The Reindustrial Age: Where Technology Meets Purpose in VC

In the world of venture capital, few shifts rival the monumental rise of software over the past three decades. The SaaS business model, with high margins, recurring revenue, and rapid scalability, became the ultimate VC playbook. Billions of dollars flowed into startups promising to revolutionise digital processes or improve workplace productivity.

The early SaaS era was characterised by a rush to capitalise on these scalable, high-margin business models. But as the market matured, the innovation landscape began to narrow. Billions of venture dollars poured into incremental improvements - apps and platforms that optimised convenience or offered modest productivity gains for consumers and businesses.

Startups proliferated with pitches promising to shave minutes off tasks or automate the mundane, while industrial sectors, fraught with complexity and lower immediate returns, were often overlooked.

This increasingly marginal utility of innovation came at a cost: many of the world’s most critical challenges - climate change, resource scarcity, and crumbling infrastructure - were sidelined. The allure of fast returns overshadowed the urgency of addressing these systemic issues.

When we look back in years to come, we will likely see the investment extremes of 2021/22 as the high-water mark of this period. Since then, a big correction has forced the entire venture ecosystem to rethink priorities.

Whilst it would be naive to think that the allure of fast returns will ever recede completely (just look at the current GenAI surge) it is not the only priority. As the great challenges of our time have increased in severity and scale, so too has the urgency to address them. A growing cohort of investors - and founders - sense a significant opportunity.

Some have dubbed the startup pioneers of this new era the 'New Industrials'. They, together with a growing band of mission-aligned investors, see a vast landscape of opportunity ahead. Enabled by remarkable advancements in innovation and technology - not least AI - they have been quietly gaining momentum.

This week we highlight some the key industries, the major drivers, and the implications of this new era for both startups and their investors.

The 'New Industrials'

Faced with a mounting environmental crisis, global supply chain fragility, and infrastructure unfit for the 21st century, the venture ecosystem is undergoing a reckoning. Investors, founders, and policymakers alike have realised that the world’s problems cannot be solved by yet another ride-sharing app or collaboration tool.

This demands a return to basics: addressing real-world challenges through innovations that matter. Acequia Capital, a leading industrial tech VC, notes in its manifesto, 'New Industrials: An Investment Strategy for the Reindustrial Age', that this is not merely a pivot but a profound shift in priorities, where technology once again meets purpose, tackling the existential challenges that shape our future.

Acequia says we are witnessing the rapid emergence of a paradigm in which multiple global industries, such as those listed below, are all undergoing transformation simultaneously. 

1. Energy: a shift to renewable energy (production, storage, distribution)
   
   
2. Mobility: transportation without fossil fuels
   
   
3. Food systems / Agriculture: fundamental shifts in feedstock, supply chains, and consumption
   
   
4. Circularity: the reduction/replacement of carbon and petrochemicals as the industrial backbone 
   
   
5. Computation / AI + ML: Step changes in data processing and human meets machine innovation
   
   
6. Health: Standardised to personalised medicine and from symptomatic to proactive healthcare
    

This forward-thinking investor observes that, different from the previous era, the companies being formed are not confined to one technology vertical. "To transform a legacy industry like agriculture, petrochemicals, or aviation, technology convergence must be a design tenet. Therefore, entrepreneurs are building solutions that are software-centric but also integrate hardware, biology, data, laboratories, factories, and even farmland."

As a result, investors recognise that the solutions created often become embedded into larger systems. This makes them 'sticky', enjoying extended lifetimes and predictable revenue flows. They are far less prone to the risk of churn that has beset so many SaaS businesses in the wake of the recent market reset.

And the mission of course is not just 'purpose-driven'. The scale of the economic opportunity in this 'Reindustrial Age' is vast and we have only just begun to scratch the surface. Investors believe that companies pioneering these new solutions will be some of the most valuable companies of the 2030s.

To get a sense of the incredible scale of this opportunity, just consider some of the major drivers now at play:

The Big Drivers

1. The Call for Sustainability

The drive to combat climate change is a defining force behind this shift. In a 2022 report, McKinsey estimated that achieving net-zero emissions globally by 2050 would require $9.2 trillion in annual average spending on physical assets, $3.5 trillion more than today.

We already know that the urgency to reduce greenhouse gases is fuelling interest in startups innovating in such areas as renewable energy, carbon capture, energy storage, sustainable agriculture and the circular economy. And European founders are leading the way.

In 2024, 21% of all venture investment in Europe will be deployed into companies tackling sustainability. That's more than double the US equivalent of 11%. The vast majority is going into mitigating rather than adapting to climate change.

2. Rebuilding Critical Infrastructure

Modernising infrastructure is another cornerstone of the New Industrials. The McKinsey report identified $Ts in global investment required by 2030 to update and expand critical infrastructure to meet the needs of growing urban populations and industrial expansion.

Startups are already addressing this with innovations in smart infrastructure, such as AI-enabled traffic systems, predictive maintenance for utilities, and decentralised water treatment technologies, to name just a few applications.

