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Cracking Hardware Capex: Insights from SF Deeptech Week
During the SF Deeptech Week that took place the week of June 24 2024 a deep discussion on topics of robotics, defense, medical/healthtech and CLIMATE were in the mix were common topics like scale up capital intensive industries and market entry in a time where capital from VC is hard to come by was a critical topic of discussion. I participated in two specific and very informative sessions titled "Cracking Capex Heavy Industries: Prototype to Scale" and "Fusion Energy Landscape" and some side social events. Below are some of the most relevant insights form these discussions.
Cracking Capex Heavy Industry Talk
This talk had representation from the battery, mining and nuclear industries, deeptech venture capital, and testing facilities. A quick overview of the speakers is below:
Bibhrajit Halder is Founder & CEO of SafeAI, a leader in autonomous technology and solutions for heavy vehicles.
Tori Shivanandan is COO at Radiant, helping to build Earth’s first mass-produced nuclear reactors.
Vivek Bhagat is the Senior Vice President of Engineering at Liminal, where he leads the development of EchoStat, the company's advanced Ultrasound inspection and Machine Learning analytics platform.
Vivin Hegde is the Founding and Managing Partner at Zacua Ventures, a global venture capital firm transforming the Built Environment with innovative technology investments.
Brendan Skiffington is the Manager of NORCAT Innovation and Investment Manager for the Sudbury Catalyst Fund. He specializes in developing support programs and driving technology adoption in the mining industry.
Insight 1: Selling the Product should focus on a "Three-Tier Approach"
To market deeptech technologies effectively, speakers in the mining and industrial decarbonization sectors saw a common thread of a strategic three-tier sales approach:
- C-Suite: Decision-makers at the top level.
- Engineering: Enthusiasts who appreciate the product but lack decision-making power.
- Innovation: Innovators who can introduce the product within the company.
Insight 2: Deeptech focuses on a “Go Slow to Go Fast” approach rather than a “Move Fast and Break Things” approach
It is critical to consider that solutions in deeptech can have strong ramifications in the safety, health, environmental, regulatory and social aspects of a solution, therefore, critical care, risk evaluation and "somewhat slow" test approaches makes more sense so that the end customer can count on a solution. As one panelist noted, new technology in mining can test their approach at NORCAT. That way when the approach is fine tuned, it is tested with potential customers but at a testing facility, then the potential customer can see the value in a reliable and safe solution translating into rapid adoption.
Another aspect is that customers need to build trust and envision how a workflow modification will look like. As one expert said, "Nuclear reactors cannot go and break things... need to test beyond the boundaries before calling it safe."
Insight 3: Capital stack clarity is critical to survival
In order to properly underwrite technology a careful consideration of the capital stack is necessary. Go after grants and angel investments to venture capital and infrastructure funding, each stage has unique risk profiles.
Insight 4: To shorten the sell cycles speak the same language and be creative
One important insight from the panel was the importance of "speaking the operations language" and using KPIs like $/ton to communicate how exactly a process improvement is performed and what is in it for them. Sometimes it is hard to envision how a particular solution can actually help a customer, if it is tight to their operations and their main pain points as well as it connects to their strategic drivers, more traction can be obtain form the team. Piloting and demonstrating a 5-10x improvement in operations can help overcome resistance. The focus should be on how the technology will be implemented and its impact on current operations.
Also, start thinking of methods to back engineer failures or pain points taht your customers could have potentially. An specific example could be to create a synthetic problem to test your solution on. As one participant explained, "Liminal tests the technology by creating synthetic problems and then testing with them."
