$1 Billion proof that the next 30 years will be the era of physical systems investing: I’m in Chicago at S2G’s Summit, where they just announced the close of Solutions Fund I at $1B - their largest fund ever, raised in one of the toughest fundraising environments in over a decade. Sit with that for a second. For fifteen years, the assumption was that the best returns lived in software, and the physical economy was someone else's problem. That assumption is breaking - and the capital flows are starting to show it. $25-100M growth checks into food, energy, and ocean businesses with real revenue, customers, and margins. Not green premiums. Not subsidy dependence. Companies that win on cost, performance, and resilience. A few signals worth noting from the close: - $300M already deployed across 10 companies, with the first exit booked - Urbint acquired by Itron. - The portfolio is unmistakably commercial. ANA's hybrid generators cutting customer opex 50-80%. Exacto improving herbicide performance up to 90% across 130M U.S. acres. Echandia anchoring the first high-speed zero-emission ferry network in the country via San Francisco Bay Ferry's REEF program. - The Missing Middle is finally getting funded. The financing gap between early-stage venture and infrastructure capital has been one of the most expensive market failures of the last decade. $1B purpose-built for growth-stage physical-systems businesses is a structural fix. S2G now manages $2.8B across 120+ portfolio companies. This is not a thesis being tested anymore. It is a thesis being scaled. Energy. Water. Food. That’s where the next decade of returns gets earned. Congratulations to Sanjeev Krishnan, Chuck Templeton, Aaron R., and the entire S2G Investments team. One of the cleanest proof points yet that the rotation from bits to atoms is real. #realassets #climatefinance #foodsystems #energytransition #resilience #atomsoverbits
AJ Berman
2w
Strong signal and probably one of the clearest signs that capital is rotating back toward the physical economy. But here’s the irony: For years, investors mocked “atoms” as slow, capital intensive, and unscalable… while happily funding software companies with no margins and questionable durability. Now resilience, infrastructure, energy, and industrial systems suddenly look like the smarter long-term bet. The market may be rediscovering something old: the real world still matters.
Hear hear Jay Lipman - I might add transport and transport infrastructure to that, but I’m biased 😊 The key is surely that physical stuff comes first, it makes money (a lot) and enables the fundamentals of life to be provided. It’s not fluffy, it’s hard, and it’s where there are huge advances to be made in making money from doing things better - reducing environmental footprints and increasing circular economy solutions for example. In his 2015 treatise “The New Harvest: Agricultural Innovation in Africa” Harvard Professor Calestous Juma posited that “Infrastructure is both the backbone for the economy but also the motherboard for technological innovation”. At the time, he was arguing that Africa’s leaders needed to broaden their-then focus purely on physical infrastructure and pay more attention to infrastructure as a crucible for technological transformation. Now, it appears the reverse argument is playing out in investment. Thank you for a thought provoking (and encouraging) post. KATE MARIA VINTHER
This is excellent news. How are you viewing this in relation to the built environment - urban greening efforts, green infrastructure, NbS applications, etc? It seems that funding is becoming more available but curious to your insights on this application. And welcome any examples of financing/funding centered in this area and any that also require or value third party certification/validation for sustainable land development.
So much good stuff in here. Let’s keep sharing these important signals amidst the noise!
Every year I have found the S2G summit to both confirm and expand some aspects my own thinking - love their newer thesis around the “seams” for where value is created.
this is wonderful !
When physical systems become the constraint, capital reorganises quickly. This feels like that moment.
Jay: we like the Re. model but we use the stored solar electrons in homes to deliver their highest possible use—powering AI processing nodes in homes which transfer a lot of the inference happening in data centres to the home nodes. we are edgium.ai
Yea let’s solve the microplastic problem!
Amen Jay! Looking forward to see you soon and progress this.