The lights dimmed, the countdown clock ticked away, and a booming video cued up. Footage of planes and rockets coursed across the screen, interspersed with the logos of tech companies, and venture capital firms.
Katherine Boyle strode on stage confidently, and stepped to the mic.
“We believe a strong America means a strong world, a safer world, a more civilized world…and that technology is the backbone of maintaining this order and civilization and always will be,” the Andreessen Horowitz (a16z) General Partner told the crowd of more than 700 military, investors, founders, operators, and Defense Ventures Fellowship alumni.
In the opening keynote of the Defense Ventures Summit on Nov. 15, Boyle was reiterating a16z’s American Dynamism thesis, which is the umbrella for the iconic Silicon Valley VC firm’s investments in startups that support the national interest, from aerospace to industrials.
The concept isn’t new. American Dynamism has been a frequent topic of discussion in venture circles over the last year, as Boyle, a former reporter at The Washington Post, referenced when speaking about her “friends in San Francisco.”
But, with members of more than 100 venture capital firms gathered in one building on the East Coast at an event that organizers at Shift.org trumpeted as the largest-ever gathering of startup investors in D.C., Boyle’s elucidation hit different.
Here was a leader from a firm at the vanguard of boundless innovation planting a flag in support of a singular country, and staking out ground for technology in the geopolitical arena.
It came on a day of talks, panel discussions, and networking that positioned the recent wave of attention to defense tech along a historical curve that has ebbed and flowed with the economy and defense-industrial policy. Today, the rise of innovation and entrepreneurship that was spurred by the Great Recession has turned the startup ethos into the dominant mode of business, while military leaders are recognizing how the digital revolution that changed everything from personal communications to transportation to office work is transforming battlefield capabilities. The result is a flurry of investment activity in defense startups, and a growing number of initiatives geared toward innovation at the U.S. Department of Defense. Following a decade of experimentation and lessons learned, there is much to build on. For startups, investors, soldiers, and policymakers, there is also much to work out.
How do scrappy startups that are wired to transform industries and ship product form a community with a proud and hierarchical institution that prioritizes the national interest while holding human life in its hands?
What happens when advancing the mission comes into conflict with generating returns?
As Deloitte Senior Manager for Defense Innovation and Acquisition Lauren Dailey asked during one panel, can the DoD transform not just its incentive structure and business processes, but also its culture and mindset as a monopsony to more easily do business with a technology-forward private sector that operates through a dual-use lens?
The Summit offered a space for some of the most experienced and senior leaders in defense tech to wrestle with these questions, out in the open. By bringing the community together, Shift.org provided a forum that will shape the future of the relationship between the defense industrial base and VCs. To find the answers, you have to ask the questions of each other.
‘Democracy demands a sword’
Bringing stakeholders from different sides of the community to one space offered the opportunity to unite them under one banner. Boyle’s opening speech offered an articulation of how Sand Hill Road and the Pentagon fit together. She positioned American Dynamism against the backdrop of a “new violent age” following the invasion of Ukraine, tying the firm's investments in defense tech to support for America, and its economic prosperity.
In Boyle’s telling, it is not enemies amassing outside U.S. borders that stand to do the most harm to the nation. In the most stirring section of the speech, she detailed “how you win a war against America,” by decrying menaces that lurk within. These included dynamics such as pitting “security vs. grievance,” the decline of patriotism, valuing consumption over production, and adopting a mindset where “your instinct is to destroy the weirdos doing new things on the frontier,” as well as more concrete challenges such as TikTok, fentanyl, and crime rings in cities.
“We’re here because we heard the call to build against these dark forces we face. We know technology is the escape hatch from a nihilistic world, and that democracy demands a sword and sometimes we have to use it to defend ourselves, our allies, and civilization,” Boyle said.
The Defense Ventures Summit was the largest-ever gathering of VCs in D.C. (Image via Shift.org)
The call to action inspired many in the room to rise to their feet, but it is also worth reflecting on how it positions venture capital, and tech as a whole. a16z was founded by consumer-driven software entrepreneurs who heralded that “software is eating the world.” A dozen years after that famed missive, the software-powered hardware and infrastructure developed to support the defense-industrial base is operating in a narrower geography.
From a bird's eye view, this approach to business may appear to limit expansion opportunities, and run counter to the globalism that so many leading brands exported over the second half of the 20th century. Now, a16z is tying its investment activities to a fight. In war, it seems, you have to choose sides.
Learnings from history
The event underscored how the perception of defense tech has undergone a transformation in the tech community in recent years. Five years ago, employees of the largest tech companies were excoriating their management for working with the DoD, as Bedrock Capital Partner Spencer Peterson pointed out. Today, a16z is standing up for patriotism and receiving cheers from an auditorium full of their peers.
For startups, however, the playbook for doing business with the government is still being written. While Palantir’s successful 2016 lawsuit against the U.S. Army was a sea change moment that paved the way for the Silicon Valley company’s software to be used by the DoD, there are dozens of software companies today that have developed groundbreaking technology to support the mission, but struggle to build the relationships with the right office or locate the proper contracting vehicle for their product. VCs urged patience for the mission and encouraged founders to vet investors from the stage. In the networking hall, entrepreneurs talked about how they face exacting questions about revenue projections when they reach later diligence.
