2024 in Review: Deep Tech Startups & Venture Capital - Chapter 3
From Regulation and Policy Shifts to Quantum Leaps
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👋🏻 Welcome to Chapter 3 of 2024 in Review: Deep Tech Startups & Venture Capital.
In the whirlwind scenario of 2024, deep tech startups and venture capital faced a complex web of acceleration, tension, and reinvention. Chapter 3 of the 2024 in Review: Deep Tech Startups & Venture Capital report dives deep into five pivotal themes shaping the year:
Theme 6: Innovation vs. Regulation—Policy & Regulation on a Global Scale
Theme 7: Defense & Cyber Surge
Theme 8: Space Commercialization, Supremacy & Orbital Security
Theme 9: Sustainability: Carbon Credits, Penalties, and Incentives Embedded in Business Models
Theme 10: Quantum, Computing, and Semiconductors—New Records, Applications, and Troubles
Each of these themes offers a unique vantage point into the interplay between visionary ambition and real-world constraints, setting the tone for how the deep tech ecosystem both thrives and stumbles.
The significance of this chapter lies in its exploration of the critical junctions where technological potential meets regulatory frameworks, geopolitical strategies, and environmental imperatives. Whether it’s the delicate balance of innovation and governance, the defense sector’s hunger for autonomous and cyber solutions, the militarization of low Earth orbit, or the emergence of sustainability as both a moral compass and economic necessity—2024 was not just a year of breakthroughs but a year of reckoning. Add to that the steady but relentless march of quantum computing and semiconductors, and it becomes clear: this was a year where startups didn’t just build; they maneuvered.
For the reader, this chapter promises not only a retrospective on the past year’s challenges and triumphs but also a primer on the future.
Expect sharp insights into the mechanisms driving policy decisions, the strategies startups deployed to align with (or resist) regulatory shifts, and the sectors where venture capital saw both risk and opportunity converge.
Above all, this chapter challenges us to consider: in a world of exponential technological growth, can global systems keep pace? And when they fail to, who wins—and who is left behind?
✨ Theme 6: Innovation vs. Regulation—Policy & Regulation on a Global Scale
In 2024, if you sat in on any founder pitch or investor roundtable, you’d hear a recurring phrase: “We’re building faster than the rules allow.” That statement captured the year’s central tension. Tech was accelerating to meet global challenges—AI data centers consuming unimaginable amounts of power, nuclear microreactors promising carbon-free baseload, autonomous vessels crisscrossing the oceans—yet the frameworks to govern such expansions often lagged behind. Everyone wanted to go big, but the question was: how do we ensure the guardrails keep up?
Regulatory Snapshots: U.S., EU, and Beyond
United States:
The 2022–2023 period saw a wave of incentives via the Inflation Reduction Act (IRA), focusing on clean energy, advanced manufacturing, and EV infrastructure. But in 2024, the new administration hinted at reshaping or revoking parts of the IRA, favoring “all-of-the-above” energy strategies that might tilt back to oil and gas.
For advanced nuclear or direct air capture, the idea that federal support could vanish in a policy pivot caused shudders. Meanwhile, AI soared so quickly that states like California mulled over emergent frameworks for HPC usage, data privacy, and algorithmic transparency.
Startups felt whiplash: one day, they were unstoppable darlings of the IRA; the next, they were scanning Senate hearing transcripts to see if their subsidies might evaporate.
European Union:
Brussels took an aggressive stance on sovereignty. The €11 billion Iris² satellite constellation plan exemplified the EU’s aim to cut reliance on private or foreign constellations like Starlink. On quantum and HPC, the Commission channeled direct funds into labs under the notion that “whoever leads in quantum leads in secure communications.”
Yet, the EU also cracked down on environmental regulations around advanced manufacturing. Underwater data centers—like the fiasco in San Francisco Bay in the U.S.—faced an even tougher slog in Europe, where local boards held extraordinary power to block or stall.
The net effect: big subsidies for “strategic autonomy,” but also labyrinthine approval processes, especially if your project threatened local ecosystems. Founders described it as “the most formidable carrot-stick combo ever.”
China:
From the Western vantage, 2024 felt like a year of heightened Sino-American tension. China’s AI standards committee took shape, aiming to set global norms for generative models—a direct pushback to Western frameworks.
Meanwhile, Chinese state-backed funds poured resources into next-generation semiconductors and advanced robotics, often overshadowing the West’s cautious approach. Western startups worried about how to navigate a global supply chain increasingly defined by “you’re with us or against us” rhetoric.
