Update #6 on Varda's W-1 Mission:

howdy partner 🤠

V cold-emailed me when I was an associate I flew out to Portugal the next week to do all of KV's diligence The next week we invited him to fly to Menlo Park to present to our partnership The next week we invested $5m @ $25m post 5 years later the company is worth $2b+

We’re happy to announce our $280M Series D round led by @foundersfund. We’re extremely excited about this next chapter at Neuralink. If you’d like to help make the first human experience incredible and work on engineering challenges to restore vision and mobility, come join! neuralink.com/careers/

Officially open for business. DM for wire harnesses 👀

Delighted to co-lead the $142M seed round in EvolutionaryScale with @natfriedman @danielgross @Lux_Capital, a new frontier AI lab that has now trained ESM3, a natively multimodal and generative language model for proteins and the largest biological language model to date

An update on Varda’s W-1 Mission:

So @zebulgar is one of the most controversial VC’s on Twitter. From the debates on when people should have kids to Europe’s descending into a 3rd world status to Benchmark’s handling of Travis & Uber. This show has more heat than an Anduril fundraise. 🔥 Do not miss it. My top 8 takeaways 👇

At Scope we build solutions for our Vendors to have professional services that scale with you. With Scope you will have seamless customer kick offs, scale customer onboarding, and transparent project management. Start your free demo today. scopeinc.com/for-vendors

We’re gonna need a bigger boat! Meet Ghost Shark, an extra-large autonomous undersea vehicle (XL-AUV). That’s right, a massive underwater drone. As a defense product, Ghost Shark is even rarer than the creature it was named after: the prototype was delivered ahead of schedule, and on budget. We were honored to unveil the first of these with the Royal Australian Navy yesterday. More are on the way.

1) Happy to announce that Armada has secured $40M in funding led by @M12vc, @Microsoft's Venture Fund, and that all Armada products are now available on the @Azure Marketplace – further accelerating our mission to revolutionize edge computing.

Introducing the 2024 LA Hard Tech 50! 🚀 The momentum has become unstoppable for the entrepreneurs and engineers building in the hardware industrial ecosystem in Greater LA. @nickbkim and I compiled a new list of hard tech companies that had an outstanding year in 2024.

I was concerned going into 2023 that the VC crunch would hurt capital hungry hard-tech companies. The exact opposite has happened. My hard-tech investments are doing great and raising rounds but the SaaS/Fintech investments are struggling. Why do you think that is?

New Industrial Base, deep tech, hard tech, whatever you want to call it has the most dynamic founders I've met in my 12 years in tech. It takes a deep understanding of software, hardware, supply chains, enterprise level contracts, government contracts, and on and on and on

Need a weapon robotics engineer to help out in LA! Taking all levels, work alongside our team from Boston dynamics, Amazon, stripe etc building crazy automation that actually works IRL. DM me or email jobs@hadrian.co and reference this tweet and we’ll look at it straight away!

Thank you to everyone who reached out over the past couple of months. A few life updates: 1. I’ve officially wound down Countdown's operations and delivered a highly profitable outcome for our LPs. Most—if not all—of our investors are pleased with our returns. 2. I’m in the early stages of thinking about and building my next business. In the interim, I've temporarily joined @EquipmentShare, working with and learning from the founding team. Willy and Jabbok have impressively built and scaled a multi-billion dollar, cash-flowing industrial technology business in under a decade. 3. I've also decided to spend part of my time with @a16z as a Special Advisor. I’ve enjoyed learning how @davidu and @KTmBoyle are building out their American Dynamism practice. I expect a16z to be at the forefront of companies in numerous, highly-regulated sectors domestically. 4. Even though Countdown is no longer investing, my DMs are always open to founders of "hard tech" startups. If time allows, I'm always happy to ask tough questions, get your team in front of the right customers and investors, and chat through fundraising.