Founders Fund's John Coogan offers a history of defense tech. (Photo by Stephen Babcock)
While the dynamics of this moment are unique, there are lessons to draw from the past that can light the way to the future. As attendees were reminded throughout the day, a coalescence of entrepreneurship, capital and innovation around defense tech is not new. During one session, Founders Fund Entrepreneur-in-Residence John Coogan provided a history lesson that detailed how defense tech began during World War II, and peaked at the Moon landing. Then, Palantir CTO Shyam Sankar offered a reminder that it has been 30 years since the famed Last Supper, when Defense Secretary William Perry ushered in a period of consolidation among defense contractors, slashed budgets, and stifled the visionary risk-takers that spur innovation in the process.
Now, defense tech is cool again, as Coogan noted. There is more money flowing into the space. Early-stage aerospace and defense tech deals rose by 76% from 2019 to 2021, while dollars rose by 276%, according to CNBC. There are also iconic entrepreneurs. Coogan and Sankar noted that where previous generations had Glenn Martin and Bill Lear, today we have Elon Musk and Palmer Luckey. While the path for technology into the DoD has shifted from the creation of Manhattan Projects and new agencies like DARPA, it remains true that driven individuals — founders — have been at the heart of expansion.
Over the last decade, the wave of entrepreneurial energy that burst out of the 2008 financial crisis inspired some in the DoD, and there are hard-earned lessons to be learned from how they blazed a trail. In 2012, F/18 pilot Benjamin Kohlmann issued a clarion call of his own with an article that called for more disruptive thinkers in the military. This gave way to a period of experimentation, from the arrival of the first 3D printer on a ship to an unmanned underwater vehicle known as the "robotuna.”
VCs are weighing delivering returns and delivering on the mission. (Photo by Stephen Babcock)
Call them heretics, renegades, or merry bands of missionaries. Innovation-minded soldiers learned how to work inside the bureaucracy of the DoD, just as they figured out how to make technology work. Here are a few of the lessons learned:
Relationships first. Selling to the government is fundamentally different than selling to businesses and consumers. “The best technology doesn’t win in DoD,” said Kohlmann, who is now an investor with Cubit Capital. “One of the first things I look at now in due diligence is, how strong is your lobbying arm? How strong are your relationships on the Hill? How strong are your relationships in the building with the right people who can get you to a program of record? It’s all about those relationships.” Having the support of a senior champion is crucial to advancing technology. Multiple senior champions are even better. Startups must also develop resiliency in a network so that if a champion leaves, there are others to support their efforts.
War is fought by men, not machines. Over the last decade, Silicon Valley reckoned with the impact that technology has on the humans who use it. As defense tech grows, there is an opportunity to do so from the start. When it comes to building and advancing technology, “You have to have empathy,” said Joshua Steinman, cofounder of industrial operations security company Galvanick and a former plank-holder at DoD’s Defense Innovation Unit - Experimental (DIUX) in Silicon Valley. “Everything we are doing is about lethality. It is 18-year-olds going outside the wire, where people are dropping bombs. Maybe your idea didn’t get through. It’s not about you. It’s about kids that might die.”
Defense tech isn’t only deployed on the battlefield. America must build the infrastructure that can support a strong defense-industrial base, and seed development of technologies that can provide a strategic advantage. Office of Strategic Capital Director Jason Rathje detailed how the DoD is supporting development in areas like semiconductors, biotech and quantum technology that will provide a long-term supply chain advantage for America, while increasing competitiveness with other nations.
‘People, not profit’
The most important takeaway from the day is that innovation in defense will be advanced by people. After all, technology is just a tool. The actions of driven founders, committed teams, and leaders with an appetite for vision and risk ultimately determine whether it moves forward and becomes a capability. This cycle has always been at the heart of the appeal of entrepreneurship. In fact, the brash boundary-pushing of business leaders is just as American as fervor for the flag. Startup founders and VCs have just as much a role as fighter pilots and four-star generals in determining how these two national passions come together.
In the end, the community is united by a call to serve, and to make sacrifices for the good of the country. As longtime national security innovation advocate and Google Director of Strategic Initiatives for Google Public Sector & Responsible AI Joshua Marcuse put it, the largest gathering of venture capital in our nation's capital was centered on “people, not profit.”
Marcuse said that such conversations show that it is “not just about businesses, and it’s not just about technology and it’s not even just about kicking ass on the battlefield. It’s really about appreciating that this doesn’t work without us taking care of each other.”
At the event, it was clear that a growing community is working hard to make more space for entrepreneurs in the halls of the Pentagon. Now, innovation leaders from the private sector have to decide how they want to walk into the room.
Where a previous era’s corporations aimed to be faceless, a new wave of entrepreneurship is ushering in a generation of companies that lead with a point of view.
“Every day I talk to smart young people who want to work in tech or become founders. And I ask them a simple and obvious question—one that should be instinctual to answer,” Boyle said. “Not about their revenue goals or their product or how they’re going to scale a team from 5 to 50. But a more essential question: What do you believe? Why will people follow you? I might as well ask: What is your creed? What will you shout from the rooftops even if you’re maligned for it?
“We don’t win a war against bad ideologies unless we know who we are, what we stand for, and where we’re headed,” she said.
You have to choose sides in war, and you have to stand up for what you believe.
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