The Future of War, Space, and Startups: Where Smart Investors Are Betting Next | Ep 319 with Jake Chapman Managing Director of Marque Ventures

0:04Daniel Robbins:So Jake, I know at Mark Ventures, you are dealing with a lot of people that might have to do with national security. And obviously, right now, there's a lot going on geopolitically. How are you looking at this as yourself as an organization with everything that's happening right now, since there could be impacts to your business?

0:27Jake Chapman:Yeah, great question. I mean, I think anyone who gets, any founder who's building a company in defense stacker for national security is probably a geopolitics nerd because, you know, why are they in that space? They're in the space for a reason, right? They care about it. I think it's the same thing with our team. Like we all think a lot about what's going on in the world. From a personal perspective, it's just interesting. But from a business perspective, it's also quite important, right? So if you think about the old Wayne Bretzky quote, like you have to skate to where the puck is going, not where it is.

0:59You have to think about that in when you're investing in national security,

1:03Jake Chapman:you have to think about how the world is changing and like where your tools that you're investing in or your companies you're investing in might fit into the future, right? So like if you think about Ukraine, I think is a good example and what's being used in Ukraine, the technology that's being used there, it's sort of high leverage, it's small drones, it's fiber optic connection, It's electronic warfare. But then you think about what the U.S. is actually preparing for, which is to deter a war with China in the Indo-Pacific, probably over Taiwan, maybe over some other islands. The tools are very different.

1:40Jake Chapman:And so if you are only investing in the things that are being used today in a particular conflict, then you would be missing a lot of the stuff that's important for the future. Right. Venture is all about trying to predict the future with as much clarity as you can and then investing behind that future vision.

1:58Daniel Robbins:Do you have a system or a way that you can evaluate things? Because you bring up a great point. You're trying to predict the future. And as we know, things move like a million times a second right now. So I could see the challenge with trying to predict. But I imagine that you have some way in order to do that.

2:17Jake Chapman:Yeah, I mean, we certainly try, right? We don't know about crystal ball. I actually think national security, it's a little bit easier to predict the future needs than it is in any other sector I've invested in in the past. I mean, I started my career, I invested in consumer packaged goods, right, the stuff you buy in the grocery store and all sorts of stuff. I think consumer behavior is the hardest thing to predict. In national security, especially in the US, like we actually run an acquisition system that is fairly communist. I mean, we have essentially five year plans and those plans to some degree are classified.

2:54Jake Chapman:Like you can get access to some information, not all information. And you can see where Congress's priorities are in their budget. And that, again, unfolds over multiple years. And so you actually can, if you know where to look, pretty good visibility into where the spending is going to go. And then we can then take a step back and say, all right, well, this is where the spending is going to go for the next five years. Where should we be investing today to meet them where they're at? And so it's a more predictable space, actually, than anything else I've ever invested in. Geopolitics aside.

3:29Daniel Robbins:No, that is fascinating. I didn't even think, I mean, yeah, consumers, you love something one day and you hate it the next day. Something happens and it changes. We've had a lot of people on who've also talked about this. When you look at the funding space, so you came from the government and now you're starting your own thing and you have your own venture capital fund. What were the differences in the two? Yeah.

3:54Jake Chapman:And so taking a step back, I was running another fund and I was investing more and more in what was called deep tech or frontier tech. So think energy, autonomy, aerospace, stuff like that, and moving my career more and more towards national security over time. All the companies we're building in aerospace have a national security application. And so I ended up falling in love with the mission. I loved working with active duty folks and thought it was a really important place to be investing as well, you know, lucrative, but also I think important for the mission. And so I left the firm I co-founded to go start a new firm.

4:30Jake Chapman:I was going to go start a private firm focused on national security. And when I did that, a friend of mine asked if instead I would consider going and trying to fix what was called the Army Venture Capital Corporation. So in 1999, Congress CIA created In-Q-Tel, which was the venture arm of the intelligence community. So CIA, but then also sort of more broadly. And the reason they did that is they realized that the best technology was being developed in the private sector, not in government labs anymore. Back in the 40s and 50s, it was all government labs. Now it's private sector R &D. And so they needed a tool to access that technology.

5:08Jake Chapman:Then in 2002, Congress realized that the Department of Defense at the time, now Department of War, had a similar set of challenges. And so they created the Army Venture Capital Initiative, what we became under us, the corporation, to help the department find the best technology and get it to the warfighter as quickly as possible. So it ran for about 10 years from 2002 to 2012 under other leadership. And then it kind of sat fallow for 10 years. A lot of mistakes were made along the way. I would say that the government is not a great venture capitalist. But then they asked if we'd come in and fix it.

