we’re backing what’s next. Safire is commercializing safe, scalable lithium-ion batteries. Leapfrog Nuclear is building novel, advanced fission reactors alongside proprietary TRISO fuel for a resilient, distributed grid. Hexium is developing enrichment capabilities for the future of our country’s fusion reactors which will bring into reality for the first time a nuclear powered renaissance.

What unites these companies isn’t just ambition; it’s their architecture: physically integrated, software-defined, and purpose-built for the real world.

PCs birthed Microsoft; fiber backbones and smartphones scaled Google; GPS satellites, mobile phones, and cars power every Uber ride; NVIDIA GPUs and megawatt data centers fuel OpenAI. Each physical breakthrough widens the digital frontier and the markets that follow. 

Hardware-led breakthroughs don’t just launch new products and companies; they reset society’s operating system. According to economist Carlota Perez in her book Technological Revolutions and Financial Capital, technological revolutions give way to new techno-economic paradigms that reorganize economics, culture, and institutions. The next wave of hard tech is poised to do the same, and today’s builders are already laying its foundation.

The companies at the core of each enabling technology fueling the revolutions below captured enormous value, but more importantly, unlocked entirely new industries whose collective value creation was orders of magnitude more.

For example, electrification was a key enabler of the second industrial revolution. Thomas Edison’s General Electric Company founded in 1892 was the company primarily responsible for electrifying many of the U.S. factories during this period. It quickly became one of the largest and most influential companies in the world, and today it remains as one of the 100 most valuable companies globally and one of the oldest. Electrification coupled with Henry Ford’s new assembly line production system gave rise to the automobile and steel industries (respectively, $3.5 and $2.1 trillion industries in today’s dollars), and necessitated the railroad and cargo shipping industries ($590 and $15.7 billion) to transport raw material and finished goods around the world.

Apple and IBM launched early versions of the personal computers in the late 1970s and 80s and became some of the most valuable companies in the world by the mid 1980s, but companies like Intel making processors for these computers and Microsoft and Lotus making operating systems and applications, collectively were worth billions more. 

Today, Open AI is worth $300 billion, but its very existence is underpinned by GPUs made by NVIDIA (worth $3.3 trillion), who relies on TSMC ($871 billion) to fabricate many of their processors, who in turn uses lithography machines made by ASML ($303 billion). And what is unlocked with all of this is the untold billions, if not trillions in market value that will be derived from the integration of artificial intelligence into every aspect of our lives. 

In fact, many of the oldest and most valuable companies in existence today are the hardware companies behind each major technological revolution, and the hardware and software companies that came to prominence in the years that followed. 

And the Dow Jones Industrial Average, essentially an index of the overall U.S. economy and once dominated by hard tech, still counts two-thirds of its constituents as hard technology companies.

From Silicon Valley’s inception in the 1960s through the early 1980s, the most valuable venture-backed companies built hardware. In contrast, by the 2000s 90% of the top 10 most valuable venture-backed companies made software. But in the last 15 years, hard tech has made a comeback: today, four of the top 10 most valuable U.S. private, venture-backed companies are hardware focused.

As might be expected, trends in the public markets where hard tech companies like U.S. Steel, Standard Oil, General Motors, DuPoint and AT&T have dominated for decades, have been slower to shift. In fact, up until the 2020s the top-10 most valuable public companies of each decade have been those whose core product offerings are physical. Today, 50% of the world’s top 10 most valuable publicly traded companies are producing hard tech.

He was criticizing the VC industry which he felt “has ceased to be the funder of the future, and instead has become a funder of features, widgets, irrelevances.”

The origins of Silicon Valley date back to 1957 when eight engineers–later referred to as the “traitorous eight”–left their employer Shockley Semiconductor Laboratory based in Syosset, New York to start a new semiconductor company called Fairchild Semiconductor in Mountain View, California. Fairchild provided research and development for flash photography equipment primarily used for US Department of Defense (DOD) spy satellites (the DOD and Silicon Valley would go on to have a very intermingled relationship).

Arthur Rock, a former securities analyst who focused on raising money for small high-technology companies in New York convinced Sherman Fairchild, one of the traitorous eight to leave Shockley, and through his newly minted firm Davis and Rock (also located in what would later be called Silicon Valley) invested around $3M in 1961 into Fairchild, and thus the VC industry was born. Davis and Rock would go on to back other legendary companies such as Intel, Apple Computer, and Teledyne among others.