Leading investors point out that these solutions must also incorporate resilience against climate risks, with industries losing $260 billion annually to natural disasters. This focus on dual goals of efficiency and resilience is redefining what infrastructure investment looks like in the 21st century.

3. Reindustrialization of Developed Economies

Geopolitical tensions and pandemic-induced supply chain disruptions have triggered a resurgence in reindustrialisation efforts, particularly in Europe and North America. Governments are prioritising localised production, with advanced manufacturing technologies like robotics, 3D printing, and AI automation leading the charge. By 2030, these technologies are projected to add $1.7 trillion annually to global GDP, according to Bain.

This trend aligns with what McKinsey calls “industrial reinvention,” where supply chains are optimised for proximity and resilience. Recent legislation like the U.S. CHIPS Act, which allocates $52 billion for domestic semiconductor manufacturing in the US, is a clear demonstration of how policy is supporting this transition. There are many other such DeepTech markets measured in the $10's billions.

4. The Role of DeepTech and Science-Driven Innovation

DeepTech startups - rooted in scientific breakthroughs - are key players in this shift. Sectors like industrial biotechnology, quantum computing, and advanced materials are at the forefront. BCG's recent analysis underscores the opportunity in quantum computing, projected to create $850 billion in value by 2040.

Meanwhile, synthetic biology is poised to revolutionise food and agriculture, with the global market for bioengineered food projected to grow to $100 billion by 2030. And in cancer detection, innovations in the use of biomarkers in advancing new therapies is taking off. According to a report by Fortune Business Insights, the biomarkers market was valued at $19 billion in 2018 and is projected to reach $97 billion by 2032.

5. The Push for Industry 4.0 Integration

One of the most significant drivers of the shift to the New Industrials is the rise of Industry 4.0, which represents the fourth industrial revolution. This paradigm is centred around the integration of advanced technologies like artificial intelligence (AI), the Internet of Things (IoT), robotics, and big data analytics into industrial processes.

What makes Industry 4.0 unique is its focus on real-time data and automation across the entire value chain. While other drivers focus on sustainability, infrastructure, or reindustrialisation, Industry 4.0 emphasises the digitisation of manufacturing and autonomous operations, enabling predictive maintenance, adaptive supply chains, and custom production.

McKinsey estimates that Industry 4.0 could unlock $3.7 trillion annually in operational efficiencies and productivity gains globally by 2025. This revolution is driving investment in startups developing sensors, robotics, AI tools, and cloud platforms tailored for manufacturing and logistics.

Implications for Founders of New Industrials Startups

New Industrials startup founders are defined by a mindset deeply rooted in mission and responsibility. They are builders in the truest sense - driven not by the allure of quick exits, but by the desire to create meaningful, enduring solutions for humanity's greatest challenges.

The rise of the New Industrials creates both opportunities and challenges. To secure funding in this new landscape, founders must adopt a distinct approach compared to SaaS founders:

1. Longer Funding Roadmaps: Founders must plan for extended timelines to achieve proof of concept and market adoption. Early engagement with investors who understand these timelines is critical. They are more likely to be firms that are thesis-driven or have a deep thematic focus for the sector. Their teams will include individual investors with relevant industry backgrounds.
   
   
2. Robust Validation at Seed Stage: Unlike SaaS, where a minimally viable product (MVP) and early user traction may suffice, New Industrials startups must demonstrate technical feasibility, regulatory alignment, and a clear path to scale. Investors will look for strong evidence of technical and operational readiness, and supportive early adopter relationships.
   
   
3. Data-Driven Milestones at Series A: By Series A, founders will need to provide concrete data points, such as pilot results, partnerships with industry players, and evidence of cost-effectiveness or scalability. This is especially important given the higher capital requirements and longer sales cycles in these sectors.
   
   
4. Collaboration with Government and Industry: Founders must recognize the importance of aligning with regulatory incentives and forging partnerships with established players in their industries. This collaboration can accelerate market entry and reduce risks.
   
   
5. Storytelling with Purpose: While SaaS startups often thrive on visions of exponential growth, New Industrials startups must craft narratives that emphasise their potential to address systemic challenges. Investors will be drawn to founders who can articulate both the mission and the market opportunity.
   

Conclusion: A New Era of Venture Capital

For founders, the emergence of the Reindustrial Age is an opportunity to solve some of humanity’s greatest challenges. They are redefining what success looks like in the startup ecosystem.

The transformation of legacy sectors will require integrating software with hardware and other diverse technologies in novel ways. Developing convergence strategies has now become a key founder skill.

As the world’s most critical systems undergo transformation, venture capital is stepping up to invest not just in returns but in impact. The new realisation is that there does not need to be a trade off between the two.

The challenges we face are also huge and pressing market opportunities. Investors who back founders leading the New Industrials have the chance to help build companies that could define the next decade.

For founders and investors alike, this is not just a chance to build solutions that truly matter; this is an opportunity to create some of the most valuable companies of the 2030s.

Let's talk.