Beyond VC: Funding the American Industrial Renaissance
The next big opportunity
WW3 is coming.
Well the shifting financial cycle and capital markets that may precede it.
Today AI is so powerful it's enabling lean teams, fueling the likes of 'one person billion-dollar companies’ that don’t need as much Venture Capital (VC) funding.
With shifting tariff policies and a new focus on bringing core manufacturing back to America, that means more money for reindustrialization startups right? Not exactly. Because you see, while this new movement of building deep tech and infrastructure is romanticized, often these startups have significant upfront capital expenditures required to build and distribute their product to customers and generate revenue. We are talking about factories, machines, a lot of capital—with long not so attractive to VC payback periods. So how do reindustrialization founders fund their manufacturing missions and infrastructure projects that America and humanity so desperately need?
For decades, early-stage tech startups have relied on VC equity to fuel digital innovation. Now, as that innovation is working it’s way into our physical world, these early-stage startups and other high growth businesses find themselves looking for flexible ways to finance their capital intensive growth more efficiently. It’s really still so early that some founders may not even know that’s what they need yet.
In many ways, Chris Power, the founder of Hadrian, which is building the next generation of highly automated factories, is at the frontier. Their strategy has always been to use large commercial banks, which he shares really only works if you’re a high growth business. They work with a number of large banking partners that help them massively finance their factories. The catch is it takes a lot of innovation, a new business model, a really strong margin profile—and a lot of fast growth.
Chris highlights its challenging for a small business to compete with large businesses. Large players have access to benefits small players don’t, such as people skilled at creatively structuring financing, far lower cost of capital than their maybe 30% interest rate loans. So in turn, these small businesses cannot aggregate the capital and the market views them as highly risky. Essentially, it's easier for a bank to underwrite the risk of large players like Hadrian or publicly traded companies. Otherwise underwriting small businesses is really just giving them a small business loan.
And so I’m sure you’re wondering, well how did Hadrian start off in the early days? The answer? Very expensive, high interest rate, small equipment loans. Then a year later, slightly less expensive and more corporate debt. And now they’re at the big bank tiers with a mix of venture capital funding too. It seemed though, a key part of their pitch was a three year insane growth curve to be sufficiently large and sophisticated enough. Something along the lines of: for the first nine months the cost of leasing their machines would be 30%, then a year later 20% and then in three years time, something much, much lower.
“Financing the Capex very intelligently is a big part of how to grow a manufacturer fast…For small businesses that do not have a technology story, it’s very tough. What people want is what’s the 1+1=5.”
“Unless you have the growth, capital, the story and the real technology uplift to go run that curve, it’s very hard for anyone else to get there. And I think you will see this in a lot of other manufacturing startups that are venture funded, unless you hit that curve very quickly, where you get big enough so your cost of capital is cheap enough. Even if that takes you six years, that’s just too slow. You’ve got to understand that Capex dynamic from day one.”
-Chris Power, Founder of Hadrian
Similarly, Crusoe is developing a massive AI data center campus as part of OpenAI’s $500 billion Stargate Project. They have raised about $1.26 billion across 10 funding rounds, comprising equity and debt financing from 46 institutional investors. Crusoe also secured equipment financing, including a $200 million asset-backed facility from Upper90, a New York-based firm specializing in non-dilutive capital for technology companies, alongside other lenders. According to Upper90, nearly 80% of equipment purchased in the U.S. is financed, highlighting the prevalence of such strategies in scaling tech infrastructure.
Despite Hadrian and Crusoe’s success, raising capital remains a challenge for many startups. Few can secure funding unless they have the full package and are addressing critical sectors like defense or space, underscoring the competitive landscape for emerging ventures.
But these struggling startups are the backbone of our manufacturing, supply chain, and defense ecosystem. In today’s tumultuous geopolitical landscape, saying they are vital is an understatement. If we lose Taiwan? We’re out of chips, out of the AI race, out of luck, and it’s game over for us. Not to mention America is on the precipice of bankruptcy. Only an economic boom—like an American Industrial Renaissance—can save us. These startups and infrastructure projects aren’t just nice-to-haves. They’re humanity and national security must-haves.
To fuel this industrial renaissance, we need innovative financing tools—new asset classes and platforms that creatively blend grants, subsidies, venture capital, private equity, debt, and infrastructure financing. Founders shouldn’t have to navigate this complex landscape alone, crafting solutions from scratch. Just as venture capital revolutionized startup funding decades ago, bold new models can unlock the capital needed to scale advanced manufacturing today.
Alternatively, the government could fast-track IPOs for industrial startups, letting them tap the stock market’s capital. Striking accredited investor rules could also help, but pitching to the masses is still a time suck when founders just want and need to build.
This capital problem is draining energy. Solving it turbocharges our American Industrial Renaissance.
So I will leave you with this...
“Today, we're standing at the edge of an opportunity so vast it's almost hard to grasp. By 2040, the global demand for new infrastructure investment is $68 trillion. To put that price tag in perspective, it’s roughly the equivalent of building the entire Interstate Highway System and the Transcontinental Railroad, start to finish, every six weeks – for the next 15 years.”
“Decades from now, we might reflect on 2025 as another pivotal moment, when the financial landscape shifted once again."
- Larry Fink, CEO of BlackRock