The Generational Opportunity for Industrial Software

The digital future can't be built without the physical world, and the physical world can't be built without digital tools.

At Energize, we're committed to the digital enablement of critical, complex industries. While this thesis has seen many market shifts in the last decade, we've never faced a chapter quite like this one. Today's convergence of industrial investment, AI demand, infrastructure strain, and operational necessity has inspired new urgency for buyers of industrial software-and thinned the divide between the cyber and physical spheres.

Software hasn't always been inherent to critical industries, and for good reason: the "move fast and break things" mentality of big tech is anathema to the zero-fault standard for physical systems like manufacturing, energy infrastructure, and supply chains. Consider PJM, the largest grid operator in the United States. PJM spans 88,000 miles of transmission lines, coordinates generation from 1,400 sources, and serves 67 million customers. A power system like this is complex, distributed but integrated, and vast in scale; the cost of failure-for households, hospitals, and industrial facilities alike-is immediate and significant. For grid operators, keeping the lights on often means extreme caution about new software, leading to long pilot periods, rigorous diligence, and measured integration.

But physical industry is facing new pressures. Investment in U.S. manufacturing has surged since the early 2020s; U.S. spending on factories, for example, has roughly tripled since 2021. And an aging grid, coupled with surging AI compute requirements, is creating a watershed moment for energy infrastructure, with utilities planning to spend $1.4 trillion over the next five years to meet demand. This expansion, coupled with new regulatory tailwinds and labor shortages, is helping operators look anew at software solutions. We believe the digital future can't be built without the physical world. But the physical world also can't be built without digital tools. That's why last year, we explored the intersection of software and physical systems through the lens of grid systems. Now, we're looking at the industrial software-and the AI frameworks-reshaping manufacturing today.

A new horizon for industrial software

For ten years, we have used the term industrial software as an umbrella to describe the digital systems that run the industrial economy. These are tools that, for example, a manufacturer might use to schedule production, route materials, monitor equipment, manage procurement, and coordinate field crews across sites. Now, we see a new software class in this category-industrial AI-which embeds intelligent inference, forecasting, and automation directly into industrial workflows.

These terms are quickly becoming one and the same as both legacy tools and new solutions strive to capture the benefits of AI. As energy OEMs, manufacturing facilities, and supply chains race to meet the growing demand of an AI-driven economy, software solutions are paving the way.

Why industrial software is gaining traction

The global industrial software market is projected to grow 17% annually through 2030. Why is this growth happening now?

Industrial investment is increasing. In the last decade, new laws and policies have directed billions of dollars into domestic industrial sectors, and tariffs have encouraged domestic supply chains. Across industries, operators are under pressure to build new infrastructure quickly and, at the same time, reduce costly downtime for existing facilities.

Labor is not keeping up. The U.S. is projected to have roughly 1.9 million unfilled manufacturing jobs by 2033. In many industrial facilities, experienced workers are retiring faster than new ones are joining, and they take decades of operational knowledge with them. As a result, manufacturers are seeking more software and automation solutions, as well as a tech-trained workforce to oversee them.

Software is increasingly well-suited for industry. Industrial sectors produce enormous quantities of complex, unstructured, and fragmented data, often distributed across facilities. Because AI can structure and interpret this data, AI solutions are poised to help industrial operators extract more value from the data they already have. And many facilities in industrial sectors already rely on the cloud and Internet of Things (IoT), making software adoption more feasible.

These factors are driving innovation in industrial software. In the last few years, the digital landscape has grown, with new solutions emerging around industrial design, manufacturing, and automation. And while many industries are facing immense disruption from vibe-coded solutions, the market shows unique defensibility: once industrial software is embedded in a facility's operations, it's likely to stick, and a successful deployment at one site tends to expand across others.

Nearly a decade of investment

Energize has been embedded in industrial software since our inception in 2016. We recognized then, as now, that the energy transition requires the construction, maintenance, and coordination of vast physical systems across many sectors of the industrial economy. Software makes these processes possible at scale.

That's why, in 2018, we backed Zededa, which deploys and manages applications in distributed industrial environments, and Sitetracker, which gives infrastructure developers a platform to manage dispersed project sites. In 2019, we invested in DroneDeploy, which supplies drone software for projects in construction, energy, and beyond. These three companies recognized that sectors responsible for physical infrastructure had a significant unmet need for software to manage it.

We deepened our investment in the construction industry with our 2022 investment in Handle, a platform built to manage payments and legal commitments for suppliers across the construction value chain. Since then, Handle has expanded to serve the top logos across electrical, equipment rental, materials, plumbing, and more. And earlier this year, we led an investment in Nixtla, which uses AI for time-series forecasting across manufacturing, energy, and supply chains-an example of AI's potential to extract more value from complex operational data and make industrial processes more efficient.

For Energize, these investments reflect our enduring recognition that software underpins the physical economy of the future.

What's next in industrial software

For decades, the complexity and criticality of physical industry made software adoption difficult. But recent macroeconomic trends have catapulted industrial software to the forefront for many sectors, including construction, manufacturing, energy infrastructure, electronics, and supply chains.

Software solutions are likely to impact many stages of industrial workflows. In product development, design, and simulation, software can cut costly iteration cycles and connect siloed teams; in manufacturing and automation, software can reduce facility downtime, automate manual tasks, and extract more value from the data that industrial facilities generate but rarely use in full.

Our economy is in a moment of rapid transformation, and that transformation hinges on efficient, effective, and software-enabled physical systems. Through intelligent deployment, we can not only meet the manufacturing demands of today, but do so in a way that lays the foundation for a decarbonized future.

For a closer look at the specific solutions and companies we're watching most closely, stay tuned for our industrial AI deep dive, dropping May 12.