The IRA “Amendment Shock” and Its Ripple Effect
Arguably the biggest local policy drama in the U.S. was the rumored “IRA Amendment,” pitched by certain officials as a rollback or redirection of clean energy incentives. Microreactor companies that had banked on government loan guarantees found themselves in limbo. Direct Air Capture startups, too, braced for a potential slash in 45Q tax credits.
Meanwhile, industry watchers noted that re-channeling federal support to fossil-based projects would hamper the scale-up for budding advanced nuclear or geothermal solutions—thereby dampening capital inflows from VCs who rely on stable policy backstops.
The Amendment wasn’t guaranteed; it remained locked in committee fights by year’s end. But its mere prospect froze some expansions, with founders citing “regulatory risk” as a top reason to adopt a wait-and-see approach for large-scale deployments. Ironically, the unstoppable momentum of AI HPC forced certain policymakers to think twice—there was real need for large amounts of carbon-free baseload, which advanced nuclear or geothermal might supply, but not if the incentives shift unpredictably. The year ended with that unresolved tension.
Tension Over Environmental Regulations
While policy big-picture talk often focused on national security or energy independence, the local level sometimes overshadowed everything. The fiasco with an underwater data center test in San Francisco Bay illustrated it perfectly: a startup, fresh out of Y Combinator, tried to submerge HPC modules to save on cooling. They neglected to secure local environmental board approvals, resulting in a swift clampdown. The friction was universal. Across the Atlantic, smaller nuclear or advanced materials projects encountered delays from regional councils if they threatened protected habitats or required excessive water usage. In short, 2024 hammered home the idea that if you want to deploy any large-scale hardware or infrastructure project, ignoring local boards is a recipe for meltdown, no matter how grand your global aims might be.
Looking Ahead
Regulations that once seemed tangential to deep tech—like labor laws around robot usage, maritime rules for underwater data centers, or region-specific HPC energy standards—became front-and-center issues. Investors realized that you couldn’t just “innovate first, ask questions later” if entire categories of technology might get banned or slowed. As 2024 ended, that sense of policy friction overshadowed the sense of unstoppable momentum. Founders and funds that navigated these complexities best were the ones forging public-private alliances, actively engaging in preemptive regulatory dialogues, or building robust compliance teams from day one. The overarching question remains: does the pace of regulation align well enough with the breakneck speed of HPC, microreactors, or quantum expansions? For many, the answer in 2024 was “not yet.”
✨ Theme 7: Defense & Cyber Surge
Intertwined with the regulation landscape was the ever-present push from defense agencies hungry for new technology solutions. If the “China-free” mania was one wedge, the bigger story in 2024 was how thoroughly defense and cybersecurity shaped technology priorities. Government buyers locked in multi-year deals for advanced drones, uncrewed vessels, cybersecurity frameworks, or space-based intelligence platforms. The synergy with AI, HPC, and new manufacturing lines was impossible to miss.
The New Defense Boom
One could argue the single biggest impetus for next-gen UAVs and advanced robotics was the Department of Defense’s pivot to “autonomous everything.” The $21 million Series A for Darkhive was a prime example. Focused on advanced uncrewed aerial systems designed for “contested environments,” the startup leveraged the unstoppable demand from militaries that realized how quickly drones had redefined modern conflict. Meanwhile, the push for “China-free” UAV parts spurred expansions in local manufacturing, giving players like Orqa a direct line to the Western defense market.
Cyber as Indispensable Infrastructure
While the flashy side of defense captured headlines—like new drones or AI-driven satellite imaging—cybersecurity quietly became a key growth area. Governments were increasingly worried about data infiltration or HPC sabotage.
Bureau, a no-code cybersecurity startup, raised $30 million in Series B, capitalizing on the realization that digital vulnerabilities scale exponentially when HPC and AI are integrated. Investors recognized that advanced AI labs or HPC data centers storing national security data needed bulletproof defenses.
Companies like Axiado, focusing on hardware-level security (trusted control/compute units), found a new market in hyperscale data center security. The synergy with defense was clear: militaries needed end-to-end solutions, from hardware root-of-trust to AI-driven threat detection.
Palantir’s FedStart and the Procurement Overhaul
A subplot that garnered plenty of chatter was Palantir’s FedStart—a program designed to streamline compliance for AI or drone startups trying to work with the DoD. Where it once took a year or more to navigate the labyrinth of federal procurement, FedStart compressed it to a matter of months, hooking smaller but promising startups into the defense pipeline.
