Venture capital turns toward the physical world
Venture capital manufacturing is a growing investment focus in which investors fund early-stage companies building hardware, software, and services that improve how physical products and infrastructure are designed, produced, and maintained, especially in factories and industrial supply chains. Transition Ventures’ new fund of more than USD 150 million (approx. RM690 million) signals how far this shift has gone. The firm backs founders working at the intersection of artificial intelligence and the physical world, from energy and materials to industrial infrastructure. According to Transition Ventures, rapid advances in AI and rising geopolitical pressures are driving demand for cleaner, more efficient systems that can replace polluting and inefficient legacy assets. These physical tech startups may face more complexity than pure software plays, but investors see the chance to rebuild the foundations of the global economy and capture long-term value in the process.
Early-stage founders and the appeal of physical tech startups
Transition Ventures is doubling down on early-stage founders who build “full-stack by necessity,” combining hardware, software, and deep technical expertise. These physical tech startups are tackling problems such as energy bottlenecks in computing infrastructure, industrial efficiency, and climate resilience. Portfolio company OLIX, for example, addresses power constraints tied to high-performance computing and has reached a reported USD 1 billion (approx. RM4.6 billion) valuation. Upway refurbishes electric bikes and has deployed more than 200,000 units while growing revenue thirtyfold, highlighting how physical products and circular-economy models can scale with venture backing. Seneca uses autonomous drones to fight wildfires and has secured USD 60 million (approx. RM276 million) in funding, showing how hardware innovation investment can support critical public-safety infrastructure. These stories underline why investors are comfortable funding complex, capital-intensive businesses when the upside includes durable economic and environmental impact.
On-demand custom manufacturing funding takes center stage
One of the clearest signs of venture capital’s new appetite for the physical world is the rise of custom manufacturing funding. SendCutSend, an on-demand platform for custom-cut metal and fabrication, has raised USD 110 million (approx. RM506 million) in its first venture round, led by high-profile backers including the founders of Stripe, Sequoia Capital, and Paradigm. The company had been bootstrapped since 2018, funded through personal savings, bank loans, and credit cards, until surging demand from AI-driven industries such as robotics and data centers pushed it to seek outside capital. Paradigm’s Matt Huang noted that fast, on-demand sheet metal and custom parts are now vital, saying that frontier sectors from robots to rocket companies “all need very fast turn prototyping.” This deal marks Paradigm’s first investment in the manufacturing sector, underscoring how venture capital manufacturing is moving into advanced production services.
What this wave of hardware innovation investment signals
Taken together, Transition Ventures’ physical-world fund and SendCutSend’s large round show a broader shift in hardware innovation investment. Investors are no longer focused only on software; they are seeking companies that mold atoms as well as bits. Custom manufacturing funding is flowing toward platforms that shorten prototyping cycles and support sophisticated hardware development in sectors from defense to electric mobility. At the same time, funds like Transition Ventures see opportunity in rebuilding energy, materials, and industrial systems around AI-enhanced tools and automation. This signals a future in which physical tech startups are central to both climate and productivity goals, as they modernize factories, supply chains, and infrastructure. For founders, the message is clear: if they can combine deep technical skill with scalable business models, the next wave of venture capital manufacturing is ready to back physical innovations that can outlast the current software cycle.