Silicon Valley, and the sprouting venture capital ecosystem inside of it, gave birth to many transformative companies during the 1960s and 70s: Fairchild Semiconductor, Apple Computer, Genentech, Intel, Atari, Tandem Computers, Cisco, 3Com and Microsoft, all of whom either helped birth, or benefited greatly from what Carlota Perez called “the Age of Information and Telecommunications.”

For much of the 20th century, the U.S. experienced unprecedented economic growth, fueled by bold investments in foundational technologies. Each decade brought innovations that expanded industrial capacity, reshaped infrastructure, and elevated productivity.

From the time of the second industrial revolution of the 1900s through the post World War II boom in the 1950s, the Apollo program of the 1960s, and the rise of Silicon Valley in the late 60s and 70s, America saw its prominence in the world rise drastically. Decade-over-decade GDP growth was at all-time highs, and the overall standard of living for the majority of people in the U.S. was at its peak. The American Dream was thriving. 

Offshoring of U.S. manufacturing began in earnest in the late 60s and 70s as companies sought lower production costs abroad. One early channel was the maquiladora program launched in 1965, which let US firms operate factories just across the Mexican border. By relocating labor-intensive assembly to Mexico, companies like General Electric (a pioneer in this trend) significantly cut costs. Employment in Mexico’s maquiladoras exploded from about 200,000 in the early 1980s to over 1 million by the late 1990s. The North American Free Trade Agreement (NAFTA, 1994) further incentivized manufacturing shifts to Mexico, and China’s entry into the World Trade Organization (WTO) in 2001 was a watershed. After 2001, with permanent normal trade relations in place, many U.S. firms moved production offshore at an unprecedented pace – a phenomenon often dubbed the “China Shock”. Manufacturing employment in the U.S. went from a peak of 19.6M people in 1979 (21% of total employment) to a low of 11.5M people in 2010 (9% of total employment), and total GDP share from manufacturing went from 35% in the 1950s to only 17% by the 2010s. The U.S. went from being a net exporter of manufactured goods to a net importer. 

Meanwhile, from 1980 to 2020, China’s real GDP (in 2015 dollars) compounded at 9.3%, rising from $423 billion to $14.6 trillion. Over the same period, the United States real GDP in 2015 dollars grew 2.6%, from $7.1 trillion to $19.7 trillion. China’s output was just 6% of U.S. GDP in 1980; by 2020 it had reached 74%.

As U.S. manufacturing shrunk, the financial services industry (finance, insurance, and real estate) grew. In the mid-1950s, the industry accounted for a mere 3% of total U.S. GDP. Today, it is worth close to $5 trillion and accounts for over 20% of total GDP. 

Many of the highest-performing companies during this period optimized existing systems, but did not materially advance the infrastructure or capabilities that drive long-term economic prosperity. As a result, companies increasingly extracted economic returns—through higher revenue, profits, and valuations—without driving proportionate gains in societal progress.

And perhaps in response to these major macroeconomic changes, Silicon Valley also went searching for profit-maximizing opportunities. The commercialization of the internet began in earnest in the early 1990s, and by 1993, web browsers like Mosaic and Netscape Navigator made the internet accessible to non-technical users, fueling rapid public interest. Low interest rates and Alan Greenspan’s Fed policies encouraged capital flow and increased risk-taking. As a result, VC funding ballooned from $8 billion in 1995 to $105 billion by 2000. Hundreds of dot-com startups were formed with little more than an idea and a website. Companies were often funded to IPO with no revenue, minimal user base, or no viable path to profitability. The Nasdaq Composite Index, heavy with tech stocks, more than doubled from 1997 to early 2000, peaking at 5,048 on March 10th, 2000. And then the bubble burst, and the Nasdaq lost 78% of its value by 2002, with billions more of private venture dollars wiped out as companies failed. However, physical infrastructure built during the bubble (fiber optics and data centers) became the backbone for the Web 2.0 and mobile revolutions of the 2000s.