The shift resonated with critiques that the U.S. was losing ground to more agile systems in adversarial states. If advanced AI was the future, it needed to be integrated quickly into everything from logistics to threat detection to drone swarm orchestration. FedStart effectively became a gatekeeper, ensuring that Palantir maintained a central role in data infrastructure, raising eyebrows among those questioning the ethics of a single private player being so embedded in defense deals.
The Sino-Western Tension
2024’s defense surge was also a direct reflection of Sino-Western friction. The swirl of new drone deals, advanced data analytics for intelligence, or “inspect and repair” satellite systems for orbital security (like Turion Space) traced back to fears that China’s dual-use technologies might outpace Western capabilities.
Startups jockeyed for attention from NATO or U.S. agencies, leaning heavily on “not made in China” or “100% domestic supply chain”. The cost premium was overshadowed by the strategic imperative.
Meanwhile, smaller defense tech players saw new capital channels open—some from specialized VCs that once avoided defense but now recognized its stable budgets and near-guaranteed revenue streams. The momentum was unstoppable, albeit ethically contentious for some corners of the tech community.
✨ Theme 8: Space Commercialization, Supremacy & Orbital Security
Space once seemed the domain of iconic rockets and heroic astronaut stories. But 2024 continued the shift to an orbital environment dominated by thousands of satellites, uncrewed “service” spacecraft, and militarized initiatives in tight orbits.
The race for space-based broadband, Earth observation, and deep-space resource exploration escalated.
The question overshadowing everything: who secures a strategic foothold?
The Rise of Orbital “First Responders”
Turion Space’s $32.6 million contract from the U.S. Space Systems Command underscored the growing importance of “satellite rendezvous and proximity operations” (RPO).
The plan? Launch satellites capable of advanced imaging, inspection, and even minor servicing tasks in orbit. The impetus was partly commercial—servicing or refueling satellites—and partly defense-oriented, ensuring the U.S. can monitor adversarial assets and mitigate collisions. This highlighted the overlap between commercial viability and military aims in LEO (Low Earth Orbit).
Fleet Space’s Earth-to-Moon Ambitions
On the entrepreneurial side, Fleet Space raised $100 million to expand their seismic sensor networks for terrestrial mining while preparing for lunar expansions. The goal? To replicate Earth-based space-based geologic surveys on the moon, targeting resources like water ice. With satellite constellations proliferating, bridging Earth-lunar use cases seemed increasingly plausible.
Critics questioned whether it’s too early to turn the moon into a resource zone, while advocates argued that commercial space ventures should seize early opportunities.
Iris²: Europe’s Bold Satellite Move
The European Union forged ahead with Iris², an €11 billion satellite constellation designed to ensure “connectivity sovereignty” and reduce reliance on private or foreign networks like Starlink.
While critics cited the ballooning budget and uncertain timeline, proponents emphasized its strategic value, framing it as essential for the EU’s independence in a future marked by conflicts or trade wars. The project symbolized space’s transformation into a domain of strategic infrastructure rather than pure exploration.
Collisions, Debris, and Security
As LEO became more crowded, the risk of collisions soared. Startups like Sidus Space, Momentus, and Ion-X (specializing in electrospray thrusters) attracted modest but consistent funding to tackle orbital traffic management, propulsion upgrades, and in-orbit servicing. At the same time, concerns about “satellite sabotage” or adversarial jamming loomed large in defense circles.
Governments and private entities invested heavily in craft designed for orbital mobility, capable of inspecting satellites, shielding them from interference, or swiftly relocating between orbits.
The key takeaway? Space commercialization continued its unstoppable rise, but so did militarization. While 2023 saw the seeds of militarization in LEO, 2024 witnessed the first signs of growth. Agencies like NASA and the Pentagon poured funding into these solutions, reinforcing the idea that space is the next domain of strategic competition.
✨ Theme 9: Sustainability: Carbon Credits, Penalties, and Incentives Embedded in Business Models
The Economics of Sustainability
Sustainability in 2024 transcended its role as a moral imperative, becoming a calculated economic strategy. The integration of carbon credits, penalties, and incentives into business models reframed environmental action as both a necessity and an opportunity. Companies weren’t just pressured by regulators—they were motivated by markets.
A clear example was EcoCycle Innovations, which raised $25 million in Series B funding from GreenFuture Capital. By positioning itself at the intersection of environmental benefit and industrial efficiency, the company demonstrated that solving climate challenges could also yield substantial economic returns.
