Santa Barbara has been producing quite a few startups in recent years. Over the past 3-5, several local companies have emerged as significant players in the AI hardware and computing space. And many more successful companies in vastly different industries have also been founded here recently. However, it's a noticeable trend that startups in Santa Barbara prefer to build physical products rather than software solutions. Which is in contrast to what most of Silicon Valley and beyond is channeling their money into right now. However, it seems that during the new AI era, these physical solution companies are not just surviving more, but thriving at levels not matched by their software competitors. Some might argue that Santa Barbara is incredibly well positioned as the Artificial Intelligence boom matures.

There are two companies that stick out from the rest when it comes to developing physical solutions which are well-positioned to thrive in the coming years. All these startups are still early in their journey (pre-seed and seed) but share in common the following: both are developing a physical solution to a technical problem, the founders are highly educated in the field, and the timing is more than appropriate.

1. Lucidean

The first company FoundedSB placed on the list of SB startups to watch out for this year is Lucidean. They are building a hybrid option for data center networks that eliminates the need to choose between low-costing IMDD optical links versus high-performance links that are power hungry and expensive. Lucidean's CohZero™ technology will allow for data centers to work with most of their existing technology but get much better results. If you want a much more technical analysis of their solution, you can visit their site.

What makes Lucidean a compelling startup story is the founding team and the timing. Founded in 2022, Lucidean has had a bit of a head start to a market demanding physical solutions that can make data centers more powerful and more efficient. This demand is both massive and urgent: if Lucidean can produce a solution that offers a significant benefit for data center efficiency- they could take off. The founding team of UCSB grads, Hector Andrade and Aaron Maharry, alongside recent CEO addition, Dr. James Raring, combines technical expertise with business experience. And while the co-founders are new to the startup game, Dr. Raring provides a depth of industry experience with over 300+ patents and previous executive officer positions.

In December of 2025, Lucidean raised an $18M seed round led by Entrada Ventures. A managing partner at Entrada backs our earlier sentiment of the executive group, stating that Lucidean is "backed by a uniquely capable technical and leadership team poised to tackle AI-scale networking [source]" This large seed round is on the higher end for companies like Lucidean, which is promising. Entrada ventures was joined by KDT and four other unnamed investors which signals major interest in the product/team.

To make it clear, they are still in a vulnerable position. The company is pre-product and in a very crowded and well-funded market. If their product eats into specs like reliability or sensitivity, the value proposition quickly disappears. But the bottom line is that if Lucidean can bring this product to market and it demonstrates clear value, they have the connections, funding, and ability to turn this company into an optical networking powerhouse.

2. Dragon Q Energy

This next company raised $750,000 in pre-seed funding recently and is developing a solution that could change the way energy storage is thought about. We believe this is a story and founder worth betting on. Dragon Q Energy is building an energy storage system that is claimed to be both safer and far simpler than anything else on the market. Their prototype energy systems do not require active cooling and eliminate the risk of any fires.

Founded by Santa Barbara based, Dan Casey, in 2022, Dragon Q Energy has yet to bring any product to market, but is actively working on prototypes, certifications, and pilots. Casey has lifelong experience in the aviation industry and has had pretty significant success in that space (founded RotorCorp). Casey worked for NASA and the US Army as well, which is where the idea for Dragon Q Energy actually came from.

The downside to this startup is that their team is made up of almost entirely of engineers, which is great for developing a product, but it may be hard to get user adoption. There is a marketing director on staff (Liam Casey), but with limited experience to back up his work, it's unclear how much he can accomplish alone. If they can overcome this hurdle, perhaps by hiring an experienced business operator, they will have much more favorable odds.

We like this company because the solution they are proposing will benefit the scalability of energy systems and completely change the way it can be stored around the world. The payoff and outcome is huge if they can develop a go-to-market product that does not dilute the value proposition. You can read more about their proposed solution here.

If you are building a startup in SB, we would love to hear from you! Or if you have any topic idea, please don't hesitate to reach out. Contact us at editor@foundedsb.com