Israel's deep tech edge: AI's real bottleneck is physical, says VC partner Zack Fagan

Zack Fagan, a partner at Earth & Beyond Ventures, argues that the common narrative of AI development focusing solely on processors misses a critical point. He believes the true bottlenecks are unglamorous physical limitations: power delivery, heat dissipation, and data throughput. Fagan likens the situation to a powerful GPU being rendered ineffective by slow data transfer, highlighting an area where Israeli engineering can excel.

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A GPU that handles a thousand data points is worth little if the wire feeding it moves a hundred at a time, and that, he says, is exactly where Israeli engineering can win.

Speaking on the Jerusalem Post's Defense & Tech podcast, Fagan challenged the notion that only Israel produces battle-tested founders in the defense sector. He asserted that Israel's real advantage lies in its proximity: the front lines, major defense contractors, and startups are all within easy reach. This allows founders called up for reserve duty to return with new product ideas already sketched out. He contrasted this with American capital, which often seeks large platforms rather than specific, brilliant solutions.

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scarcity creates hyper-focus

Fagan also discussed the unique focus fostered by scarcity, stating that "scarcity creates hyper-focus." He noted that American investors, in their pursuit of the next Raytheon, often desire a broad platform, whereas Israeli startups might offer a more targeted, brilliant fix for a single problem. He also touched upon why quantum computing might yield Israel's first category-defining deep tech company and how his fund distinguishes genuine businesses from mere "science projects." The essential founder trait, he believes, is the ability to articulate complex ideas like both a PhD and an MBA in the same conversation.

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the front, the primes and the startup all sit within driving distance, and a founder called up for reserves comes back with the next product already sketched.