However, the economic balance wasn’t without tension. Carbon credits, while a lifeline for companies looking to offset emissions without overhauling operations, drew criticism for enabling greenwashing. This commodification of sustainability allowed major players like ExxonMobil to appear environmentally conscious while maintaining high-emission activities. Critics argued that such credits delayed critical systemic changes, raising questions about the true costs of these market-based mechanisms.
A Dual Pressure: Penalties and Incentives
Governments wielded both the stick of penalties and the carrot of incentives to force industrial transformation. Penalties, like those introduced by the European Union’s Carbon Border Adjustment Mechanism (CBAM), created financial strain for companies unwilling or unable to adapt. Manufacturing firms, heavy energy users, and exporters faced mounting fines for exceeding emissions thresholds, pushing many to adopt cleaner technologies or relocate operations to more lenient jurisdictions.
The financial toll was stark, especially for smaller players, highlighting a divide between those who could afford change and those left struggling to comply.
On the other hand, incentives like subsidies and tax breaks created new opportunities. Companies like Tesla thrived under programs rewarding electric vehicle (EV) production, accelerating their innovation and market dominance.
Yet, the playing field remained uneven. Startups often found themselves sidelined by complex bureaucracies, while well-capitalized giants reaped the rewards. CycleRenew, which raised $35 million to scale advanced recycling technologies, showcased that navigating this complex landscape was possible—but not without considerable effort and expertise.
Energy and Materials: The Pragmatic Path Forward
The energy transition took a pragmatic turn in 2024, particularly in high-performance computing and data centers, where carbon neutrality became an operational mandate. Companies like Fervo Energy, which secured $28 million to deploy deep geothermal systems, aligned with tech giants like Meta and Google to deliver reliable, zero-carbon energy.
These partnerships underscored a fundamental shift: sustainability was no longer a fringe consideration but an operational requirement for sectors dependent on consistent, high-energy output.
In materials, the collapse of Northvolt highlighted the fragility of global supply chains and the necessity of closed-loop systems. Startup like Tidal Metals gained traction by offering innovative solutions. Cyclic Materials ’s $53 million raise to scale rare earth recycling demonstrated the growing demand for localized, sustainable resource management.
Meanwhile, Tidal Metals pioneered oceanic magnesium extraction, bypassing the geopolitical and ecological challenges of land-based mining. These material innovations didn’t just lower carbon footprints; they provided economic advantages by reducing dependence on volatile markets and costly imports.
So, 2024 marked a turning point in sustainability’s evolution from a moral cause to a strategic necessity. Through a mix of market mechanisms, regulatory pressures, and forward-looking innovations, businesses found ways to embed environmental responsibility within their economic frameworks.
While challenges of inequity and greenwashing persist, the industrial pragmatism of startups and investors demonstrated that sustainability isn’t just viable—it’s vital. As the climate imperative continues to intensify, the question for 2025 won’t be whether companies can afford sustainability, but whether they can afford to ignore it.
✨ Theme 10: Quantum, Computing, and Semiconductors—New Records, Applications, and Troubles
Finally, we turn to the domain that, in another timeline, might have hogged the entire year’s spotlight: the quantum computing race and the equally intense hustle in advanced semiconductors.
This domain encompassed everything from newly minted QSaaS (Quantum Software-as-a-Service) startups to photonic chips that operate at room temperature. Meanwhile, HPC expansions for AI and do-or-die supply chain politics forced the semiconductor conversation into sharper focus.
BlueQubit and Others: The Year of QSaaS
On the quantum side, one of the more notable seeds was BlueQubit, snagging $10 million to build a QSaaS platform bridging classical HPC and quantum simulators. They claimed 100 times faster emulations of certain tasks, luring interest from financial and pharmaceutical players needing an edge that classical supercomputers can’t provide.
The hype was tempered by the knowledge that real quantum advantage remains elusive beyond toy problems, and that the entire quantum hardware space is still short on stable, error-corrected qubits. Yet, the consistent flow of seed and Series A deals across quantum software, photonic hardware (like Ephos?), or cryogenic spin-qubits signaled that the race to crack quantum computing remains unstoppable.
Record-Breaking SPAM Fidelity and Diamond Chips
A handful of labs published new quantum records—like Oxford Ionics’ 99.9993% SPAM fidelity—while diamond-based quantum computing from Quantum Brilliance promised room-temperature operation. Each new milestone felt like the next rung in a ladder toward a truly disruptive computing paradigm.
