Why deep tech VC Driving Forces is closing its doors

Sidney Scott, the solo general partner of Driving Forces, has decided to exit the venture capital scene, humorously announcing an auction of his vests starting at $500,000. This decision comes as Scott winds down his $5 million fintech and deep tech VC fund, launched in 2020, which he described as a “wild ride.”

Despite a strong performance from his fund, Scott cited increasing competition in the limited hard tech and deep tech deal space as a significant challenge for smaller funds like his. “This wasn’t easy, but it’s the right choice for the current market,” Scott told TechCrunch.

Scott expressed gratitude to his supporters, including entrepreneur Julian Shapiro, neuroscientist Milad Alucozai, Intel Capital’s Aravind Bharadwaj, 500 Global’s Iris Sun, and UpdateAI CEO Josh Schachter. During his tenure, Scott also contributed to building Handwave, the first AI and deep tech investor network, working with investors from Nvidia, M12 (Microsoft’s Venture Fund), Intel Capital, and First Round Capital.

Throughout his venture, Scott made approximately two dozen investments in notable companies such as SpaceX, Rain AI, xAI, and Atomic Semi. His portfolio achieved an impressive over 30% net internal rate of return (IRR), outperforming the average deep tech IRR of around 26%, according to Boston Consulting Group.

Scott’s departure from the venture capital landscape highlights the increasing pressures and competitive nature of the industry, especially for smaller funds focusing on specialized tech sectors.