Fusion Energy Landscape
Fusion energy represents the pinnacle of scientific and engineering challenges, promising an almost inexhaustible source of clean energy. Unlike conventional nuclear energy which splits heavy atoms, fusion merges light elements, primarily hydrogen, to form helium and release energy. This process mimics the energy production mechanism of stars, including our sun. Below is an overview of the 3 hour session on the Fusion Energy Landscape were key concepts, players, and developments
Understanding Fusion Energy
Fusion starts with hydrogen atoms fusing to form helium, releasing vast amounts of energy. This reaction continues, forming heavier elements up to iron, which has the minimum energy required for fusion. Beyond iron, fusion becomes energy-intensive rather than energy-releasing, marking a natural limit to efficient fusion processes.
Fusion is the most direct pathway to energy production, compared to secondary or tertiary pathways like combustion or fission. However, creating a stable fusion reaction on Earth introduces numerous challenges, such as managing plasma instabilities within reactors designed to harness this energy.
Key Players in Fusion Energy
Marathon Fusion
Kyle Schyller of Marathon Fusion is pioneering efforts to make fusion a viable energy source. Fusion's potential is staggering, with a single plant capable of producing 1 TWh of energy, compared to the current global production of 180K TWh. However, achieving this requires overcoming several hurdles:
- Manufacturing and material handling challenges.
- Tritium scarcity and the need for a sustainable tritium cycle.
- The operational scale, necessitating 100 people per plant and the production of 100 units daily to reach 1 million plants.
Crucial to this effort are the tritium breeding ratio, tritium burn efficiency, and tritium cycle time, ensuring a self-sustaining supply of this vital fuel.
Commonwealth Fusion Systems
Darren Woufle and Commonwealth Fusion Systems have raised $2B and employ 650 full-time staff. They are developing SPARC, a revolutionary reactor in collaboration with MIT, using tokamaks with high-temperature superconducting magnets. These magnets enable the highest power output from plasma, a breakthrough that could lead to net-positive energy production.
Thea Energy
David Gates of Thea Energy advocates for tokamaks over stellarators due to their superior design flexibility and maintenance capabilities. They focus on a two-step power production process involving DT fusion (tritium) followed by energy generation. Thea Energy raised $20M in a Series A round in 2023 to further their innovative designs.
Avalanche Energy
Robin Langtry at Avalanche Energy is targeting distributed energy solutions, including maritime and data centers. Their roadmap involves overcoming technical risks such as achieving high plasma densities and managing Coulomb scatter rates. With a successful Series A in 2022, Avalanche Energy is poised to test and iterate on their concepts rapidly.
Zap Energy
Zap Energy is exploring Z-pinch magnetic confinement without conventional magnets, utilizing cylindrical plasma configurations. This method, characterized by ideal magnetic instabilities like sausage shapes and kinks, promises high power densities. Their FuZE reactor aims to deliver 25MW of power output, using DT fuel without a solid first wall, which reduces material constraints.
Lawrence Livermore National Laboratory (NIF Shot)
The NIF Shot at Lawrence Livermore National Laboratory has achieved significant milestones, including generating more energy output than input. Their focus is on burning denser fuel and achieving higher energy gains to make Inertial Fusion Energy (IFE) plants viable.
Xcimer Energy
Xcimer Energy has made strides with a gain of 5MJ from 2MJ input. They emphasize the importance of fuel compression and avoiding solid materials at high temperatures through innovative designs like gas optics and liquid walls. Their $100M Series A round supports further development towards achieving practical fusion energy solutions.
Fusion energy remains a frontier of scientific exploration with immense potential to transform global energy landscapes. The efforts of companies like Marathon Fusion, Commonwealth Fusion Systems, Thea Energy, Avalanche Energy, Zap Energy, and research initiatives like NIF and Xcimer Energy highlight the diverse approaches and significant investments driving this field forward. As we advance, overcoming technical, operational, and material challenges will be key to unlocking the full potential of fusion as a sustainable, high-output energy source for the future.
This talk provided a significant understanding of the landscape of this technology and what it can do to reduce our carbon footprint.
Overall, the SF Deeptech week was filled with insightful discussions and a very well structured layout keeping information and connections lean and deep.