PodLumePodLumeSign in
This Week in Startups
This Week in Startups

Sep 2, 2026 · 1h 20m

Venture capital surges into physical AI and defense technology

VC experts on why Physical AI funding is heating up | E2333

As venture capital pivots from pure software to physical AI and defense, the strategies for funding, scaling, and regulating hard tech are being completely rewritten.

3 key takeaways
  1. 1Top-tier software engineers are rapidly migrating from ad tech to hard tech, defense, and physical AI startups.
  2. 2Sovereign AI demands are driving a massive shift back to on-premise hardware and localized LLM deployments.
  3. 3Investing in hardware-heavy physical AI requires specialized fund strategies to combat heavy equity dilution.

Don't miss

Katelin Holloway explains her high-stakes decision to back StarCloud, an orbital space data center startup, after a chance meeting.

The brief

A massive funding wave is sweeping through physical AI, robotics, and defense tech as top engineering talent migrates from traditional ad tech to hard tech. Venture capitalists Paige Doherty and Katelin Holloway join the show to break down this shifting landscape.

The rise of physical AI is forcing investors to rethink traditional software models. Startups are tackling high-capital hardware challenges, from automated metal servicing with Nox Metals to building sovereign AI infrastructure that keeps data secure on-premise.

Taking non-consensus bets is becoming crucial for high-yield returns. Holloway shares the story of backing StarCloud, a space data center company, illustrating how venture firms must embrace highly unconventional, capital-intensive risks to find massive winners.

Navigating this new era requires strategic fund management. The panel discusses how early-stage funds can manage dilution in hardware-heavy sectors, leverage pro rata rights, and use special purpose vehicles to maximize their ownership in breakout companies.

Featuring

PDPaige DohertyKHKatelin Holloway

Mentioned

SASpatial and physical AISeven Seven SixSeven Seven SixBehind Genius VenturesBehind Genius VenturesNox MetalsNox Metals

Books & mentions

BG2 Podcast

For deeper weekly analysis of venture capital trends, AI investments, and late-stage tech liquidity.

Listen to the full episode and explore every guest, topic, and moment on PodLume.

Listen to the full episodeOr get the iOS app

What is PodLume?

PodLume turns podcasts into searchable knowledge. AI-decoded transcripts, identified guests and topics, smart highlights, and cross-show search across the world’s best conversations — all in your pocket.

Venture capital surges into physical AI and defense technology | PodLume