Following the launch of its initial $100 million fund last year – an investment pool focused on early-stage companies in sustainable food, clean energy, health innovation, and space technologies – Prime Movers Lab has announced a second fund. Prime Movers Lab Fund II has secured $245 million in commitments and will continue the same investment approach, but with an intention to support a greater number of companies through increased investment activity, facilitated by an expanded investment team.

Dakin Sloss, founder and general partner, explained the fund’s core concept: “While numerous venture capital firms exist, few concentrate solely on pioneering scientific advancements or deep technology. Even among those that do, a relatively small percentage of total capital – I estimate less than 10% – is directed towards these types of companies. However, these are precisely the companies that will profoundly impact the lives of individuals over the next three decades, from advancements like coronavirus vaccines and solar energy to innovative solutions for global food production, such as aquaponics. These innovations are essential for improving the quality of life for a majority of people.”

Sloss indicated that a key challenge in allocating capital to address these critical issues lies in the necessity for extensive, specialized knowledge to make informed investment decisions.

“Many VC firms lack the requisite technical proficiency to effectively identify promising ventures, potentially leading to outcomes similar to those seen with Theranos or past clean tech bubbles,” he stated. “My initial goal was to address this gap. With my background in physics, I assembled a team of partners possessing deep technical expertise.”

As noted, Sloss holds a degree from Stanford University in Mathematics, Physics, and Philosophy. Prior to establishing the fund, he was a serial entrepreneur, founding companies like Tachyus, OpenGov, and the nonprofit California Common Sense. The partner team also includes Dan Slomski, a systems engineer with experience in machine vision and fluid analysis; Amy Kruse, a neuroscientist with a PhD and experience in defense technology; and Carly Anderson, a chemical engineer with a PhD and a background in biomedicine and oil & gas. Prime Movers Lab further benefits from the contributions of venture partners and specialist advisors, such as former astronaut Chris Hadfield.

The presence of individuals with substantial expertise in their respective fields, coupled with access to leading advisors, provides a distinct competitive advantage, particularly when investing in companies at an early stage of development. A common perception is that companies tackling these complex technological challenges may not be as attractive to traditional venture funding due to extended return timelines. Sloss believes this is a misconception stemming from previous unfavorable experiences.

“There are three prevalent misconceptions surrounding breakthrough science, hard tech, or deep tech,” he said. “These are the beliefs that it takes longer to realize returns, requires more capital, and carries a higher degree of risk. These perceptions are often rooted in past investments in companies like Theranos and those involved in the clean tech bubble, where fundamental errors were made in risk assessment.”

To mitigate these risks, Prime Movers Lab assesses potential investments using a “spectrum of risk” framework, encompassing the viability of the science itself, the feasibility of engineering a marketable product, and the scalability of commercialization. Sloss suggests that focusing investment on addressing engineering risks minimizes concerns about return timeframes.

He points to the portfolio of Fund I, which includes space propulsion company Momentus, poised for a public market entry via SPAC, and notes that four of the 15 companies Fund I invested in are on track for an initial public offering. This suggests a faster exit timeline than typically observed for early-stage investments, a result Sloss attributes to the unique approach hard science startups take to intellectual property and capital management.

“These companies often achieve market inflection points more rapidly because they dedicate years to developing intellectual property while maintaining relatively low valuations,” he explained. “We then step in to assist them in preparing for commercialization and scaling, allowing investors to focus on the proven functionality and revenue generation rather than the inherent risks associated with scientific and engineering development.”

Companies aligning with this model frequently originate from academic institutions, maintaining small, focused teams while developing core scientific breakthroughs. Wingcopter, a German drone startup that patented a tilt-wing rotor technology improving the economics of electric drone flight, serves as a recent example, securing its first significant investment after four years of bootstrapping to accelerate engineering and production.

While Wingcopter is not a Prime Movers Lab portfolio company, many of its investments share similar characteristics. Boom Aerospace is developing a subscale demonstration aircraft for a future supersonic airliner, and Axiom Space recently announced the first crew of private tourists to the International Space Station, traveling on a SpaceX Falcon 9 for $50 million each. Demonstrating the soundness of fundamental principles is key to justifying investment in turning these concepts into marketable products.

For Fund II, Prime Movers Lab intends to invest in approximately 30 companies, doubling the number of investments made by Fund I. Beyond its partners with scientific backgrounds, the firm also includes individuals with expertise in creative direction, industrial design, executive coaching, and business strategy, offering these services to portfolio companies to enhance their technical innovations. Fund I’s portfolio includes Momentus, Axiom, vertical farming startup Upward Farms, coronavirus vaccine developer Covaxx, and others.