5:44Jake Chapman:And so we spent two years working with Congress and the services. So Army, Navy, Air Force, Marines, Space Force, trying to figure out how you'd run a venture arm hand in hand with the department. it. And at the end of that process, like one of the realizations was you would run it as a private firm because the sort of congressional budgeting cycles and the just the bureaucracy of being a quasi governmental organization made it almost impossible to run a successful firm. So we took the plan we had put together and the team we had built inside that organization and then left and started Mark Ventures.

6:21Jake Chapman:So that's kind of the origin story for our firm.

6:24Daniel Robbins:So if you're talking to a founder who's like, you know what, I see some problems. I never thought about getting into this industry or industries impacted, but now I want to. What advice do you give to them? Maybe because they want to do a startup or maybe they just started something and they want to grow it to the point where they could look for funding?

6:43Jake Chapman:Yeah. So, I mean, I'll give advice specific to national security because that's what we do. I think it's a very unique space to break into. So, one, I think if you're interested in the space, maybe you've been watching the news and you see that the world is sort of a more dangerous place today than it was, you know, 10 years ago or 20 years ago, you want to do something about it. That's great. Like, would love to have you building in the space. Find someone on your team that if you weren't active duty, that was, that serves and has like firsthand experience dealing with the bureaucracy at the Department of Work, like how they acquire things, what they need.

7:20Jake Chapman:Understand that process. Have that person on your team. If they're not a co-founder, they need to be like a first hire. Because otherwise you might build something that's awesome and never find that customer. It's a really hard space to break into if you don't have some connectivity and some understanding of how it works. So super important. That's number one. I think number two is talk to the customer. I mean, this is true in every space, but like know who your end user is and get like really early feedback on the thing you're building. You know, there are so many founders who have built really cool widgets, but they're, you know, solutions in search of a problem.

7:58Jake Chapman:Or there's like something about it that they wouldn't think about that the end user would that makes it unusable. It's like an example in like the national security spaces. You know, if you're building something for the individual soldier, you know, it might be like a one pound thing, like relatively light. You would never think about the weight in your day to day life. but they're already carrying 80 pounds in a sack rucksack they've got a hundred things attached to their bodies it's all wired up maybe you have a wire now and so there's like a new wire they have to have attached to their body that's going to tangle with things and they'll just never use it so what happens is you build it it gets shipped to them overseas and then it sits in a pelican case in a box back at the base never gets used and then doesn't get bought again and you would never know those things unless you talk to the end user who's like oh yeah you know i'd never carry that, it's got to be half the weight.

8:49Jake Chapman:Or if I'm going to carry it, it's not going to be attached to my rifle. It's got to be like on my hip or whatever it is. You need that feedback.

8:55Daniel Robbins:Yeah, I could see you need the firsthand experience in order to really solve the problems. Like myself, I wasn't in the military. So the problem that I think that they would have, how would I even know where they would know the exact problem? What do you see is the biggest mistake when founders are pitching you? Because I think I don't see a lot of VCs talking specifically about like, this is what I want to see. But I would imagine though, that there are a lot of mistakes or bad pitches or things like that, that you would see on an ongoing basis. So what, what do you see that you're like, this totally is the wrong thing to do when you're pitching a VC?

9:34Jake Chapman:I mean, there's a bunch of things that can go wrong. So first of all, when, when VCs say no to founders, it was like, every founder should know this, like 99 % of the time, it has nothing to do with the company that's in front of them. It's like, they just did a deal last week. And so their partner, because of internal from politics, is probably going to be the one that gets to do the next deal. Or they've invested in a company like yours and they don't want to invest in a competitive business. Or they just don't like your space. Whatever it is, there's like 99 % of the time it has nothing to do with the company.

10:00Jake Chapman:It's like an exogenous segment. That said, there's like lots of things that make it easy for VCs to say no. Like if I'm going to look at 1 ,000 deals this year, 1 ,500 deals or whatever the number is, and I'm going to do four, I'm basically looking for reasons to say no because I just I need to be able to move on and then look at the next company talk to the next founder. So one we all have bad days or days where we're low energy. But like if we're on a call or I'm meeting you and you are not like oozing excitement for the thing you're building like how am I going to be excited about it. Right.

