Betting on the Physical World When the Digital One Feels Unstable
Geopolitical turmoil has a way of exposing assumptions. For years, the venture capital world operated on a thesis that software would eat everything — that bits and bytes would outpace atoms every time. But as trade wars escalate, supply chains fracture, and nations grow increasingly suspicious of one another's technology, some investors are rethinking that bet.
Kompas VC is one of them.
The firm has quietly carved out a niche backing startups that engage with the physical world — logistics, manufacturing, energy, and infrastructure — sectors that might once have seemed unglamorous compared to pure software plays. In a fragmented geopolitical landscape, however, those are exactly the kinds of companies that governments, corporations, and consumers are suddenly very interested in.
Why Fragmentation Creates Opportunity
The logic isn't complicated. When global supply chains were humming, there was little incentive to rebuild them domestically or regionally. Cheap labour abroad and frictionless international trade made offshoring the obvious move. But a pandemic, a ground war in Europe, escalating U.S.-China tensions, and a new wave of tariffs have made the vulnerabilities of that model painfully clear.
For Kompas VC, that shift represents a generational investment opportunity. Startups that help companies reshore manufacturing, optimize domestic logistics, or build energy resilience are suddenly not niche bets — they're critical infrastructure plays.
"We're entering an era where the physical and digital worlds are converging in ways that create enormous value," the firm has argued, pointing to robotics, advanced materials, and climate technology as sectors where founder ingenuity is meeting urgent demand.
The Challenge of Investing in Hard Tech
Not everyone is rushing to follow. Physical-world startups are notoriously capital-intensive. They take longer to build, have messier unit economics in the early stages, and require investors with patience — and deep pockets — to see them through to maturity. The 18-month sprint from seed to Series A that defines many software companies simply doesn't apply when you're scaling a factory or building hardware.
Kompas VC acknowledges the difficulty but frames it as a competitive moat. Fewer investors are willing to do the hard work of underwriting physical-world companies, which means valuations can be more reasonable and the competition for deals less frenzied than in pure software.
A Broader Shift in Venture
Kompas isn't alone in this pivot. Across the venture landscape, firms are quietly rebalancing portfolios toward what some are calling "hard tech" — robotics, defence technology, energy infrastructure, and advanced manufacturing. The Inflation Reduction Act in the United States and similar industrial policy moves in Canada and Europe have poured billions in subsidies into exactly these sectors, creating favourable tailwinds for startups operating in the space.
For Canadian founders and investors watching from the sidelines, the Kompas thesis offers a useful frame. Canada's strengths in mining, energy, forestry, and advanced manufacturing — sectors often overlooked by coastal venture ecosystems — may be precisely the areas where the next wave of high-growth companies emerges.
In a world that's fragmenting, the firms willing to invest in the physical pieces that hold it together may end up building something that lasts.
Source: TechCrunch
