Betting on Founders Who Build the Real World

The venture capital industry has a money problem, but not the one you think. While critics bemoan inflated valuations and excessive capital flooding the market, Eclipse Ventures founder Lior Susan argues that venture actually needs more money, not less. His reasoning cuts against conventional wisdom: technology is about to devour industries representing trillions in GDP that venture has barely touched.

Susan's contrarian thesis rests on a simple calculation. Technology companies today represent roughly 9% of GDP, concentrated in software, consumer products, and digital services. But as technology infiltrates physical industries like manufacturing, mining, automotive, and defense, that percentage could triple or quadruple. "If that sleeve moving from 9% of the GDP is now to a 20%, 30%, 40% because now we go into space and we go into automotive and we go into defense and we go into mining and manufacturing," Susan explains, "arguably, the venture should grow significantly because that's how we enter technology into a much bigger town."

This expansion into what Susan calls the "real world" demands a fundamentally different approach to venture investing. While software VCs can get away with pattern recognition and financial modeling, physical world technologies require operators who understand the messy realities of atoms, not just bits. Susan built Eclipse entirely with partners from operating backgrounds, avoiding traditional VC hiring. The firm eschews the platform team model popular among large funds, instead having partners directly serve portfolio companies.

The operating background matters because physical world companies face constraints software never encounters. Manufacturing requires supply chains. Hardware needs regulatory approval. Industrial customers buy differently than consumers clicking "add to cart." "We are very fundamental investor and operators, and we know at the end of the day, it's a blended cost game," Susan notes, emphasizing the importance of unit economics over growth-at-any-cost metrics.

This operational focus extends to how Susan runs Eclipse itself. He treats the venture firm as a business requiring the same discipline he demands from portfolio companies. Quarterly reports, annual meetings, and systematic processes matter. "It's not raising money and making investments. Oh, I was so fun. How cool? No. It's a company. It's a business," Susan states. "Everything that we do here, quarterly reports, AGMs, emails is, like, in the top of the way I can the best I can do. And I obsess about it, and I stopped not cannot stop thinking about this is a business, and we are as good as we are running our internal business. That's how we find the best CEOs."

The implications for early-stage valuations appear counterintuitive. Susan acknowledges that valuations have increased and some deals reflect "stupid" pricing. But he frames this within the context of exit potential that has fundamentally changed. Fifteen years ago, a billion-dollar exit ranked among the largest ever. Today's technology companies will go public at north of $500 billion valuations. If the ultimate market opportunity has expanded by orders of magnitude, paying 3-4x historical valuations for early-stage companies becomes rational, not reckless.

Susan's framework suggests that venture capital stands at an inflection point similar to the internet's early days. Just as few predicted how thoroughly software would reshape entire industries, we're underestimating how deeply technology will penetrate physical world sectors. The difference this time is that those sectors represent dramatically larger markets than anything software has conquered.

For investors, this means rethinking what constitutes expertise in venture capital. Financial engineering and network effects matter less when evaluating companies building rockets, manufacturing batteries, or automating factories. The premium goes to investors who understand how things actually get built, shipped, and scaled in the physical world.

For entrepreneurs, Susan's thesis validates the opportunity in unsexy industries that software investors often ignore. Mining, construction, agriculture, and manufacturing may lack the viral growth curves of social media, but they offer massive markets with incumbent players vulnerable to technological disruption.

The venture industry's money problem isn't too much capital chasing too few deals. It's too little capital chasing the wrong deals while ignoring the multitrillion-dollar transformation happening in industries that make, move, and maintain the physical world. Susan's bet is that the smartest money will flow to founders building technology for reality, not just the metaverse.