Lior Susan: The $100 Trillion Physical Economy Is Venture Capital's Biggest Blind Spot

Lior Susan, co-founder and CEO of Eclipse Ventures, has articulated a fundamental misallocation in venture capital's investment thesis over the past decade. According to Susan, the industry has concentrated billions of dollars into software solutions for advertising, subscription management, and customer relationship tracking, while systematically underinvesting in the physical industries—manufacturing, energy, defense, transportation, and mining—that form the actual backbone of the global economy.

This oversight represents a strategic blind spot of extraordinary scale. Susan estimates that physical industries constitute roughly 85% of global GDP, translating to approximately $100 trillion in market opportunity. Eclipse, now managing $12.5 billion across 90 portfolio companies, has positioned itself to capitalize on this structural gap by adopting what Susan terms an "operators with capital" framework. This approach prioritizes teams with genuine operational expertise in hardware manufacturing and industrial execution, rather than the software engineering and go-to-market talent that has dominated venture funding criteria.

Susan's critique extends to fundamental valuation methodologies in software-as-a-service markets. He dismisses the industry's emphasis on gross margin percentages as "an accounting trick," arguing instead that free cash flow generation represents the true determinant of whether a company will trade favorably in public markets. This perspective is buttressed by empirical observations: Cerebras, despite achieving 40-50% gross margins, trades at valuations comparable to or exceeding most SaaS companies. More structurally, the memory chip market is dominated by three players, compared to approximately 10,000 SaaS competitors, demonstrating how hard physical constraints—semiconductor manufacturing capacity, rare material access, capital intensity—create durable competitive moats unavailable in software markets.

Eclipse's operational strategy reflects this thesis through an incubation model spanning multiple segments of industrial and infrastructure value chains. The firm has carved robotics company Mind from Rivian, launched new memory semiconductor companies, and built a gas turbine challenger to GE Vernova. This portfolio construction reflects what Susan describes as the "Eclipse economy"—an interconnected set of investments spanning AI infrastructure, energy systems, manufacturing automation, and semiconductor production. Susan's investment philosophy explicitly rejects institutional portfolio construction orthodoxy: rather than maintaining diversified exposure across predefined sectors, he prioritizes conviction-driven positions in companies where Eclipse can apply operational leverage and capital deployment expertise.