Looking at the top 100 U.S. venture deals by size from the decades of the 1990s and 2000s, the changing focus of investor attention can clearly be seen. In the 1990s, 90% of the top 100 venture deals and 87% of the deal volume went into non-physical companies, many of which were dot-com companies. During the 2000s, 52% of the deals and 54% of the deal volume went into non-physical companies.  

The effects of both the industrial and technological booms of the 1940s through the 1970s and the offshoring of manufacturing, financialization of the US economy, and shifting focus in Silicon Valley of the 1980s through the 2010s can be seen in the two charts below. Starting in the 1940s and continuing into the late 70s the widening of the income gap in the U.S. slowed drastically. The share of national income held by the top 10% of the U.S. population hit a high of 50% in 1930 and then fell to under 35% by the mid 1940s where it stayed for the next 35 years. 

This shrinking income inequality gap contrasts with what has been happening since the 1980s. While the middle 40% and bottom 50% of earners in the U.S. have seen their wages rise slower than per-capita GDP, those earning in the top .01% have seen their incomes rise over 400%. And as of 2017, the top 10% of U.S. households held 50.1% of the income, according to economists Emmanuel Saez and Thomas Piketty. The per-capita GDP in the U.S. grew by a compound annual growth rate of 2.24% during the 30 year period of 1950-1980, but fell by nearly 50% to 1.18% during the 42 years following 1980.

Instead of flying cars, we got stagnating growth and rising income inequality. 

The conventional “hardware is hard” narrative was fueled by concerns around long timelines, capital intensity, low margins, and poor exits. Investors had gotten used to software companies and their high margins, zero marginal cost of distribution, and reliable recurring revenue. However, 45 years into the software era, that narrative is being questioned. 

We wanted to address some of these historical concerns using real-world data. Starting with long timelines and poor exits, using PitchBook data, we looked at the top 100 venture-backed company exits ranked by exit proceeds. For each company on this list, we categorized them into physical and non-physical groupings based on their core product offering. While the table below highlights the dominance of non-physical companies in both number and total exit proceeds, a closer look reveals that physical product companies performed surprisingly well across several key metrics.

Despite representing a smaller share of total exits, physical companies exited more quickly on average and achieved exit proceeds that were nearly on par with their non-physical counterparts. Additionally, although average exit valuations were higher for non-physical firms, the $7.6 billion average for physical companies still reflects substantial value creation. Notably, both categories reached maturity at nearly the same pace, with average company ages through 2025 differing by just one year.

Next, we took a look at capital intensity differences between physical and non-physical companies. As a proxy for capital intensity we used total VC funding as reported by PitchBook. This analysis looked at the top 100 venture-backed companies ranked by total funding. Here the results were even more striking: non-physical companies actually made up 65% of the companies on this list by number and 68% by total dollars raised. Non-physical companies actually raised on average 1.17x more than physical companies. And while non-physical companies have 1.3x the collective valuation, the average valuation of physical companies was actually 1.4x higher than non-physical ones. 

This analysis lines up roughly to what Leo Polovets of Humba Ventures described in his post, Betting on Deep Tech. Looking at PitchBook data for US/Canadian companies founded since 2010 that have had $250 million or greater exits, Leo finds that on average, most funded companies “are almost exclusively more traditional startups in areas like marketplaces, fintech, social networking, etc. These are companies like Uber, WeWork, and Oscar, which spend orders of magnitude more than most deep tech businesses” and that “companies across traditional and deep tech sectors are similarly capital intensive.”

Leo also found that “deep tech and life science companies actually exit 10-25% faster than their traditional counterparts. For example, the average company age for exits above $500 million is just under 8 years for traditional companies, just over 7 years for deep tech companies, and under 6 years for life science companies.”

This also aligns with the analysis done by Aaron Slodov, Co-Founder and CEO of industrial manufacturing company Atomic Industries, comparing total VC raised between top software and hardware companies. 

Leo also took at a look the percentage of companies across a range of traditional and deep tech industries that had an exit after raising $250 million or more in venture funding, and found that “almost regardless of category, your chance of hitting a $250 million plus valuation is around 7-9%”, and “companies in areas like defense, space tech, and life sciences have 2%-5% odds of having $250 million plus exits, while companies in categories like SaaS, Fintech, and AI/ML have 1%-1.5% odds.”

Finally, Aaron also dove deep to compare various metrics of hardware vs software companies in his post, Rewiring Silicon Valley for the World of Atoms: The Industrial Venture Moment and found that software and hardware companies on the whole to be very similar across a wide range of company metrics.

