Silicon Is Back: Playground Global’s Decade-Long Bet On Hardware, Energy And Deep Tech Looks Prescient

For much of the past decade, Silicon Valley chased software and apps. Playground Global was investing elsewhere: in semiconductors, quantum computing, robotics and energy infrastructure. Now, as AI drives a scramble for chips, power and data-center capacity, Playground co-founder Peter Barrett believes the venture industry is finally returning to the physical technologies it neglected. Peter Barrett, co-founder of Playground Global. (Courtesy photo) “Silicon Valley has done very well with software, but while software was eating the world, they forgot about silicon,” Barrett told Crunchbase News in an interview. The firm recently closed a $475 million fund focused on investing in deep-tech startups at seed and Series A. In the decade-plus since its founding, it has built its investment thesis around the idea that breakthroughs in science and engineering — not just software — would create the next generation of valuable companies. With demand surging for compute, semiconductors and energy, Barrett argues the rest of the industry is now catching up. “We’ve been at it for more than a decade,” he said. “In recent years, as AI is eating software, people are scrambling back to recognize that the energy, semiconductors and infrastructure they operate on all need capital too. We’ve been operating in that regime for a very long time.” Barrett is originally from Australia and came to Silicon Valley in the 1980s. He’s been coding for 50 years, he said, after developing an early and deep respect for science and engineering as the child of two engineers. His childhood was steeped in punch cards, draftsmen and drawings of control systems and machinery, he said. “Science lets you follow breadcrumbs from prehistoric plumage to semiconductors. One principle can be applied somewhere orthogonal and create extraordinary value,” Barrett said in a lengthy interview with Crunchbase News. Barrett went on to found video game developer Rocket Science Games , joined WebTV to build the entertainment browser acquired by Microsoft , and was subsequently CTO at CloudCar prior to co-founding Playground Global in 2015. Playground Global Lab in Palo Alto. Playground Global operates a lab in the former Palo Alto Research Building in Palo Alto, California. The location hosts 350 people, including those working at its portfolio companies and others with adjacencies working from the lab. On a recent visit to the warehouse, I saw various models of Agility robots, materials for aerospace construction, and a model of xLight building powerful lasers to increase the speed of semiconductor manufacturing. The quantum computing startup PsiQuantum , a Playground portfolio company, moved in when it had three employees and moved out when it reached 90. From left: Playground Global general partners Peter Barrett, Pat Gelsinger, Jory Bell and Bruce Leak, and partner Benjamin Kim. (Courtesy photo) The firm has four general partners. Along with Barrett, they are Pat Gelsinger , the former CEO of VMware and Intel who architected CPUs at Intel that helped computing take off at scale, and who joined the Playground team last year as a general partner specializing in semiconductors; Jory Bell , who has made many investments in biotech, including Manifold Bio ; and co-founder Bruce Leak , who led the investment in Agility . What follows are highlights from a wide-ranging interview with Barrett that covered topics including sovereign technology, the need to invest in companies that operate on the physical plane, and why he believes putting data centers in space is stupid. This interview has been lightly edited for clarity. Gené Teare: What is the thesis for Playground Global? Peter Barrett: It is about reducing new results in science and engineering into commercial and societal value. That means operating at the boundary between computation and the physical world. We are very interested in new capabilities of computation driving civilization forward, and that inevitably means operating in the same physical plane that we live in. We’re seeing in our data a huge amount of funding going into space , semiconductors and robotics . It seems as if the whole venture industry has pivoted to this much broader array of companies. Do you see that as a good thing? Barrett: We lost a lot when people weren’t investing in things that strike us as important. It is good that there is capital chasing the things we care about and that have real consequence. You can’t spin up a deep-tech practice overnight. You still need domain expertise. You still need to understand why investing in nuclear reactors is good, and why data centers in space are preposterous. Silicon Valley hasn’t been very efficient with much of the capital it’s deployed over the past decade or so. But I do think it’s good that people recognize that software may be eating the world, but you can’t eat software. We have to operate in the physical layer. Do you think Silicon Valley gets more efficient? Barrett: We need to do the work. You develop the instincts and the platform to deploy capital efficiently into these places. It’s important that people recognize there’s this unprecedented funnel of technical change. AI is an early indicator of it, but we have technologies like quantum. We know how to produce computation using things beyond transistors and semiconductors. We’re scratching the surface in terms of AI models. We’re right at the beginning of an explosion and renaissance in materials science driven by things like quantum computing. Now would be the time — and candidly, I feel the imperative — that anywhere there is science and capital, it needs to be turned into value, especially in liberal democracies, because the despots are doing a pretty good job of it. It’s incumbent on us to stay ahead. We’re in the DOS age of AI. We’re scratching the surface, both in terms of the models we make and the hardware we run them on. Now would be the time for people to write checks into things that are sensible and valuable. We spent a lot of time on NFTs. How are we doing with cancer? How are we doing with our most difficult challenges in terms of healing and feeding the world? There are lots of new degrees of freedom that could take capital and turn it into value. Do you think deep tech fits the venture thesis, despite the long time horizons and the amount of capital it requires? Barrett: The long time horizons certainly exist. If you’re building PsiQuantum, we’re building million-qubit quantum machines. That takes billions of dollars and a decadal effort. The corollary is that we’ve had hardware exits in two years. The timelines for hardware aren’t necessarily that different from software. Therapeutics naturally take a longer time, because of clinical trials. But we’ve also seen exits there. One of our companies tested half a million drugs in a single animal and created a new corpus of AI input for building models to create therapeutics. That’s not a decadal effort — that’s a handful of years before exit. We try to craft a portfolio that’s a mix of tactical and strategic. Some of these companies get to hundreds of millions in revenue within a few years. Others, like PsiQuantum or Snowcap , may take a decade to reach full entitlement. That’s part of portfolio construction. The biology company you mentioned — what’s its name? Barrett: Manifold Bio . It did the largest pharma deal of its kind last year with Roche . The deal could be worth $2 billion on the back end. It’s a unique mechanism to create giant AI training sets by using physical systems — using animals and in vivo testing to create that dataset. It affords the ChatGPT and biology moment, where you can have large enough training sets to build big models. You describe the firm as investing somewhere between improbable a