Can venture investors trained on software successfully underwrite hard tech, defense and climate?

Harry Stebbings · Mar 20, 2024

Many software investors moving into hard tech will get burnt because it requires a fundamentally different mindset

It's as mismatched as having your sales team write code — the skill set doesn't transfer

Scope: still shares the excitement about the category

49:06 20Product: Why Process is Killing Your Product Team and How to Remove it | Three Product Decisions Every Team Needs to Make | Why the Best Companies Build Movements and Lessons from Shopify and Atlassian on How to Do It Right with Jean-Michel Lemieux

Harry Stebbings · Apr 3, 2024

A generation of venture investors will burn a lot of capital on hard tech, because investing in hard tech is a very different skill set from enterprise software, fintech or consumer and most investors don't comprehend the difference.

Hard tech has become popular in venture again but the requisite skill set is not transferable from software investing.

56:27 20VC: Founders Fund's Trae Stephens on Why The Most Competitive Deals are the Worst, Why No Company is Successful Because of their VC, Why We are Making ZIRP Mistakes Again Today, Why Loss Ratio is BS and Upside Maximisation is Everything

Harry Stebbings · Jun 19, 2024

Many software investors moving into hard tech will lose their shirts because it is a completely different type of company to underwrite

SaaS is over-proliferated and too competitive so capital is rotating to hard tech, climate and physically challenging investing, which requires different skills

29:04 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg

Harry Stebbings · Nov 27, 2024

Defense investing is a fundamentally different category from enterprise SaaS investing and requires a different investor mindset.

38:35 20VC: Why Price Sensitivity is BS | Why "Portfolios" are Merely a Construct to Make LPs Happy | Why the Best Investment Never Happen in "Fundraising Rounds" | What Europe Needs to do to Become a Superpower Again | Klaus Hommels, Lakestar

Harry Stebbings · Nov 21, 2025

It is worrying when a generation of software venture investors moves into hard tech, climate, manufacturing and defense

The underwriting shifts from familiar metrics like CAC to LTV and channel payback periods to bill-of-materials costs and manufacturing builds that these investors don't understand

23:26 20VC: Max Altman on The New Seed War: Can Anyone Compete with Sequoia and a16z | Leaving $2BN on the Table with Reddit | Lessons from Backing Rippling at $25M Post | Why Climate Tech is a Mirage and Disaster

Klaus Hommels · Nov 27, 2024

What is called defense investing is really deep tech investing where the ministries of defense have emerged as the customer

Countries are forced to think about technical sovereignty and self-defense capacity, classical equipment can't be built or bought fast enough, and the cost efficiency gap is enormous — a €1,000 drone takes out a $10m tank, a $500k unmanned submarine takes out a $500m conventional one — so MODs must shift allocation toward deep tech

25:40 Defense investing is fundamentally deep tech investing with mod as the customer

Klaus Hommels · Nov 27, 2024

Investing in defense is not that different from other deep tech investing; the main new thing to learn is the customer's special procurement process.

The underlying companies have the same traits — a superior sensor, or software running a drone's operating system instead of a phone's — just a different single customer.

38:53 Defense investing resembles deep tech except for learning the customers procurement process

Michael Eisenberg · Jun 19, 2024

The real question in hard tech is not whether investors lose money but why a non-software founder would take a SaaS investor's money — and the great founders likely won't, because the SaaS playbook doesn't apply

Losing money and companies is inherent to venture; the differentiating force is Darwinian founder selection of investors

29:33 Great hard tech founders wont take money from saas investors since the playbook doesnt apply

Max Altman · Nov 21, 2025 · hedged

Despite the general risk of software investors moving into hard tech, there are clear hard tech winners such as Anduril and Hadrian that will carry a fund

Their hard tech positions are clearly going to help the fund, even though part of the motivation for the shift was that it was more fun and a branding move

23:45 Hard tech winners prove the crossover can work

Delian Asparouhov · Jul 29, 2024 · hedged

The winning investor profile will be broad polymaths who can get up to speed across biotech, material science and aerospace, rather than specialists in financial analysis and software product; most current VCs will not reinvent themselves and the ranks will turn over with new classes

The kinds of companies being funded now require deep technical breadth rather than software and financial analysis skills

56:17 Polymath hard science generalists will replace software financial specialists via generational turnover