Executional Capital: The Investment Model Physical Tech Has Always Needed (and Never Had).
Feb. 27 2026
We are transitioning into a period of unparalleled industrial upheaval, driven by machine intelligence, physical AI, and automation on a global scale previously unimaginable. The question isn’t whether this revolution will reshape our industries. It’s whether our capital investment models are (actually) built to capture their value. Newly visible knowledge becomes engineering. Engineering becomes innovation. And innovation becomes real-world outcomes: machine and artificial intelligence, drug discovery, advanced sensors, robotics, new materials, etc., anywhere the physical world intersects with intelligence. At Conduit, we blend “Founder Obsession with Venture Ambition and PE Discipline”
- Amish, MD, Conduit Ventures/Labs.
At the simplest level, my position is this: capital married with entrepreneurial curiosity is the primary catalyst for human innovation and productivity, and productivity is what ultimately drives ROI. AI is an accelerant in this story, but public and private capital allocation still powered the engine across the research, development, and deployment phases.
For 25 years, venture capital has operated on a model designed for software: 10-year fund cycles, series-based investing mapped to iterative growth, and valuations pegged to revenue velocity. That model worked brilliantly for a world where products were weightless and distribution was instant.
But that same model has been quietly broken for years in physical tech.
It was built on Bay Area economics and software valuation schemes. It doubled down on ARR-based multiples that never mapped cleanly to hardware and lab-to-market commercialization. As funds grew larger, “hope” became an implicit strategy, and “spray and pray” became a portfolio-construction crutch. Meanwhile, inflated valuations helped GPs raise Fund II, III, and IV without a corresponding increase in liquidity insight or repeatable exit pathways.
The data exposes the mechanism. For VC funds raised between 2018 and 2020, the median TVPI is 1.8x, but the median DPI is just 0.4x (Qubit Capital / Carta). In plain English, most of the “value” in those funds is paper marks, not returned capital. For hardware and physical-tech portfolios, this gap is where companies go to die. Mark-ups required to sustain TVPI forced founders into artificial growth narratives - ARR targets, premature commercialization, and business models designed to impress the next-round investor rather than mature the core technology. The valuation game propped up the fund; it hollowed out the company. (call me for live examples) — By 2022, when public market comps collapsed, and re-marketing became unavoidable, VC funds posted a median IRR of -16.8% in Q4 alone (PitchBook). Hardware startups, already running on fumes from misaligned growth pressure, had nowhere to go.
A robotics founder recently told me: “VCs wanted ARR growth. We needed tooling budgets and strategic JV’s.... So we died.” ( and by died, in hardware re-caps / and liquidation sales usually are the norm)
But as Ryan McEntush of a16z recently wrote: “An electric vehicle is a smartphone with wheels. A drone is a smartphone with propellers. A robot is a smartphone that moves.” The next wave of transformative companies won’t just write code; they’ll sense, decide, and act in the physical world.
The venture model is breaking, and first-stage hardware is where the fracture is most visible.
Better together - the right capital and expertise for the stage: Every phase of a physical-tech company’s life demands a fundamentally different kind of leader, partner, and capital structure. Research labs and deep-tech institutions are brilliant at origination and core IP development, but they are not commercialization engines. Early-stage founders are builders and missionaries - but they are rarely the operators who can navigate a hospital procurement cycle or negotiate a supply chain LOI. Growth-stage executives know how to scale, but deploying them too early burns runway and misaligns incentives.
In this world, the most valuable builders are not simply the deepest specialists. They are the synthesizers—the people who can move between domains, understand how each discipline contributes, and bring those contributions together at the right moment. Execution is no longer just speed. Execution is composition.
The institutions that have consistently created the most value in life sciences, med-tech, advanced manufacturing, and robotics understand this. They treat the handoff between phases as a strategic asset, not an afterthought. That means research labs partnering with the right commercialization operators early. It means capital investors entering at the right milestone, not the loudest moment. It means strategic partners, the distributors, OEMs, and platform operators who will ultimately scale and integrate the technology being brought into the conversation long before a term sheet is signed for Series A/B.
This is the nature of value creation across physical-tech: orchestrated, phased, and deeply relational. Conduit’s role is to serve as the connective tissue across these phases, ensuring the right teams, capital, and strategic relationships are in place before they are urgently needed.
To understand why this model is so rare and so urgently needed, we have to diagnose the structural failure with precision.
The Problem: Software Logic Applied to Hardware Reality
Early-stage venture investing in physical tech, spanning medical devices, industrial systems, robotics, and consumer hardware, has always been an awkward fit inside an asset class built for software.
