What We Learned Funding Hard Tech
Summary
YC's bet on hard tech was widely ridiculed by investors who thought founders without technical expertise couldn't build fusion reactors or quantum computers—yet the hit rate was unexpectedly incredible. The secret wasn't technical expertise from VCs, but recruiting uniquely qualified founders and helping them build companies, not just products.
Key Takeaways
- Hard tech companies have built-in competitive moats because so few people have the qualifications to start them. The Venn diagram intersection of people capable AND willing to build quantum computers or fusion reactors is tiny, creating natural competition barriers that easier startups don't have.
- VCs don't need to provide technical expertise in hard tech—they need to help founders with company-building and capital raising. Billion to One's founders precisely hit their IPO timeline by planning years in advance, showing execution excellence matters more than VC technical knowledge.
- Counterintuitively, harder startups face less competition because they're more inspiring and outrageous. Low-ambition ideas attract hundreds of competitors; extreme technical ambitions naturally repel most people, giving founders a competitive advantage.
- Hard tech founder quality was historically underestimated by traditional investors who dismissed YC's model. Companies like Helion, Rigetti, and Oaklo that were ridiculed for taking unfavorable YC terms are now public, validating the founder-first approach.
- Hit rate for hard tech companies in YC batches was surprisingly high compared to expectations. The assumption was maybe one company would succeed, but the actual success rate of multiple IPOs demonstrates that founder quality matters more than technology domain expertise.
Related topics
Transcript Excerpt
[music] >> This is Dalton and PB from Standard Capital and we are talking today about what we learned uh funding a ton of hard tech companies at YC way before that was a thing. And so maybe start by telling the story of when we the first ever hard tech company that I guess Sam recruited, which I believe was Ginkgo Bioworks. So yeah, what do you remember about that? >> At the time it was a little bit crazy, right? Because YC for a long time was just known as like things you could build with a website. >> Yeah, it was consumer websites with a few goofy like gadgets. >> Yeah. >> Like like little doodads, gadget things. >> There there wasn't there wasn't a lot of hard tech. So so yeah, that was kind of one of Sam's big innovations was actually recruiting a bunch of these great hard tech compan…