Investors followed with caution, aware that big leaps in lab results don’t always translate easily to commercial viability. Meanwhile, the massive HPC expansions for AI ironically gave quantum players new HPC resources for their simulations, bridging synergy in a curious way.
The Semiconductor Supply Game
2024 hammered home that advanced HPC chips—particularly Nvidia’s GPU lines—were a choke point for everything from AI labs to quantum simulation.
This created “semiconductor nationalism,” driving efforts to localize chip production in the U.S. or EU, ironically echoing the “China-free” mania.
Partnerships between HPC cloud providers and specialized chip startups emerged, with talk of next-gen photonic or neuromorphic chips to reduce power usage for data centers. However, regulatory friction and massive capital demands limited the speed of these expansions. The meltdown of Northvolt served as a cautionary tale: if battery gigafactories can flop, so too can advanced semiconductor fabs, if cost projections or supply chain integration go awry.
China vs. West in Quantum
Reports of China investing ten times what the U.S. does in quantum R&D hovered over every conversation in this domain. This sense of a “quantum arms race” fueled Western governments to pump more into quantum labs, HPC expansions, and encryption research, though often overshadowed by the gravitational pull of generative AI.
Founders in quantum computing recognized they might need to survive on specialized grants or corporate co-development deals until the hype wave justifies bigger private rounds. Still, the record-breaking fidelity, magneto-optic breakthroughs, and the unstoppable drive for quantum encryption or HPC synergy signaled that 2024 was an inflection year. It was not the year quantum computing took over the mainstream, but the year many key puzzle pieces clicked into place.
💡 Final Reflections
In this third chapter of our 2024 Deep Tech retrospective, we’ve navigated another series of transformative, and at times, turbulent changes:
Innovation vs. Regulation: The high-speed dance of artificial intelligence (HPC), advanced nuclear, or autonomous technologies clashed with local authorities, national policies, and the uncertain amendments of the IRA.
Defense and Cyber Surge: Government money poured into drones, next-generation UAS, HPC security, and a “China-free” stance. Startups capitalized on this, creating new public-private alliances that overshadowed the old slow rhythms of procurement.
Space Commercialization and Orbital Security: Constellations took flight, from Iris² in Europe to U.S.-funded "first responder" satellites. The frontier of Earth’s orbit turned into a contested space for both commerce and defense.
Sustainability-Driven Change: Vertical farms, advanced recycling, invisible fiber, and robotic ranchers moved from niche to a partially mainstream trend, overshadowed by AI but bolstered by climate imperatives.
Quantum and Semiconductors: Lab innovations and HPC synergy kept quantum in the conversation, even if overshadowed by short-term AI hype. Meanwhile, the semiconductor supply chain became strategic, fueling “de-risking” expansions but also cost anxieties.
If there’s a unifying thread in Chapter 3, it could be the clash and collaboration between public interests and private ambition. Government programs, driven by national security, sustainability goals, or competition with China, played an outsized role in determining which startups succeeded or stumbled. We also see how everything from HPC chip shortages to local environmental committees can hinder even the most well-funded expansions. The net effect is an environment where capital is massive in certain pockets but heavily dependent on favorable regulatory winds or defense imperatives.
In Chapter 4, our final chapter, we’ll tackle the last set of themes completing the 2024 mosaic: how AgriFood overcame commodity flows and labor shortages, how reindustrialization and dual-use technology influence future expansions, why advanced materials remain a slow but steady cornerstone, how geopolitical tensions continue to fuel new alliances, and whether the year’s collapse stories (like Northvolt) overshadow the massive valuations we’ve seen in Anthropic or other high-level AI labs.
Until then, remember that the 2024 race wasn’t just about who raised the largest round. It was about alignment or conflict with an increasingly intricate web of policies, security needs, and environmental demands.
In many ways, this second set of themes defines the playing field where every deep tech founder had to operate, for better or worse.
For now, we close Chapter 3 with a simple reflection: in 2024, it wasn’t just about building great technology; it was about navigating a swirling ecosystem of global power plays, local regulations, climate urgency, and unstoppable HPC expansions. The stage for 2025 is set.
Remember, this is part of a series!
This chapter is part of a broader series reflecting on the trends, challenges, and opportunities that shaped 2024 for deep tech startups and venture capital.
Explore the full series with the links below:
Chapter 4 drops soon. Stay tuned.