Forget robots on assembly lines. Foundational Industries wants AI to run the entire factory. July 30, 2026 His startup, Foundational Industries, just raised a $25 million seed round, Fortune learned exclusively, to build factories where AI runs the whole operation rather than bolting automation onto an old assembly line. The round was led by BoxGroup and Zigg Ventures, with Abstract Ventures, Adverb Ventures, Buckley Ventures, and Offline Ventures participating. Rather than retrofitting a factory with a robot arm here and a vision sensor there, Foundational makes physical products, starting with data-center hardware, using factories designed from scratch to be run by software. Winer, who spent 25 years at Alphabet's Sidewalk Infrastructure Partners deploying over $1 billion in capital, told me the seed money isn't meant to fund a giant factory yet. "What this is allowing us to do is to sort of build a minimum viable product," he said. "We've actually built the entire factory in software already using software emulators." Foundational's first customers are data-center developers, neoclouds, and chipmakers who need custom rack enclosures now that new AI silicon runs at different voltages and cooling requirements. They declined to disclose customer names. But Winer's real argument is about China. The common wisdom in Washington is that China's manufacturing dominance is built on cheap labor and lower-quality copying. Winer says that's outdated. "Many of their factories are some of the most advanced automated factories in the world, and they are increasingly using not just international industrial automation, but also homegrown and home produced solutions," he told me. China has poured over $1 trillion into advanced manufacturing over the past decade, backed by state subsidies and what Winer calls "a really dense industrial ecosystem" that lets new products get designed and launched fast. That density is precisely why he thinks a head-on copy of China's approach won't work. "We just don't have the people or the skill sets to do it," he said. "And even if we did, it's probably not economically competitive to China." So Winer's thesis is to skip that fight entirely and build a different kind of factory. His argument rests on two American advantages: sophisticated AI models and researchers (which is now a shrinking talent gap) and far more AI compute. That combination, he says, lets Foundational's system take a customer's "product intent" and almost instantly generate a bill of materials and manufacturing process (a step that traditionally took months of manual design work). There's also a structural weakness in China's model that Winer is betting against. He argues China's factories, however advanced, are still built around older-style automation that needs constant utilization to justify state subsidies. "They kind of need to feed the beast now," he said. His wager is that AI-native factories - cheaper and faster with each one built - can give the U.S. a much-needed edge. See you tomorrow, Lily Mae Lazarus X: @LilyMaeLazarus Email: [email protected] Submit a deal for the Term Sheet newsletter here. Venture deals. - CAIS, a New York City-based alternative investment platform for independent financial advisors, raised $170 million in Series D funding. Vista Equity Partners led the round and was joined by AllianceBernstein and others. - Eliyan, a Santa Clara, Calif.-based developer of connectivity technologies designed for AI compute, memory, and networking systems, raised $145 million in Series C funding. Seligman Ventures led the round and was joined by Cisco Investments and Lumentum. - Onyx Security, a Tel Aviv, Israel and New York City-based AI control company, raised $113 million in Series B funding. 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