Hardware Can’t Be Vibe-Coded
A battery-swapping network in Nairobi is proving that the best moats in the AI era are physical.
There’s no shortage of LinkedIn posts discussing AI and the many doors it’s opened in the entrepreneurial community.
Vibe-coding has made software generation so fast and cheap that writing it is nearly frictionless. Software moats are eroding in real time. If any engineer, or someone with even less experience, can generate a working app in a few hours, the defence of pure software businesses starts to crack.
Michael Spencer, who spent four years inside Tesla building out the Supercharger network before founding Zeno in Kenya, has a simple response: you can vibe-code an app, but you cannot do the same with a battery swapping network across Nairobi.
“Hardware can’t be vibe-coded.”
– Michael Spencer, CEO of Zeno
For the past few decades, the economy has over-indexed on software and under-invested in the physical world. However, what we’ve seen in early-stage venture within the past year is a shift toward investing in hardware and deep tech. Supply chains, field operations, utilization management, physical infrastructure deployment. All layers of building a hardware company that cannot be copied overnight. From Michael’s point of view, it’s for this exact reason that some investors reverse their decision and lean in. Hardware is attractive because, done correctly, it has the potential to become an impenetrable moat.
At the same time, AI is not the enemy of hardware. In many ways, it’s the enabler. Zeno’s 75% network utilization rate is only possible because of an AI matching algorithm that manages battery swaps in real time. MCJ partner, Yin Lu, who led our investment in Zeno, sees the same pattern repeating across our portfolio.
“AI is making software more commoditized, but AI-powered physical infrastructure with years of operational data is really, really hard to replicate. The moat compounds in the physical world in a way that software cannot.”
– Yin Lu, GP at MCJ
Zeno’s success is also proof. A petrol station anywhere in the world has historically returned 8-10% IRR. Zeno, servicing the same end customer with AI-managed electric infrastructure, is running at 30%.
Learn more from Michael Spencer on this episode of Inevitable.
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