Software iterates in sprints. Hardware iterates in 6-to-12-month build cycles with dependencies on supply chains, tooling, compliance, and manufacturing readiness. Software scales with a marginal cost approaching zero. Hardware scales through orchestration: procurement, pilots, integration, deployment, and service.
Yet the dominant investment model still tries to map agile-style iteration to a class of innovation that is fundamentally milestone-driven. The result? Great technologies get stranded - not because they don’t work, but because the capital structure around them doesn’t match the journey.
The Shift: From Series Investing to Milestone Investing
Here’s what we believe at Conduit Venture Labs: the innovation revolution requires a new investment architecture, one that blends the mission-driven founder obsession with the ambition of venture capital and the operational and executional discipline of private equity.
This isn’t about being less ambitious. It’s about being strategically ambitious. Physical tech ventures don’t fail because the technology doesn’t work. They fail because:
Capital is deployed before the pathway is validated. Engineering hardens before the delivery system is understood. Growth-stage expectations are applied to milestone-stage companies. Founders are forced into premature scaling - or premature dilution
The first capital into a physical tech company shouldn’t buy speed. It should buy clarity: of the pathway, of the pilot, of the procurement, of the manufacturability. We call this ‘executional capital’: the first dollars spent to de-risk the real-world delivery system before complexity compounds.
A Different Model: Founder Obsession x Venture Ambition × PE Discipline
Conduit is an investment platform designed from the ground up to bridge lab-to-market / opportunity-to-market in physical tech.
But here’s what makes us different: We don’t just write checks and wish you luck. We get our hands dirty. We co-build, co-operate, and work alongside operators through the hardest stages. Everyone at Conduit is a builder and operator first. We have all navigated the trials, failures, and successes of building a real-world solution.
What does PE discipline actually look like? Private equity, at its core, deploys capital against verified milestones, maintains operational control through active board oversight, and measures success on DPI, you know, actual returned capital, not paper marks or inflated TVPI multiples. The critical distinction is that PE typically applies this rigor at the growth-and-scale stage, where business models are already proven, and the primary risk is execution speed. Conduit applies the same principles one phase earlier - at the commercialization and pathway-validation stage, where the model itself is still being defined, and the leverage of getting it right is greatest. That is precisely where the traditional VC model fails most visibly in physical tech. Combined with venture ambition (10x outcomes, equity upside), and founder-friendly alignment - it looks like this:
Take a medical device venture. We don’t deploy $2-5M upfront and wait 18 months as a founder figures out how to navigate the complexities of physical-tech team building, and multi-disciplinary execution. We release executional capital against concrete validation milestones: first POC, the first pilot conversion with a hospital partner, a signed supply chain letter of intent, and an FDA pre-submission meeting, etc.... Each gate unlocks the next tranche. If a milestone doesn’t hit, we pivot the pathway or wind down cleanly - no zombie equity, no false hope. And we’re in the room for every one of those milestones: helping run the pilot, navigating the regulatory strategy, architecting the product, managing manufacturers, and mapping the supply chain.
That’s what co-building means. We operate the company with builders until the pathway is validated and you’re ready to scale (and take on the right, risk-adjusted, external capital for the journey ahead).
Conduit Venture Labs is our venture studio and hardware execution platform. We collaborate with strategic deep-tech labs and experienced founders to jointly establish and operate new ventures from their initial phases. We blend venture building and technology commercialization into a single portfolio, and we spin out companies as independent entities only when it makes sense, not on an arbitrary timeline. That means operating longer to reach meaningful milestones: a license deal, an M&A outcome, a JV, or a validated commercial pathway.
Conduit Ventures is our investment fund. It fuels growth for both our studio-born/accelerated portfolio companies and startups beyond our walls that need a blend of executional and market-entry capital, paired with access to our network, domain experts, and supply chain infrastructure.
The platform maps directly to how physical-tech companies actually mature - across three distinct phases, each demanding different leadership, capital structures, and partnership configurations:
Phase 1 - Core R&D and IP Development (”from the deep”)
Who leads: Research institutions, university labs, deep-science founders. The science is being built. Core IP is being established. Technical risk dominates. This phase belongs to scientific leadership - not venture capital. The primary objective is to prove the technology works and create defensible IP. Forcing VC growth logic here is where great science goes to die.
