Authors: Bojan Stojkovski and Bogdan Iordache
Sam Cash has been investing in critical industries for over ten years. Delian (autonomous systems for defence), Compass (infrastructure for real estate) and Quix (an event-driven data engineering platform for building real-time apps) are just a few of his notable investments at the intersection of software and physical industries.
Passionate about how technology changes the world we live in, Sam started a newsletter on how software defines the physical world and recently launched with Dealroom.co an in-depth analysis of Europe’s most critical industries—energy, robotics, supply chain, and defence.
In 2024, he set up the REALTECH Conference, an invite-only event aiming to put the most ambitious founders, operators, and investors in critical industries in one room, for one day. After being a Partner at Project A and leading their UK office, he left to start his venture capital firm Entropy Industrial Capital, where he’s now investing at the seed stage.
In this interview with Underline Ventures, he shares his perspective on the shifting landscape of European manufacturing, the growing role of AI and software in industrial transformation, and the qualities he looks for in founders.
Underline Ventures: What led you to establish Entropy Industrial Capital, and what is the core philosophy behind Entropy Capital’s investments, particularly in re-architecting critical industries?
Sam Cash: I’m an engineer by training. I’ve spent the last decade investing in venture capital, specifically focusing on technology companies that are re-architecting our physical industries. Over the years, I’ve invested in more than 25 companies, achieving some notable successes.
Post-COVID, I noticed massive changes across physical industries, particularly in energy, climate, supply chain, manufacturing, and national security. The reasons for these changes are multifaceted. COVID-19 highlighted the resilience of digital infrastructure but exposed significant weaknesses in physical infrastructure. Following that, persistent challenges emerged, including the urgent need to transition energy systems to renewable sources, ensure sovereignty in computing infrastructure, and automate and localize industrial operations.
These shifts are driven by major macroeconomic changes, which, in hindsight, became particularly apparent after Trump’s election and can broadly be categorized as de-globalization. This highlights one of the biggest challenges in Western society: addressing foundational issues within physical industries.
In Europe, I’ve also observed a surge in technical founders building companies in these sectors. These founders are often highly technical, mission-driven, and focused on creating systemically important companies in these sectors. However, I felt no firm in Europe adequately served such founders, which inspired me to build Entropy.
UV: What types of deals do Entropy Capital typically invest in, and what is the usual check size?
SC: The types of investments I focus on are typically very early-stage deals. I look for just a few founders, ideally with an early product already built or clear evidence that they can build the product or technology—either demonstrated in a previous role or project. Our check sizes range from $200K to $500K, depending on the stage. I prefer to collaborate with other lead investors, bringing them into the deal. This makes our fund very collaborative; we’re not competing for ownership but rather working to participate and support the founders.
The firm’s philosophy is centered on backing technical founders who can build tech no one else can. These individuals tend to be obsessive and driven by a strong personal narrative or point to prove.
Beyond investing, my approach involves supporting these founders in a highly concentrated way. This support includes being a thought partner, building a network of technology companies and potential customers—partially through a conference (REALTECH – an event that is dedicated to technologists that are rebuilding critical industries) I’ve been hosting for three years—and maintaining a focused investment strategy. I typically invest in five or six companies per year, aiming for about 20 companies per fund, with a material percentage of the fund allocated to each investment.
UV: How do you view the current state of manufacturing in Europe, and what opportunities or challenges do you see in this field?
SC: Sectors like manufacturing, supply chain, and energy, which are core to industrial infrastructure, are undergoing their most significant transformations since the Second World War. These changes are driven by challenges in renewable energy, significant labor shortages tied to an impending demographic crisis in the Western world, and the rerouting of trade relationships. For example, the US is increasingly disengaging from China, an accelerating trend. Europe, meanwhile, finds itself in a middle ground.
Europe has excelled in areas like climate and energy infrastructure. The Nordics, for instance, could be seen as a Silicon Valley for Climate Technology. However, manufacturing infrastructure has struggled. Many legacy companies, such as automakers like VW, are losing ground to low-cost Chinese producers that have reached product parity. This trend is expected to continue, as these legacy companies—burdened by their traditional business models—struggle to transition effectively to EVs and modern solutions.
The dominance of long-established companies is being challenged across manufacturing, supply chain, and energy. This creates two major opportunities. First, it opens up space for new companies to emerge, capturing latent demand that legacy players can no longer fulfill. Second, it presents opportunities for startups to sell solutions to these companies, enabling them to automate, digitize, and modernize quickly.
UV: What verticals do you prefer, and what trends have you observed in your portfolio investments?
SC: I tend to be agnostic to specific ideas and instead prioritize founders. My focus involves delineating the markets I don’t invest in, and within those I do, I’m primarily led by the founders themselves. For example, we’ve invested in an as-yet-unannounced energy storage company that has developed a completely novel form of mechanical energy storage. The market for this technology is enormous, measured in the hundreds of billions of dollars in Europe alone. If successful, this company could scale significantly. While that’s an abstract example, I hope it provides some context.
