“Rare earths” are a group of 17 specific minerals that form the hidden foundation of the modern economy, essential for manufacturing everything from F-35 fighter jets to the permanent magnets in electric vehicles, data centres, and consumer electronics. Despite their name, these elements are not actually rare; they are just rarely worth the trouble to extract and refine geologically, logistically, and economically.
Because Western markets historically avoided the toxic, highly capital-intensive process of refining them, a massive vulnerability emerged. Today, the rare earth elements (REE) market is almost entirely dominated by China, which accounts for roughly 70% of global mine production and a staggering 90% of all rare earth separation and refining capacity. China also controls 98% of global primary gallium production and 60% of germanium refining.
This monopoly is precisely why, if you want a crystal-clear signal of where global capital is flowing in 2026, you should look no further than the cap table of USA Rare Earth. In January 2026, the Trump administration took an unprecedented 10$ equity stake in the company as part of a $1.6 billion debt and equity investment package aimed at bolstering domestic mine and magnet facilities. When the federal government starts acting like a lead VC, the broader market is undergoing a seismic shift.
This is not happening in a vacuum. By late 2024 and into 2025, China tightened its geopolitical chokehold, restricting exports of essential elements like gallium, germanium, and antimony. The resulting supply shock was brutal. Western defense contractors faced critical delays, and one drone parts manufacturer that supplies the United States was quoted a price for samarium at 60 times the standard rate.
Software may be eating the world, but the physical infrastructure of the 21st century (from generative AI data centers to autonomous defense systems) still runs on rocks. For venture capitalists and founders, critical minerals have officially graduated from esoteric mining to Tier 1 deeptech infrastructure. This is the new space race, and the companies capable of cleanly extracting, processing, and recycling these elements will define the next decade of returns.
Market Snapshot: The Numbers Driving the Renaissance
The data coming out of 2025 and 2026 paints a picture of a massive supply and demand imbalance that traditional mining cannot solve alone. According to the latest USGS Mineral Commodity Summaries 2026, the United States remains dangerously exposed, depending on imports for over 70% of its consumption for nearly 30 critical minerals. The vulnerabilities are staggering, especially when you consider that a 30% disruption in gallium supplies could cause a $600 billion reduction in U.S. economic output.
Simultaneously, the energy transition and the artificial intelligence boom are driving demand to historic highs. The IEA Global Critical Minerals Outlook 2025 projects that by 2030, the exponential buildout of AI data centres will boost global demand for copper by 2%, rare earth elements by 3%, and gallium by a massive 11%. The infrastructure required to train a single large language model depends on thousands of GPUs containing gallium arsenide semiconductors, linked by germanium based fibre optics. Copper, essential for data centre cooling and power transmission, is facing a severe global shortfall projected by 2035.
Furthermore, Benchmark Mineral Intelligence has repeatedly warned that the battery cathode material supply chain is flashing red, with deficits expected before the end of the decade. The compounding demands of electric vehicles, wind turbines, and grid scale storage are colliding with a brittle, centralised supply chain.
Price trends reflect this acute volatility. While bulk battery materials like lithium suffered price crashes of 75% due to short-term oversupply between 2022 and 2023, the niche, highly critical metals required for AI and defence have seen their prices double or triple following export restrictions. The Department of Energy and subsequent policy updates have highlighted the urgent need for domestic alternatives, pointing to advanced extraction tech, artificial intelligence, and new processing paradigms as essential tools to secure these supply chains.
The VC Opportunity: From Earth to Deeptech Infrastructure
Historically, venture capital avoided the mining industry. The sector was characterized by massive capital expenditures, grueling regulatory timelines, and total reliance on volatile commodity markets. But the thesis has fundamentally shifted. We are no longer talking about financing a traditional hole in the ground; we are talking about funding vertically integrated, software native, product driven companies.
