Defense Could Drown America's Dynamism
Great first customer. Just don't build your entire business around the DoD.
My experience at the Reindustrialize Summit last week was encouraging. Don’t think I’ve seen so many talented people spending every waking minute trying to build cool things in America. After I got home from Detroit though, I couldn't help but reflect on how much of energy was focused on serving the Department of Defense. While defense contracts are a great revenue stream to start from, I wonder if this concentration on a single customer might actually be selling reindustrialization short. Anduril emerged as the archetype for the DoD vendor (see American Dynamism) and will likely become the fifth Prime. The venture ecosystem has overcorrected based on this success story.1 International variations of this thesis are proliferating globally (European Dynamism, Global Resilience, etc.), and it's fascinating that capital charged with filling government gaps has largely converged on defense.2
I believe that capital is accidentally creating an illusion where founders believe the only viable path for deep-tech is selling to government or the DoD.
Even worse, nearly everyone building in deep-tech now adopts the same rhetorical framework as defense companies.3 Not every nuclear startup needs to prioritize military base micro-reactors. Not every manufacturing company needs to position itself primarily through the lens of competition with China.
Great companies necessitate category creation. No need to force the next great technology into the American Dynamism umbrella.
Waymo was pre-American Dynamism. Flock Safety was pre-American Dynamism. Zipline was pre-American Dynamism. SpaceX was pre-American Dynamism. All of these companies will move critical American industries further into the future that any 10x improvement to our defense ecosystem could.
Chasing defense contracts is a distraction from making an impact in larger markets that have dramatically more effect on everyday American’s lives.
If you're building one of these companies, craft your own narrative from day one. Using existing movements like American Dynamism can helpful for initial fundraising or hiring, but don’t let your company be defined by someone else’s vision.
I’m excited to take on our nation’s great unsolved problems: we need terawatts of new energy capacity annually, we need to expand advanced manufacturing 100x, we need to control our food and water supply at scale, and we need affordable housing across the country. Each of these challenges needs its own narrative and its own champions. These are massive opportunities to make the country better, take one and be that champion. I hope you’re one of them.
My case for avoiding defense as an industry stems from my strong optimism in Anduril. It’s the first defense company in two generations to invest in real R&D on it’s own dime, and use it’s own vision for the future to dictate good strategy to the DoD. Avoiding the RFP process from the start takes real chutzpah. It’s also telling that as they scale, they’ve started to take on some of the shape of the existing primes (small facilities in many states, large lobbying function). Is there really room for a new company to do the same?
I can’t blame the VCs. It’s rational to seek high margin investments. Price insensitive customers are the mother of technical innovation. Largely led by a16z and Founders Fund, the VC community made inroads with various parts of the government to provide new companies with easy access to their first customers. When you’re in VC and can de-risk selling to an entity that could pay much more than anyone else, it’s easier to write that check and raise the next fund. Doesn’t mean that the opportunity translates for the next founder. Enduring companies are built by owning their distribution.
This could be self selection. I find that either the VC marketing engine has attracted a high density of patriotic people, or more likely that new players in the space feel compelled to signal as such. I think signaling patriotism is great. It’s especially important if you’re a defense company! Make sure that makes sense for you.