Every company should be on a mission to lay the foundation for our future. Commodity Capital is designed to finance those missions. To understand more about how we think, read through our Letters to LPs. commoditycapital.xyz/letters…

“Services” was a dirty word in venture until 5 minutes ago. Now, it feels like every VC firm has a thesis for why they’re investable in the era of LLMs. This is both exciting (because I think this view is correct) and amusing (because it became consensus overnight, like everything else in the SF venture matrix). Along the way, we somehow experienced a not-so-subtle shift from “AI-forward services companies are venture-investable” (a view I’ve held for a long time) to “VCs should invest in rollup strategies for AI-enabled services businesses” (no). The latter statement is decidedly not a logical extension of the former. I know I’m far from the only person who feels this way. But I’ve heard it so much over the last few months that I feel compelled to offer a few thoughts. To start, we ought to consider why the VC-backed rollup opportunity is exciting to some. Some of the excitement is warranted: (i) if AI reduces the barrier to building software products, distribution becomes relatively more valuable and (ii) selling AI tools to old-school services businesses run by boomers is extremely difficult. For these reasons, there are compelling reasons for software companies to “buy their customers” and own the end-user relationship directly. Of course, a lot of the excitement is attributable to typical VC hype-chasing, momentum investing, mimesis, etc. I’m sure some vibes-driven investor (who has never seen a balance sheet) came across Mark Leonard’s letters earlier this year, posted a Twitter thread, and whipped his followers into a frenzy. Constellation, Transdigm, Acrisure… the thoughtboi case study threads started flying. The smartest people in the business (Thrive) funding something in the space created an even greater sense of FOMO. The nature of venture as an asset class has contributed to the frenzy as well. Venture is structurally broken. There’s never been more capital chasing so few companies that matter. Many brand-name firms are waking up to the reality that they have no right to win deals in the ultra-competitive landscape. It’s obvious that only a tiny number of firms will continue to produce strong returns and that everyone else ought to pack up shop. They’re desperate to put money to work. Why not roll the dice and try their luck at rollups? I can already envision the pithy taglines for the website: “we purse a private equity strategy in the venture markets.” Buying, transforming, and rolling up old-school services businesses is going to produce wonderful outcomes for some investors. I’d be shocked if any of them are VCs (at least as most VC firms are constructed). In the same way that the ZIRP VCs couldn’t differentiate between a good product and a good business (let alone a good investment), they can’t differentiate between a good strategy and a good strategy for VCs. VCs don’t have the expertise Investing in the unleveled equity of high-growth, unprofitable startups requires an entirely different underwriting and post-investment support skillset than running a serial M&A strategy. VCs (rightfully, for the most part) roll their eyes at Wall Street types who read a Paul Graham essay and decide to build a startup. But expertise-strategy mismatch cuts both ways. The fund math doesn’t pencil If you are running a venture fund in the classic mold, you expect most investments to be worthless or return a very small amount. Fund-level returns are driven by a small handful of companies that become very big. Any given investment must have the potential to become very big: return all (or at least a very large chunk) of the fund. Rollup strategies simply don’t have the required risk/return profile to make sense for a VC investor. They aren’t taking the sort of market, execution, and technical risks that berth venture scale outcomes. VC-backed companies become huge because their founders take on at least one of these risks, conquer them, and build something that nobody else can: differentiated, durable, moaty businesses. If you talk to founders pursuing a rollup strategy, they’ll usually tell you that AI transformation can be achieved by implementing off-the-shelf AI tooling and some lightweight in-house AI development. They promise to be highly capital-efficient: “we’ll deliver great venture-scale returns because this will be the last money we ever raise!” This is a huge tell with respect to risk-reward potential. Capital efficiency is a double-edged sword. On one hand, the ability to fund growth via FCF and non-dilutive debt is highly attractive for initial equity investors. On the other, it indicates why the return potential for these businesses is much lower than most venture-backed companies. True venture-scale companies constantly need capital because they’re making very expensive R&D and long-term customer acquisition investments in the service of creating something hard, novel, and durable. AI-enabled rollups implementing third-party tools or building cheap solutions in-house simply indicates that what they’re doing isn’t very differentiated. I’m skeptical that “seeding” rollup strategies with tiny checks makes much sense Most VC-backed rollups are raising small amounts of money (like normal seed rounds) to purchase companies. I think this is a flawed approach for a variety of reasons. Investors ought to start by making large platform acquisitions, not tiny sub-scale ones. First, one of the driving beliefs behind the “buy and build” thesis is that distribution trumps product in post-AI software markets. If this is true, you want to buy businesses with as much existing distribution as possible. Second, scaled companies have much better access to large quantities of proprietary, domain-specific data to create powerful (and hopefully differentiated) AI tools. If data is the new gold, you want to buy businesses with as much of it as possible. Third, buying a large business to start limits the amount of M&A execution required — it’s much easier to identify, execute, and integrate one target business vs. doing this serially with many tiny companies. This is especially true for venture investors with 10-year fund lives; VC-backed companies need to achieve huge scale within a certain timeframe, and M&A is quite slow. Fourth, buying a large business makes the ROI math pencil — it offers a large existing cost base over which to amortize up-front investments (losses) in AI tooling. A crude example: if it will cost $5M of R&D expense to build great AI tools that reduce costs by 50%, you’d rather be working with a $10M cost structure than a $1M one. Fifth, buying a large business allows you to take advantage of multiple arbitrage, a key driver of value creation for rollup strategies. It works if you start with a large platform business that commands an attractive valuation and subsequently buy sub-scale players at low prices, integrate them into the platform, and have them become more valuable given scale advantages, professionalized management, etc. Sixth, structuring these investments like typical seed deals is downright silly. The typical seed construct makes sense because (i) so much of potential future returns are attributable to founder labor, knowledge, insight, etc. rather than pure capital and (ii) there is always an implicit bet that founders are taking at least one meaningful risk, giving them an opportunity to build something novel and huge if they’re able to conquer that risk. It’s true that developing a strong, repeatable AI-led transformation playbook isn’t easy, but ripping out huge cost centers via automation (an inherently “N to 1” process) is nowhere near as difficult as building something truly zero-to-one. Funding these investments like typical seed deals is essentially paying an enormous premium to book value for a business with no reasonable expectation of growing book value per share so quickly to make that premium worth it. Consider VCs purchasing 20% of a VC-backed rollup: if ~100% of the capital finances acquisitions, VCs have paid a 5x premium to book. A 20x return on the underlying asset would be legendary, and the VCs would make 4x their investment. Silly! All this is to say: I am extraordinarily excited about capital allocators pursuing an AI-forward services transformation strategy, especially those who pursue serial M&A in certain end markets. But this strategy makes no sense for VCs, at least how they're pursuing it today. Like the e-commerce rollup phase during COVID, I suspect this new phase will end in tears for many.

