Venture capital firm Transition Ventures has announced the final closing of its 2nd flagship fund at $150m. The oversubscribed fund expands the firm’s total assets under management (AUM) to above $300m and points to one of the biggest 2026 trends in venture capital output: the flow of equity from digital software into the physical infrastructure that will make modern AI possible.
Transition Ventures was established in 2021 by a team of well-known operators and investors. David Helgason, once the co-founder and former long-time CEO of gaming software giant Unity Technologies, led the firm. Transition Ventures initially launched with an early-stage climate technology mandate, but the exponential growth of generative AI has sent pressures into a whole new dimension on electrical grids that serve the world, vital material supplies, and hardware pipelines.
As a reflection, Transition Ventures has since changed its central thesis to “Physical AI”, which is the use of next-generation machine intelligence to rebuild, perfect, and safeguard essential real-world infrastructure.
The Pivot to Physical Bottlenecks
The company’s strategy is a literal solution to the “gigawatt-scale” data center bottleneck. With AI training models requiring exponential leaps in compute, the energy grid and computer chip supply chains have become the primary problems for tech hyperscalers.
Source: Unsplash
“The data center industry was already a huge market, but now the AI revolution is driving demand exponentially higher,” said David Helgason, Partner at Transition Ventures. “The fundamental challenge of our era has moved on to physical limitations. How to put more and more computing into the materials we have and the energy we can produce. The traditional venture model of funding continuous iterative software progress has reached a dead end.”
Transitions Fund II will make checks from pre-seed all the way through Series A and will focus on deep-tech startups that marry innovative software with physical engineering. This U.K./U.S. cross-Atlantic institution works out of major European and U.S. centers (namely London and New York), bringing deep tech research across the Atlantic into institutional deployments in the U.S.
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An Elite Operator Bench
The funds raised reveal the strength of Transition’s core team. Together with the Helgason brothers (David Helgason & Ari Helgason), Transition has strong institutional and venture experience:
- Kristian Branaes was previously at Atomico and the Canada Pension Plan (CPP) Investment Board.
- Clara Ricard (Investment Alumni from Balderton Capital).
- Mona Alsubaei was a former investor at Union Square Ventures’ climate sleeve NY anchor.
- David Pacák already has hands-on experience with early-stage execution from Earlybird and Picus Capital.
All the team members have been either founding or scaling companies worth more than $15 billion, within software and deeptech ecosystems.
A Battle-Tested Portfolio
Transition’s pivot is also supported by a handful of superstar winners in its active portfolio. Transition backed Olix Computing early on, a photonics computing startup that replaces electricity with light to perform AI calculations. Olix has seen a valuation spike to an approaching $1 billion.
Other notable portfolios illustrating the physical AI thesis include:
- Applied Atomics: A business set up by ex-SpaceX engineers that is working on manufacturing a small modular reactor (SMR) that can productively supply colocation data centers with their own dedicated zero-carbon nuclear power.
- Seneca: A comprehensive ground and air autonomous drone network for ultra-fast AI-based forest fire abatement.
- Invisix: A dedicated hardware specialist in the field of semiconductor metrology (measurement & inspection of microchips during manufacture).
Transition’s initial climate reports were high-profile, with the bankruptcy of ocean carbon-removal startup Running Tide in 2024 amid a collapse of voluntary carbon markets. However, Transition’s pivot into physical AI infrastructure has hit home with institutional LPs. Recasting climate resilience as power generation, data centre efficiency, and resource use efficiency has landed Transition as one of the most resilient late 2020s investment mandates.
