More ex-military officials are becoming VCs as defense tech investment reached B | TechCrunch

More ex-military officials are becoming VCs as defense tech investment reached $35B | TechCrunch

The gap between Silicon Valley and the Pentagon is shrinking. As venture capitalists continue to pour money into defense tech startups, they're turning to a new hiring pool: veterans and former Defense Department officials.

Andreessen Horowitz hired Matt Shurtle, a former fighter jet pilot, as his chief of staff. Lux Capital brought in former US Special Operations Command chief Tony Thomas as an adviser. And Raj Shah, managing partner of Shield Capital, served in the Air Force.

“Instead of just sitting in Silicon Valley and theorizing,” Ali Javari, an emerging tech analyst at Pitchbook, told TechCrunch that hiring veterans can be a big advantage for firms, allowing Giving them “an understanding of what the real issues are on the battlefield”. .

Along with the continued frenzy of defense technology investment comes the honor of veteran recruits. Silicon Valley has poured nearly $35 billion into defense tech startups in 2023, and more than $9 billion so far this year. According to a report released last week by PitchBook. This trend is anchored by some blockbuster fundraisers. Shield AI, which develops AI-powered drone pilot systems, raised $500 million last year, and Anduril, Palmer Luckey's defense tech startup, Allegedly safe $1.5 billion in new funding last month. Although funding in the sector has fallen this year, Javieri said it has still shown “resilience” in the face of a brutal fundraising environment.

But the sector is not all roses. Javeri described the Defense Department's procurement process as “burdensome,” sometimes taking years for startups to secure any contracts. Now is the time for startups to show investors for their efforts in a financially lean climate.

Venture firms that can offer startups veteran connections have a big leg up on competitive deals. “You get their network where they can talk to a program officer who is ultimately in charge of a budget line for a specific military office,” Javeri said. “The military is a very networked organization.”

For veterans, they enter other, lucrative careers with advanced technology. “A few years ago you would have gone to Lockheed Martin as an executive vice president — not very sexy,” said Chris O'Donnell, a former Navy SEAL and director of Franklin Venture Partners. The New York Times.

But after the military, the time to pursue a passion may be over. Aside from Palantir's public offering in 2020 or its recent buyout of Endorel, in which it snapped up engineering company BlueForce and rocket motor maker Adranos, there is hardly any talk in the sector.

Even if the tech IPO window hadn't closed then, Javieri wouldn't see many IPOs in the future. He advises VCs to view their investments as potential acquisition targets, perhaps from the same unsexy companies these veterans are currently abandoning.

“There's a good chance that the current defense contractors will gobble up some of the smaller companies,” he said.

But for now, the defense tech hype is still going strong — and veterans and DOD personnel can end their careers with a well-funded landing pad.

For those who know the history of Silicon Valley, it is a coming home for the tech industry. The valley's tech industry began at the intersection of university research and DoD tech spending, as the area has always been home to a variety of military operations. In fact, the Presidio area of ​​San Francisco now hosts a number of VC offices, such as the Defense Tech Baker Founders Fund.

“Silicon Valley has returned to its roots and is working closely with the Pentagon in this increasingly tense and competitive geopolitical environment,” Javieri said.

(translated tags)Andresen Horowitz

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