To dive deeper into the private and public investing trends of the past 25 years we used PitchBook to create hardware and software company sample groupings.

Hardware includes companies tagged in advanced physical-tech fields such as aerospace and defense, semiconductors, 3-D and advanced manufacturing, robotics and drones, autonomous vehicles, space, quantum, and AI-enabled edge infrastructure, while excluding any company also tagged for consumer goods, retail, pure software, or health services.

Software comprises businesses PitchBook places in the software vertical including applications, developer tools, SaaS, and related segments. While these groupings did not capture every relevant company in each category, we feel that directionally a story emerges. 

Maybe most notable is the discrepancy between where VC dollars have flowed over the last 25 years compared to where the majority of both private and public value has accrued. From 2000 up until just a few years ago, about 3x more venture capital investments went into software companies.

However, if you look at the cumulative post-money valuations of hardware and software companies the story is different. While software companies have attracted more investment capital, the aggregate valuations of the companies in these two sectors are roughly the same over the time period.

In the public markets this dichotomy is more extreme. Hardware company IPOs have far outnumbered their software peers, and aggregate market caps immediately following those IPOs have largely accrued to hardware companies.

And on a per-IPO basis, software companies have actually raised more on average over the last 25 years—a fact that in and of itself might challenge the notion that hardware companies require more capital for continued scaling.

What the data clearly shows is that the narrative around hardware companies being at a disadvantage compared to software companies has been overstated. Because of this and other macro factors that are mentioned below, VCs over the last few years have started to come back to the industry’s hard tech roots:

• * Leo Polovets, Co-Founding General Partner at software-focused VC firm Susa Ventures, launched Humba Ventures in 2022 to focus only on hard tech investing.
• * One of LA’s most well-known and successful early-stage venture firms, Crosscut, which started in 2007 and focused mostly on consumer and software companies in the marketing and retail spaces, pivoted to exclusively focus on frontier tech in 2024.
• * Growth-fund Coatue, started in 1999, whose notable investments include Airtable, Ant Financial, Instacart, Snap, and Sofi, published America’s Industrial Reboot: A Massive Tech Opportunity in 2025.
• * Union Square Ventures, one of the most successful seed-stage firms of all time recently put out a post on the deep tech opportunity in early 2025.
• * Even Marc Andreessen–who wrote the software manifesto, Why Software Is Eating The World in 2011–has come back around writing It’s Time to Build in 2020, followed two years later with the announcement of their American Dynamism fund.
• * And this is in addition to the countless other funds like Founders Fund, UNION Labs, Not Boring Capital, Counstruct Capital, Cantos, DCVC and others (these hyperlinks lead to each fund’s manifesto) who have been continuously investing in hard tech.

We find ourselves today at the confluence of several macro trends that are each driving the necessity of a new hard tech revolution encompassing AI, aerospace and defense, energy and climate, industrial automation and advanced manufacturing, robotics, supply chain and logistics, cybersecurity, and biotechnology.

These trends include: 

Ironically, the most promising hard tech companies of today have a distinct advantage over their predecessors: software. While this essay began by weighing the relative importance of hardware versus software, it is clear that the most transformative companies today are those that integrate both. The future of hard tech lies not in choosing between hardware or software, but in fusing the two through vertical integration.

Vertical integration, the seamless unification of hardware and software within a single organization, is a defining feature of the most valuable technology companies today. From NVIDIA and Tesla to SpaceX and Anduril, these firms do not simply assemble components or write code; they control the entire value chain from design to deployment. As investor and writer Packy McCormick explains, vertical integrators are companies that integrate multiple cutting-edge yet proven technologies, build significant in-house capabilities across their stack, modularize commoditized components while maintaining control over overall system integration, compete directly with incumbents, and offer products that are better, faster, or cheaper—often all three. In his words, “the integration is the innovation.”

This model is not a recent invention. In the industrial era, companies like Ford, Boeing, and Standard Oil achieved success by vertically integrating their operations. What differentiates today’s leaders is the central role of software in enabling that integration. As Peter Thiel noted in a Stanford lecture, the most impactful innovations over the last 250 years have come from either software or from complex, vertically integrated monopolies.

