By Theo Saville
Silicon Valley lore is written in lines of code.
From Facebook to OpenAI, the canonical 1,000-to-1 venture wins almost all originate from software that can ship worldwide at the speed of a browser refresh. When every extra copy costs pennies and your feedback loop is minutes, the playbook works beautifully — and keeps capital locked inside the digital realm.
That focus has left a trillion-dollar blind spot. The industries that actually make things — machining, logistics, chemicals, construction — still run on processes that look more 1995 than 2025. American manufacturing alone is a $2.5 trillion market. Capture even a sliver and you have true venture-scale upside.
So why has so little money flowed into deep tech for physical production? Because, until now, it broke the venture math. Hardware iterations took months, working capital strangled young balance sheets, and every customer integration felt bespoke.
Many, many investors carry institutional scars from hardware bets that never scaled, and those still serve as reminders to stay clear of the sector entirely.
But a platform shift underway in 2025 is changing that. AI tooling collapses the cost and complexity of deploying sophisticated software in factories and supply chains. Tasks that once demanded armies of on-site engineers can be handled by self-configuring AI agents; integrations measured in quarters shrink to days.
When those bottlenecks compress, the venture calculus flips — creating a new opportunity.
Four filters for the new wave
From my vantage point building CloudNC — in short, our AI accelerates CAM programming for CNC machining, relieving a bottleneck that plagues the manufacturing sector globally — four criteria separate tomorrow’s winners.
- A bleeding-neck problem: Customers must already be spending real money to solve urgent pain. If the CEO isn’t losing sleep, move on.
- A massive, fragmented market: Deep tech only works when even a modest share builds a large business. The U.S. has tens of thousands of precision-machining shops; gain traction there, and you’re in the money.
- Friction-free deployment: The product should be “plug and go,” not a three-month consulting project. AI-driven self-integration makes this plausible today; at CloudNC, we circumvent this problem by deploying into software that machine shops already use.
- A durable moat: Proprietary data flywheels, years of specialist R&D, or regulatory approvals keep fast followers at bay. At CloudNC, we spent nearly a decade painstakingly building an AI on data we often had to capture ourselves, at our own factory.
Meet all four and you have the holy grail: A pure-software experience that delivers hard ROI in the physical world — and is devilishly hard to copy.
Consider precision machining. A single aerospace bracket may require dozens of tool-changes and thousands of lines of G-code, each tweak traditionally done by hand. At CloudNC our CAM Assist AI solution generates those instructions automatically, cutting programming time from days to minutes and unlocking latent machine capacity worth millions per plant.
Similar stories are emerging in composite lay-up, wastewater testing and micro-fulfilment — proof that software can now address pain points once written off as “too hard” or “too small.”
The pattern repeats: Identify an overlooked but ubiquitous bottleneck, digitize it end-to-end, then let AI handle messy real-world variation. When integrations become automatic and the product lives in the cloud, what looks like a hardware company on the shop floor behaves like SaaS on the income statement. Gross margins soar, sales cycles compress, and the outlier makes sense again.
Why the timing is now
The cost of spinning up domain-specific AI solutions is falling fast, and Western governments are pouring billions into reshoring advanced manufacturing. Policy incentives may mean early adopters are literally being paid to modernize.
So why the lack of competition among VCs — still — in this space? Well, most generalists lack the domain expertise to carry out due diligence on a factory-floor startup, and many founders still default to SaaS. That asymmetry creates an edge for those willing to understand, say, spindle utilization or PLC protocols.
If your thesis stops at the browser, you risk missing the next Tesla-sized win. Yes, deep tech takes homework, but that learning curve is the moat that keeps cap tables uncrowded.
Partner with specialist angels, recruit operators who have run plants, and prepare to engage on supply-chain dynamics. The funds that do will own territory their peers won’t even visit — until the returns are obvious.
The internet ate the world’s information layer. AI is about to eat the control layer of physical production. Founders who turn months-long processes into minutes will define the next decade of venture. The only question is whether the capital will be ready when opportunity knocks — this time, literally on the factory door.
Theo Saville is co-founder and CEO of CloudNC, a technology company whose mission is to enable single-click manufacturing. CloudNC has raised more than $75 million in venture capital from leading corporations and investment funds, including Autodesk, Lockheed Martin and Atomico. Saville was recognized in the 2019 30 under 30 in Manufacturing & Industry, and 2023 MIT Innovators U35.
Illustration: Dom Guzman
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