As for trends, the most notable is the growing number of founders creating companies that target physical and legacy industries. These entrepreneurs recognize the opportunity to sell to large enterprises in these sectors, and I’ve been continually impressed by the quality of talent pursuing these opportunities.
Another major trend is the increasing role of software and AI as transformative levers within industrial enterprises. AI has reached a level of maturity where it can be widely adopted across industries, particularly in industries, and there is no real customer demand for integrating these technologies.
A prime example is Palantir, which transitioned from being seen as a consultancy to a productized software business focused on AI and software workflows for legacy industries. Palantir’s evolution into a $100 billion company with reaccelerated growth highlights the potential in this space. This trend is becoming evident across many verticals and specific products in both Europe and the US.
UV: How do you balance the risks and rewards of investing in software startups that work on industrial tech solutions?
SC: These markets, even today, remain challenging for many investors to navigate. Over the past two or three years, there’s been a positive trend in more generalist and specialized funds becoming active in this space. However, the level of sophistication and understanding of the underlying customers and markets is still relatively low, particularly on the VC side and occasionally outside of the founder community.
The complexity of these markets explains this gap. They are vast, difficult to generalize about, and highly specialized across engineering, supply chain, and product dimensions. They can also be hard to access and identify. This combination necessitates specialization—not only for founders building in these spaces but also for investors assessing them. Furthermore, go-to-market strategies in these industries tend to be intricate, requiring deep knowledge of customer behavior and highly specialized networks. Unlike consumer FinTech or SME SaaS, these markets demand a nuanced approach.
Because of this, I have a strong bias toward founders who demonstrate a deep understanding of the specific problems they’re addressing. They don’t need to be experts, but they must have enough experience and realism to approach these challenges effectively. I particularly value founders who have gained meaningful insights through their own experiences in these markets.
On the reward side, these markets are still underappreciated, with the potential for winners that can scale to tens of billions in value. While some might struggle to name current success stories in this space, examples abound. Tesla, arguably the first robotics platform with robotic capabilities in its vehicles and adjacent products, is now a $1 trillion company. Despite the massive opportunity, there’s still a narrative gap around these markets and their players. For me, this creates an advantage: I can build deep relationships with founders early in these underappreciated spaces and leverage my knowledge and network to partner with exceptional companies poised for outsized success.
UV: How do you evaluate whether to support startups helping incumbent manufacturers digitalize versus those aiming to replace them and what advice would you give founders to analyze their opportunities in these terms?
SC: I don’t take a strict sector or vertical approach to what works; instead, I’m led by the founders themselves. For example, I probably wouldn’t invest in a company selling software to automotive manufacturers in Europe today—it’s likely to be a tough market. That said, if the founder is exceptional, I might reconsider.
When assessing opportunities in manufacturing, I look for a clear understanding of the specific segment the startup is targeting. For instance, are they selling to tier-two manufacturers in France or Germany who produce specialized precision-engineered products for tier-ones or OEMs? This understanding helps me diligence the problem space effectively.
UV: What key change do you think VCs need to make to better support startups in physical industries?
SC: I believe it’s essential to foster a deeper understanding of end customers and develop patience. Startups in these sectors often have longer gestation periods, requiring time to refine products and navigate extended sales cycles.
VCs also need to challenge entrenched biases around physical industries, which historically haven’t been seen as “hot.” Supporting founders from unconventional backgrounds is critical; not every problem in these sectors will be solved by someone from a high-profile tech company.
It’s about recognizing and backing talent that deeply understands the nuances of their space, even if they don’t come from the traditional startup mold. Above all, following the smartest, most capable founders and trusting their guidance is key.
UV: What role do you see industrial innovation playing in shaping the future of our world?
SC: I believe Europe is at a critical juncture, and while the urgency has been apparent for at least two years, the response has been slow. The Trump election seems to have marked a turning point in highlighting the need for action across the continent. Governments, in my view, should focus on creating optimal conditions for entrepreneurs to build transformative technologies.
Historically, periods of significant technological innovation, wealth creation, and sovereignty have often been driven by scaling research and development. For instance, early Silicon Valley grew out of U.S. military R&D projects, and Bell Labs played a pivotal role in developing foundational technologies. While these innovations might not have had immediate commercial applications, they laid the groundwork for long-term ecosystems that fueled massive growth—evidenced by the trillions in market capitalization that U.S. technology companies have achieved.
To address today’s challenges, I believe we need to focus strongly on research, deep tech, and innovation. Private enterprise is often the best vehicle for turning these advancements into scalable solutions. So, I’m super bullish on the founders’ ability to build many of these companies and solve many of these problems. Ultimately, we have no choice but to solve these issues.