Modern vertical integrators unite both forces. Software now plays a pivotal role throughout the entire product lifecycle—from development and manufacturing to post-sale updates and continuous optimization. Cars, once static machines, have become dynamic platforms. Tesla vehicles receive regular over-the-air updates that improve performance and add new features. Apple enhances the functionality of its iPhones and Mac computers through ongoing software upgrades. Even the equipment used to manufacture these products is improved by intelligent software systems on the factory floor.

This convergence enables faster operational improvements and extends the lifespan of physical products. Together, these forces create a self-reinforcing cycle of innovation, allowing companies to scale efficiently and remain competitive over time.

This led to new techno-economic paradigms that reshaped business and society, created entirely new industries, and provided higher standards of living. At the heart of each of these movements have been innovative and disruptive entrepreneurs wielding force over the world of atoms to shape physical matter into powerful new tools that had an outsized impact on the world.

We again are at a time in history where major global macro trends coupled with advancements in technology can create the incentive and means to unlock a new and better world. As in the past, this process will be rooted in hardware. As investors, we cannot forget this past, nor can we shy away from investing in the hard things. This moment provides us with an opportunity to back companies that will not only alter the path of the human race, but also create more value than anything that has come before.

As Packy McCormick writes in his essay, Better Tools, Bigger Companies, “techno-industrials will create more value and wealth over the next decade than pure software companies for the simple reason that the combination of atoms and bits is more powerful than bits alone. In a couple of decades, I think we’ll see more Techno-Industrials with higher market caps than the largest current incumbents, and that those market caps will be much higher than they are today, as technology unlocks better products, higher margins, and faster growth.” At MaC, we could not agree more.

Today, geopolitical risk is rising, climate disasters are more costly than ever, the world’s energy demand cannot be met, and America’s trade deficit is selling the nation out from under us. It didn’t have to be this way. 

As history has shown, progress has stemmed from building hard things–and despite the missed opportunities resulting from a departure of our building roots, evidence of this history persists:

• * global GDP has been rising exponentially
• * global life expectancy has more than doubled in the last 250 years
• * child mortality rates have fallen by half over the last 30 years
• * there are way fewer people dying from infectious diseases 
• * people living in extreme poverty has decreased dramatically 
• * global deaths from military conflict are at nearly the lowest levels in the last 600 years,
• * global food production has increased nearly 4x since the 1960s

Hopefully this report has thoroughly shown that the overall rise in global living standards and human advancement has largely been driven by technological revolutions enabled by breakthroughs in the physical industries, the world of atoms.

Perez, Carlota. Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages, April 26, 2003

Gibney, Bruce. “What Happened to the Future?” Founders Fund Blog, January, 2017

Marc Andreessen, “It’s Time to Build” a16z.com

Polovets, Leo. “Betting on Deep Tech” Humbra Ventures Blog, November 21, 2023

Marc Andreessen, “Why Software Is Eating the World” Wall Street Journal

Slodov, Aaron. “Rewiring Silicon Valley for the World of Atoms: The Industrial Venture Moment” LinkedIn, March 30, 2025

Matthew Mandel, “The Deep Tech Opportunity“ matthewmandel.com

Vedantam, Keerthi. “Crosscut Ventures Pivots” Los Angeles Business Journal, December 23, 2024

Armin Kohan, Sri Viswanath “America’s Industrial Reboot: A Massive Tech Opportunity” coatue.com

Katherine Boyle, “Building American Dynamism“ a16z.com

Ali Tamaseb, Matthew Ocko “Solving the world’s hardest problems with Deep Tech: Request for Startups” dcvc.com

Cantos Ventures, “Don’t call it “deep tech”” medium.com

Construct Capital, “The Foundational Industries of our American economy have been neglected, sacrificed, and nearly forgotten for decades.” constructcap.com

Packy McCormick, “Vertical Integrators” notboring.co

Packy McCormick, “Better Tools, Bigger Companies” notboring.co

Peter Thiel, “Vertically-integrated companies are underexplored” youtube.com

Nate Williams, “SPOILER ALERT: The Future of SaaS is DeepTech (Where Software Meets Hard Science)” linkedin.com

Jerry Neumann, “The Deployment Age” reactionwheel.com

Sebastian Mallaby, The Power Law, February 1, 2022