The Hard Thing about Hard Tech – Greg Smithies on the TRL 4-5 Challenge
Podcast Episode Description:
How do you move from novel idea to working prototype in hard tech? And how can you bend the rules of the game to give you a better chance of winning?
Greg Smithies is a finance and operations leader who has worked with some of the world's most ambitious companies. He led finance and operations at Elon Musk's Neuralink and The Boring Company. He's also been an investor with Battery Ventures, BMW iVentures, and Fifth Wall. He's helped raise over $2bn for startups, and over $950m for funds.
In this episode, we go deep on the challenges of TRL 4-5, the prototype stage, and learn how the super ambitious manage this journey versus everyone else.
The three types of hard tech
Greg outlines three categories of hard tech, each with its own capital profile and scaling challenge:
Fundamental new science – huge technical uncertainty and very large capital requirements (for example, Neuralink). These require billionaire backing because the true capital needs are far beyond venture capital or project finance. Greg calls these 'yacht racing for billionaires'.
Re-engineered systems – lower capital intensity, using existing components in smarter ways (for example, The Boring Company). The contract manufacturing ecosystem has made this the least capital-intensive route. Companies like Foxconn will spin up test lines for guaranteed volume with little upfront cost.
Economies of scale – relatively cheap to prove (single millions to tens of millions), but extremely expensive to build out (for example, solar, batteries, electrolysers). Companies hit massive infrastructure capital walls requiring project finance. The story becomes about offtakers, not technology.
Each demands a different route through the valley of death.
Why storytelling starts early
The strongest companies do not begin with a technology looking for a problem. They begin with a compelling long-term vision – a clear north star – and build towards it.
At Neuralink, that north star was high-bandwidth input and output to the brain long before the exact technical path was known. This is very different from how most university spinouts start. The best university professors run labs looking for bigger things, seeing what they bump into whilst pursuing them.
How to build around uncertainty
Before Neuralink became a company, Elon spent 9-12 months bringing together people with very different technical approaches: neural lace (opening entire skull, putting spider web on top), electrodes via arteries, thin 'hairs' into the brain (the approach they ultimately used).
The aim was not to back one solution too early, but to let the best path win. When solving fundamentally difficult things, don't be married to a certain path – any path you pick is probably wrong.
The team was deliberately diverse: neurosurgeons and brain-computer interface specialists, MEMS experts (making very small systems), micro-fabrication specialists, 3D printing at nanoscale, laser ablation experts. Get people good at the fundamental things you'll need, then let the best approach emerge.
Why off-the-shelf matters
Even in frontier science, companies should avoid inventing what already exists. At Neuralink, charging and communication were solved with electric toothbrush-style inductive coils and Bluetooth, rather than bespoke systems.
Traditional medical device companies might spend a billion dollars inventing new communication protocols. Startups can eliminate those problems by using what already exists, even with technical trade-offs.
Make the scope of the difficult thing you're doing as narrow as possible. Everything around it that isn't critical to the critical path should be as simple and knuckleheaded as possible.
Why offtakes start earlier than founders think
The best deep tech companies start offtake conversations at TRL 4, not once the product is fully mature.
Greg describes how Twelve (e-SAF / carbon transformation) began with tightly scoped 100-ton projects with P&G (one ingredient for Tide washing detergent) and Mercedes (one plastic piece in one model) at TRL 4. By TRL 5, doing the 1,000-ton version. By TRL 6, British Airways parent company (IAG) announced a 14-year offtake agreement.
If they hadn't started conversations at TRL 4, they never would have gotten there.
You're selling the vision to industries that think in decades. Start conversations even if you're telling them you'll roll product off the pipeline in a decade, because they need to act now or they're screwed in 30 years.
The project finance ratio
For companies coming down the cost curve, rough numbers: for $5bn of offtake, you probably get $100m-$500m of project finance.
That wide range depends entirely on offtake contract quality. Project finance investors aren't qualified to assess whether your technology is good. They're very qualified to assess whether your offtaker will follow through.
The CEO mistake
One of the most common mistakes in hard tech is hiring industry insiders as scale-up CEOs because they 'know the industry'. Greg's experience is that these leaders often lack the boldness and storytelling that deep tech needs.
Out of 15 clean concrete startups Greg looked at, 12 hired someone from the cement industry. Maybe two are still around. Industry insiders lack pizzazz. If they were that excited and bold, they probably wouldn't be in that industry anymore.
Always take the person who doesn't know much about the industry but has the brains to figure it out and the boldness to go for it. You're asking people to do something that sounds crazy. Your industry insider won't make the cheeky ask.
Can technical founders learn storytelling?
Some can. Some can't. It's incredibly difficult and very intangible.
If there's even the slightest chance your technical founder can learn this, absolutely go down that path. Elon, in his PayPal days, wasn't the most inspirational person. Very clearly, it's possible to learn.
If your technical founder genuinely cannot learn this, bring someone in who can. That person must be the CEO, not alongside or below the existing CEO. Putting them next to the technical founder creates split messaging.
For companies navigating TRL 4-6, Greg's journey offers essential lessons in understanding which type of hard tech you're building, matching capital strategy to that type, starting storytelling and offtake conversations far earlier than feels comfortable, using off-the-shelf components strategically, and hiring for boldness over industry knowledge.
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This episode of the Lab to Market Leadership podcast was produced by Beauxhaus.