Firms like Andreessen Horowitz argue that the United States needs an “American mining champion“, a company that treats mining and metals as a systems engineering challenge rather than a simple extraction business. The new mining champions are deploying advanced deeptech infrastructure to bypass traditional bottlenecks. Recent funding data reveals a massive surge in venture capital backing startups focused on recycling batteries and mining scarce materials. VCs are pouring hundreds of millions of dollars into founders who are cleaning up the supply chain.
Key investment themes dominating 2026 include:
- Alternative Processing and Bio-Mining: Moving away from toxic, high-heat chemical refining to clean energy processes. Traditional gallium extraction involves treating bauxite ore with caustic soda at high temperatures, creating toxic red mud waste. Startups are engineering microbes that can extract critical minerals without hazardous waste.
- Advanced Recycling and the Circular Economy: Urban mining is the new frontier. Electronic waste is rich in high-purity minerals. The IEA estimates that scaling up recycling efforts could reduce the need for new mining by 25% to 40% by 2050.
- Magnet and Motor Innovation: Permanent magnets (like NdFeB) are the most critical chokepoint for electric vehicles and defense. Startups are either developing novel ways to recycle these magnets or engineering new magnets that eliminate the need for rare earths entirely.
- AI-Driven Discovery: Machine learning algorithms are being trained on vast remote sensing, geochemical, and geophysical datasets to pinpoint new mineral deposits, optimize drill targets, and reduce exploration risk.
Risks and Realities: The Hard Truths of Hardtech
The reality is that allocating to critical minerals carries immense execution risk. These are just some of the risks associated with investing in mining of rare earths and minerals:
- Long Capex Cycles and Permitting Hell: Building physical infrastructure takes time. The IEA notes that new mining projects globally take an average of 16 years from discovery to production. In the United States, building a new mine can require up to 30 permits and take an average of 29 years, though recent federal streamlining efforts are attempting to condense this.
- The Manufacturing Chasm: Rebuilding the US supply chain to fully produce trade exposed goods is a monumental financial task. McKinsey estimates that building and equipping factories to manufacture today’s exposed imports in the US could require approximately $500 billion. Rebuilding the upstream manufacturing supply chain for those components requires another $500 billion, and manufacturing all upstream components could add roughly an additional $1 trillion, bringing the total estimated capital expenditure to $2 trillion, or about 6% of US GDP.
- Talent Gaps: We have a severe shortage of the physical engineers and tradespeople required to build and run these facilities. The Semiconductor Industry Association projects that 58% of new jobs in the US semiconductor industry could go unfilled due to a lack of trained workers.
- Commodity Volatility and State Subsidies: Startups are competing against Chinese state owned enterprises that benefit from massive government subsidies. The Chinese government provided $57 billion in financing to overseas critical mineral mines between 2000 and 2021, allowing them to artificially depress global prices to starve Western competitors of margin.
Where the Smart Money is Going: Startups and Deal Examples
Despite the risks, top-tier funds and corporate venture capital arms (CVCs) are aggressively deploying capital into startups with strong technological moats. Here are the notable companies defining the 2026 landscape:
- Cyclic Materials (Canada): This standout startup recovers rare earth metals, copper, and aluminum from end-of-life electric vehicles, consumer electronics, and wind turbines. In June 2025, they raised $25 million to build an Ontario recycling plant capable of converting 500 tonnes of feedstock annually into rare earth oxide. Their cap table is a masterclass in strategic CVC alignment, boasting backing from BMW, Microsoft, and Jaguar Land Rover.
- Phoenix Tailings (US): Extracting value from what others discard, Phoenix Tailings raised a $33 million Series B in April 2025 from Presidio Ventures (the investment arm of Sumitomo), Yamaha Motor, and In-Q-Tel. They use proprietary molten oxide electrolysis to extract rare earths, nickel, and copper from mining waste (known as tailings) without using toxic chemicals.
