Why deep tech VC Driving Forces is closing its doors

Sidney Scott has decided to step away from the venture capital race, humorously auctioning off his vests with a starting bid of $500,000.

The solo general partner of Driving Forces announced on LinkedIn this week that he was shutting down his $5 million fintech and deep tech VC fund, which he started in 2020. Reflecting on the past four years, Scott described them as “a wild ride.”

Despite a healthy performance of his first, small fund, Scott told TechCrunch that increasing competition in the hard tech and deep tech sectors made it challenging for smaller funds like his to thrive. “This wasn’t easy, but it’s the right choice for the current market,” he said.

Scott expressed gratitude to supporters, including entrepreneur Julian Shapiro, neuroscientist Milad Alucozai, Intel Capital’s Aravind Bharadwaj, 500 Global’s Iris Sun, and UpdateAI CEO Josh Schachter.

Throughout this period, Scott also played a role in establishing the first AI and deep tech investor network with Handwave, collaborating with investors from companies such as Nvidia, M12 (Microsoft’s Venture Fund), Intel Capital, and First Round Capital.

Scott’s fund made about two dozen investments in companies like SpaceX, Rain AI, xAI, and Atomic Semi. The portfolio achieved over a 30% net internal rate of return (IRR), a solid performance metric for a seed fund. This rate outpaces the average deep tech IRR of around 26%, according to Boston Consulting Group.