Honored to tour ⁦@HadrianSpace⁩ with CEO and founder Chris Power in my hometown of Torrance, CA. Hadrian is building the planet's most efficient factories to accelerate a free, abundant, spacefaring future.

There's a reason why SaaS funding is down to a 5-year low VCs are finally waking up to the fact that zero marginal costs in the short term means zero margin in the long term

The world's first space factory is flying great. We're hoping to begin pharmaceutical production next week! (Photo is from about 45 days ago when we first installed W-Series 1 onto the ESPA ring)

Thanks to our partners @RocketLab We're now ready to do some manufacturing without one of the four fundamental forces of physics

Later today, our W-Series 1 satellite will be launching from Vandenberg We partnered w/ @packyM to do a Deep Dive on us Why manufacture drugs in space? How do we partner with the DoD? What are the economics of space factories? All the answers to those questions here:

my first room in SF when I was 18 was $1000/mo in a big group house i slept on a bunk bed in an open living room that multiple people had to walk through in order to get in/out of their bedroom gotta do what you gotta do!

Fun fact: 78% of projects that get matched go to contract on the Scope platform.

We need more manufacturing engineers! Apply here! jobs.lever.co/hadrian/e05810…

The White House Office of Science and Technology Policy releases the Biden-Harris Administration’s vision for U.S. leadership in the future research and development (R&D) in LEO whitehouse.gov/ostp/news-upd…

Early-stage hard tech investing firm Countdown Capital is shutting down techcrunch.com/2024/01/02/ea…

$PLTR Managements full response to BofA Securities analyst Mariana's questions during the Q4 2023 Earnings Call:

Today’s Pathfinder pod features @TopherHaddad, cofounder and CEO of @Albedo. Albedo most recently raised a $48M Series A led by @Breakthrough & @ShieldCapVC to push the boundaries of EO by offering aerial-quality imagery (optical & thermal to start) from space. More below 👇🏽