When Santa Monica-based Crosscut Ventures announced its pivot into funding frontier technologies, it marked a stark change from what the company’s portfolio looked like since it opened its doors in 2007.

Crosscut Ventures was a prominent seed investor in what would become household names like New York-based Buzzfeed Inc., Solana Beach-based Fabletics and El Segundo-based Savage x Fenty.

But in late October, the company announced it would pivot exclusively to deep tech and utilize Los Angeles’ ports, warehouses and manufacturing plants.

“It’s all these old warehouse spaces that used to be owned by Northrup and Boeing and Howard Hughes. Like the history there is so deep back to the ’50s and ’60s,” Brian Garrett, cofounder of Crosscut Ventures, said. “We’re trying to harness that all back together to create this kind of new community around deep tech or frontier tech across SoCal.”

In December, Crosscut Ventures punctuated the move by adding another venture partner to its roster: Jon Ylvisaker.

Ylvisaker has a long history in the thing that powers most frontier tech: energy. He previously ran Yield Capital Partners, a private equity firm that focused almost exclusively on energy transition – the move from fossil fuels and coal to renewable energy.

Now that he has joined the venture capital world, his first priority is nuclear fission.

“The greatest machine we have in the world is our electrical grid. People just don’t think about it. We take it for granted. Without it, we’d still be in poverty,” he said. “If we can make that cheaper, cleaner and more abundant and more readily available where we need it, which is maybe the bigger problem, there are enormous opportunities.”

A local strongpoint 

Indeed, Los Angeles was at the epicenter of nuclear energy funding for a long time. In 2015, 91% of national funding dollars into the space went toward L.A.-based startups, according to Pitchbook. While that number has started to dwindle – so far in 2024, L.A.-based nuclear energy companies saw 20% of national sector dollars – the region is still one of the largest nuclear energy hubs in the U.S.

“There’s a sort of industrial revolution happening again and it’s happening outside of Silicon Valley,” Ylvisaker said. “And it may just be happening here in Los Angeles.”

El Segundo-based Radiant Industries Inc., for example, announced it raised $100 million in series C funding for its microreactors back in November.

“Radiant is developing technology with the potential to provide reliable and lower carbon energy to remote, off-grid locations, among other areas,” Jim Gable, the president of technology ventures at Chevron and one of Radiant’s investors, said in a statement. “This solution can circumvent grid connection challenges and provide uninterrupted, lower carbon intensity power for long periods.” 

A promising industry

Crosscut’s new investment strategy is in good company. Nuclear energy is becoming an increasingly popular funding sector both for venture capital firms and for the government, as it is more reliable to harness and utilize than solar and wind, while remaining better for the environment than fossil fuels.

In July, the U.S. Department of Energy proposed injecting $9 billion into nuclear energy projects, and, as of mid-December, funding into U.S.-based nuclear energy startups reached $1 billion. In August, California Gov. Gavin Newsom sparred with the state legislature on keeping Diablo Canyon, the state’s last remaining nuclear power plant, open and running through 2030. The California Public Utilities Commission this month approved passing on nearly $723 million onto ratepayers to fund the plant’s continued operation.

Crosscut’s change is a bit of a departure from what typical venture funding looked like in the previous decade. The rise of the internet, cloud computing and mobile more or less turned venture firms into software investors – not a bad strategy, given how little physical capital software needs to garner millions in revenue. But geopolitical concerns around manufacturing and climate change-related regulations are steering venture firms in a different direction. In Europe, for instance, energy and climate technologies are driving a large portion of venture capital due to the ongoing Russian invasion of Ukraine.  

“I think there’s a new paradigm where, as software does eat the world, there will be new atoms-based solutions,” Ylvisaker said.

Back in 2013, as Ylvisaker dove into new sources of energy at Yield Capital Partners, renewable energy was largely monopolized by solar and wind companies. 

“The biggest problem we have with non-intermittent clean power sources today, which are largely wind and solar, is they’re in the Sun Belt and in the middle of our country,” Ylvisaker said. “They’re not along the coastal areas where our demand centers are.”

While nuclear energy is promising, there’s a reason it’s still in early stages of adoption. The U.S. first harnessed nuclear fission in the form of the atomic bomb in World War II, and later used it to power its submarines. Decades later, a nuclear power plant at Three Mile Island in Pennsylvania experienced a cooling malfunction that released radioactive gas, though none died from it. There was the Chernobyl disaster, which killed about 30 and made the surrounding area uninhabitable for thousands of years. Most recently, the Fukushima nuclear accident in 2011 released radiation into the air (though, again, nobody was found to have died).

“Yeah, it just became completely out of favor. And so all of the technology that we pursued essentially was shelved,” Ylvisaker said of early nuclear energy upstarts. 

But now nuclear energy is growing. Nuclear fission and fusion startups raised, together, $9.6 billion in funding during the second fiscal quarter of 2024, according to Pitchbook data. By comparison, wind energy startups only raised $1 billion. Thanks to the artificial intelligence boom, which requires a large amount of energy, Microsoft is partnering with a utility company to re-open Three Mile Island in 2028.

“This sort of new techno-industrial paradigm is the most exciting thing, not only for energy transition, but for frontier tech. And this new era of atoms-based venture investing is, in my opinion, where venture is headed,” Ylvisaker said. “And I think the most exciting thing for L.A. is that that is all happening here.”