Why Are US VCs Writing AI Term Sheets Far From Sand Hill Road? | Deep Tech Briefing #73

Weekly Intelligence on Deep Tech Startups and Venture Capital.

Aug 17, 2025

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Dear Friends,

This hot August week didn’t slow the pace of deep tech. From fusion testbeds generating defense-grade data, to maritime telemetry becoming an underwriting layer for trillion-dollar trade, to solid rocket motor production re-shored and scaled, this week confirmed something fundamental: the future of deep tech isn’t theoretical anymore—it’s operational.

Across the stack, constraint is becoming the most valuable dataset. Launch pads are scarce. Power access—not compute—is the real bottleneck for AI campuses. Supply chain risk is being priced into everything from fertilizer to spacecraft. And the companies that will win this cycle are the ones who don’t just build breakthrough technology—but design systems that function under pressure, under budget, and at speed.

This week’s signals show capital migrating accordingly. Fusion projects are raising to monetize before commercialization. Battery rail solutions are bypassing national infrastructure gaps with distributed architectures. And new AI-native tooling is turning simulation from a cost center into an accelerant—compressing hours of compute into milliseconds, enabling faster iteration, tighter tolerances, and lower burn. What that unlocks: design as leverage, and time as alpha.

But the shift isn’t just technical. Physical capacity is being re-verticalized. Propulsion, storage, heat systems, and materials handling are coming under one roof—not for control’s sake, but to de-risk cadence. The bottlenecks aren’t theoretical anymore. They’re chemical, mechanical, regulatory—and they’re being solved not by incumbents, but by execution-focused builders who treat constraint as the design surface.

This week showed that constraint isn’t just a challenge—it’s becoming a strategy. Fusion monetization ahead of grid parity, SRM capacity re-shored for schedule control, rail batteries bypassing federal inertia, and heat infrastructure becoming the new capex line item for AI. These are not anomalies—they’re the new playbook.

The founders who understand constraint as a design surface—not a blocker—are out-executing incumbents. And the capital that backs them early won’t just generate returns—it will help redraw the industrial map.

Enjoy the read,
Giulia

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In Today’s Briefing:

Interesting Reading: from AI search moving into the browser to semiconductor geopolitics, space congestion, venture financing pivots, embedded export controls, biotech’s IPO drought, psychedelic medicine hurdles, and China’s lithium demand shock.
The Big Idea: Why Are US VCs Writing AI Term Sheets Far From Sand Hill Road?
Key Updates track execution at the frontier: impact-fusion milestones, new launch licences vs. pad scarcity, AI-campus energy pivots, solid rocket motor capacity buildout, AI-accelerated fusion design, contract-manufacturing shakeups, defense payload acquisitions, freight autonomy resets, maritime risk tech, rail battery strategies, bio-based fertilizer models, and booster-recovery infrastructure.
Deep Tech Power Play: an EU-level security framework, a U.S. minerals push, and state-level permitting reforms to attract hyperscale AI campuses.

1. Interesting Reading

AI search enters the browser, and the distribution war begins.
With Perplexity now integrated into Chrome, the battleground shifts: whoever controls the browser window may soon control how billions discover and consume information.
→ The Wall Street Journal

Intel may become a government-backed champion of U.S. industry.
Talks of Washington taking a direct stake underscore how semiconductors have moved from corporate competition to instruments of national strategy.
→ TechCrunch

Investors remain hesitant to treat Mars as a true venture opportunity.
Capital is flowing into space, but turning Martian exploration into an investable thesis still feels aspirational, with unclear pathways to economic returns.
→ SpaceNews

The new space race is shifting from rocket milestones to orbital congestion.
Vulcan’s breakthrough, Ariane 6’s successful debut, and the rapid rise of mega-constellations signal a new era—where the challenge is no longer reaching orbit, but managing the traffic already there.
→ TS2.Tech

SPVs are quietly evolving into venture’s emergency financing engine.
Once a tactical tool for opportunistic deals, special purpose vehicles are becoming the primary way investors keep capital flowing in a slowing fund cycle.
→ The Information

Export controls now come embedded inside the chips themselves.
The U.S. is adding tracking mechanisms to AI hardware, turning every shipment into a data point in the global competition for technological advantage.
→ Reuters

Six months without a biotech IPO raises questions about the sector’s future.
Is the drought a temporary pause in investor appetite, or a deeper signal that public markets have lost faith in biotech’s ability to deliver returns?
→ Endpoints News

Psychedelic medicine approaches approval but faces commercialization hurdles.
Even as MDMA moves toward regulatory clearance, uncertainty over scaling, reimbursement, and oversight could slow the field’s momentum.
→ WIRED

China’s EV lithium dominance collides with slowing demand at home.
Falling consumption in the domestic market is reshaping the dynamics of global supply chains—testing the resilience of CATL and other Chinese giants.
→ Axios

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2. The Big idea