Phase 2 - Commercialization Pathway (This is Conduit’s zone)
Who leads: Commercialization operators, product execution, and venture builders. The technology is proven (in a controlled setting). The questions shift: What is the pathway to market? Who buys this, and how? What does the delivery system look like? Can we pilot this in a real value chain and get paid? This is where executional capital is most powerful - not growth capital. The first capital at this phase should buy clarity: validated pilots, supply chain readiness, a defined regulatory pathway, a clear productization effort, and the right strategic entry point. This is the phase where premature VC pressure destroys companies. And it is where Conduit operates (and it’s what we as a team and network of partners have been doing for decades).Phase 3 - Strategic Scale
Who leads: Strategic partners, growth operators, established platforms. The pathway is validated. Now scale through the systems that already exist: established distribution platforms, licensing agreements, M&A into larger platforms, and joint ventures. Capital at this phase is ‘market entry’ capital, and it performs best when Phase 2 has done its job.
eg. Mazor Robotics is the case study for what this looks like when it works great. The Israeli spine-surgery robotics company didn’t raise a mega-round and race to ARR. Instead, it matured its core platform - the Mazor X robotic guidance system - through disciplined milestone-gated Phase 2 development. When Medtronic entered in 2016 as a strategic partner, each capital tranche - $12M, then $20M, then $40M - was gated against real operational outcomes: platform launch, sales milestones, distribution agreement execution. The result: a $1.7 billion acquisition by Medtronic in 2018, with the technology scaling globally through an established supply chain that Mazor never could have built alone. It wasn’t a venture story. It was a technology commercialization story, executed with the right partners at the right phase.
Conduit deploys executional capital at Phase 2 - milestone-gated, operationally paired, and always oriented toward Phase 3, and layers in ‘market entry’ capital during the latter phase of Phase 2, going through Phase 3. Structuring companies for growth capital that matches scale, not early-stage risk. The goal: companies enter Phase 3 validated, commercially ready, and positioned for the right investors, partners, and strategic outcomes at the right time.
Built by Builders, for Builders
Conduit wasn’t built in a boardroom. It is led by veteran Physical tech builders, founders across medical device startups, deep-tech university spin-outs, and global corporate consumer products. It stands atop a global community of operators, hardware engineers, manufacturers, and supply chain veterans who know what it takes to move technology from the lab bench to the loading dock.
From Lab-to-Market: Conduit’s active IHMC partnership is the model in practice. In late 2025, Conduit formalized a strategic partnership with the Florida Institute for Human & Machine Cognition (IHMC) - one of the world’s leading physical AI research institutions, with pioneering work in exoskeletons, human-machine teaming, embodied AI, and autonomous systems. The partnership deploys Conduit’s venture-building methodology to evaluate and execute commercialization pathways for IHMC’s breakthrough technologies, spanning direct licensing to new venture creation - with strategies designed to expand IHMC’s real-world impact across both defense and commercial markets. As Dr. Morley Stone, IHMC’s CEO, put it: “To continue pushing the frontier, we must pair world-class research with world-class commercialization.” That is Phase 1 meeting Phase 2. That is what the model looks like in practice.
We sit at the intersection of digital and physical, where machine intelligence meets manufacturing floors, where AI models meet medical devices, where software platforms meet the industrial systems that power the real economy.
The innovation revolution is here. AI is rewriting what’s possible. But the companies that will define this era - the ones that sense, decide, and act in the physical world - need more than capital. They need a partner who understands that building for the physical world is an act of orchestration, not just iteration. The mythology of the lone inventor is fading. The era ahead belongs to those who can reveal what was hidden—and then orchestrate the many disciplines required to build from it
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That’s who Conduit is for. 🚀 Let’s Build
Conduit Venture Labs & Conduit Ventures - built by builders, for builders.
Amish Patel, Founder, Managing Director, Conduit Venture Labs / Ventures
References
Carta - VC Fund Performance Benchmarks (2018-2020 Vintage). Median TVPI of 1.8x and median DPI of 0.4x cited for funds raised 2018-2020. Carta Fund Performance Data
PitchBook - US VC Valuations Report, Q4 2022. Median IRR of -16.8% reported for VC funds in Q4 2022. PitchBook Research
Andreessen Horowitz (a16z) - Ryan McEntush, “Everything is a Computer”. Source for the smartphone analogy applied to EVs, drones, and robots. a16z.com/everything-is-computer
Mazor Robotics / Medtronic - Strategic partnership and acquisition (2016-2018). Medtronic’s milestone-gated investment tranches ($12M, $20M, $40M) and final $1.7B acquisition in 2018. Medtronic Acquires Mazor Robotics - Reuters, 2018
Florida Institute for Human & Machine Cognition (IHMC) - Conduit Venture Labs strategic partnership announcement, December 2025. IHMC Partnership Announcement