- Niron Magnetics (US): Instead of mining rare earths, Niron bypasses them entirely. The University of Minnesota spinout raised $25 million in 2024 to manufacture permanent magnets using globally abundant iron and nitrogen. With corporate backing from Samsung, General Motors, and Stellantis, they represent the ultimate supply chain hack.
- REEgen (US): Operating at the bleeding edge of synthetic biology, this Cornell University spinout uses engineered bioleaching microbes to extract critical minerals from electronic waste, steel slag, and coal ash without toxic chemicals or high heat. They recently raised seed funding from Safar Partners and Cornell.
- RarEarth (Italy): Proving that Europe is also making moves, RarEarth raised a €2.6 million seed round in July 2025 to use non-hazardous chemical solutions to recover rare earth metals directly from end-of-life electric motors.
- Interlune (US): For the truly contrarian deeptech investor, Interlune raised $17 million to harvest resources from space. They have developed novel machinery to harvest natural resources from the moon and recently signed an agreement with Maybell Quantum to provide lunar helium-3 for quantum computing cooling systems.
The Israeli Angle: Brainpower Over Geology
Israel does not have vast geological reserves of lithium, copper, or rare earths. Yet, Israel was notably invited alongside key US allies to the Critical Minerals Ministerial meeting in Washington in February 2026. Why? Because the future of mineral security depends far more on technology than it does on geology.
Israel is positioning itself as an indispensable node in the allied supply chain through its deep tech capabilities:
- Process Optimisation and Materials Science: The critical weakness of today’s mineral supply chains is not extraction, but processing and refining. Israeli R&D institutions are global leaders in chemical engineering and process optimisation. Israeli startups are perfectly positioned to develop the technologies that make it economically feasible to process lower grade ores and optimise the highly complex chemical separations required for rare earths while reducing environmental footprints.
- Urban Mining: As demand accelerates, secondary sourcing will become a strategic necessity. Israel’s deep experience in maximizing efficiency under conditions of scarcity gives its founders a structural advantage in urban mining and e-waste recycling.
- Supply Chain Cybersecurity: As mineral supply chains become increasingly digitized (relying on AI driven logistics, connected processing facilities, and automated transport networks) they become prime targets for sabotage. Protecting global mineral flows is now akin to protecting energy grids. Israel’s unparalleled expertise in cyberdefense and data integrity makes it a vital partner in safeguarding this strategic infrastructure.
For Israeli founders, the playbook is to avoid the heavy capex extraction layer and focus entirely on the IP heavy layers of digital optimization, advanced refining chemistry, and logistics security.
Conclusion: The Missed Allocation of the Decade
As we look toward 2030, the battle for global technological supremacy will not be fought purely in the cloud; it will be fought in the dirt, the refineries, and the recycling plants. The United States and its allies are rushing to decouple from China, backed by historic federal spending, strategic investments like the USA Rare Earth deal, and a renewed focus on industrial policy.
Ignoring critical minerals in 2026 is like ignoring cloud computing in 2010. Whether it is an Israeli cybersecurity firm protecting a rare earth refinery, or a US bioleaching startup extracting neodymium from coal ash, the intersection of physical materials and deeptech is generating the most vital companies of our generation.
For those ready to deploy capital, the greatest opportunities lie in backing vertically integrated startups that master the complex chemistry of refining, secure robust feedstocks before scaling, and align with powerful geopolitical tailwinds. Founders should resist the temptation to pitch “China risk” as the whole company. Everyone knows the risk. The question is why your technology is the unlock.
For forward-thinking GPs and operators, the rare earth renaissance is not just a passing trend, it is the foundational infrastructure of the future. Do not miss the allocation.
He is a former General Partner at Google Ventures (GV) in Europe, former head of Google for Entrepreneurs in Europe, and founding head of Campus London, Google's first startup hub. Eze writes on Israeli tech, venture capital, artificial intelligence, and founder strategy.
He is also the founder of Techbikers, a nonprofit that brings together the startup ecosystem on cycling challenges in support of Room to Read.