10:34Jake Chapman:Like you have to be very passionate about it. Part of the reason I want you to be super passionate about it is if you're a great founder, you can go get a job at Meta and make$600 ,000 a year or whatever with very low downside risk. And you're going to face as a founder, especially in defense, it's so hard, an existential risk every six months or every year in your business. And you're going to be confronted with the decision, A or B. A, keep building this building that is giving me an ulcer and is really hard. and like maybe we'll never mount anything. Or B, go take the job at Meta for$600 ,000 or name your major Magnificent Seven startup or a tech company.

11:16Jake Chapman:And I need you to keep picking the company, right? So you have to really love the thing you're building or the problem you're solving. So that's number one, like passion on the call, in the meeting, super important. And the other one is, and the thing I would say like really impresses our team the most is if we ask you a question, and you have an extremely thoughtful answer. So it's clear that you've thought about it. And whether we agree with your answer or not is sort of irrelevant. Like what we care most about is the fact that you have thought about the challenge and like thought deeply about it and can respond.

11:49Jake Chapman:And if you don't have an answer and you say, let me think about that and get back to you. And then you send me a follow-up email with a well-thought-out written answer. Oh, incredible. Like that's what we want. We want founders who have answers for all the tough questions. Whether we agree with their answers or not, sort of irrelevant. It's like, I want to know that you've thought about it. You probably know the space better than I do, right? So like your answer is probably right, even if I don't think it's the right one. I think those are like the two, the two biggest things. Oh, number three, if I ask you who your competitors are, and you say I don't have competitors, or you like quickly dismiss the other people that I know are building in the space, like I have probably taught to those people.

12:28Jake Chapman:There, there's a reason they're building what they're building. Like you shouldn't be so dismissive of your competitors. Understand what it is that they're building and how you're different. So don't just say we don't have competitors or those guys will never get it off the ground. Tell me why.

12:41Daniel Robbins:To be thoughtful. Can you imagine Blockbuster and Netflix? Blockbuster probably said in meetings, Netflix is not our competitor. They'll never get it off the ground. I heard a story from Netflix founder that I guess Blockbuster had a streaming, but a new CEO came in and squashed it and said they want to focus on the in-store and the dvds and because i guess the netflix founders were really afraid that if this if they went in that they were going to be destroyed because their theirs was much smaller than blockbusters at the time and then that's it now we know what happened which is a fascinating how something can be so far ahead yet someone else like you said smaller can totally disrupt everything and then just propel

13:26Jake Chapman:past yeah i i love the blockbuster netflix example i use it all the time when i'm talking about modern portfolio theory with folks, which is that, you know, you can venture is inherently risky, but you can de-risk an investment portfolio when you invest in venture. And the reason is because venture has low correlation to the rest of your portfolio. So even though it's risky as a standalone, it's a counterbalance to everything else. Sort of like investing in national security, actually. Like in good times for the world, national security very slowly goes up. When when times are bad, national security investments go up quite a lot, but everything else kind of comes down, right?

14:04Jake Chapman:So it's a hedge on a portfolio. And the example I always use for like how to hedge a portfolio is the Blockbuster Netflix example, which was there was a Blockbuster on every street corner. Netflix seemed absolutely crazy. What was the smart investment? Well, the smart investment turns out was to have invested in both really. And you would have done great.

14:24Daniel Robbins:So what are you thinking about space and when it comes to national security i've been doing a lot of this like deep dive into space technology just because i thought it was fake someone was like oh no we're building like a hotel in space and we're gonna need like everyone who's doing things on earth we're gonna need in space and i thought that i really thought this was a joke and as i did more research i'm like oh my gosh like people are really building things in space and and they're like building things on the moon and I'm I can't even believe this we're even living in a time where this is real how are you looking at that or is that even a thing yet when it comes to national security

15:00Jake Chapman:yeah no I mean space is like hugely important in our sector um our industry um I mean it used to not be a dedicated service right but now we have the space force so we have an organization in the department of war dedicated to space um dominance it's important for a whole bunch of reasons um So it's important economically. Right. And like if you think about what the Navy does, the Navy's main job actually is to ensure like free trade or like the free flow of goods like to support the U.S. economy through commerce. Like that's actually what the Navy was originally designed to do and still largely what it does today.

15:41Jake Chapman:Space has the same sort of characteristics now as the oceans. right like Starlink is like vitally important in a lot of different businesses now I mean it's only a few years old right so imagine what it will be like 10 years from now and Starlink is only one piece of space infrastructure that really supports commerce and national security terrestrially so defending that is is super important but yeah a ton of businesses are going to get built in space most of them I think with customers that are terrestrial customers and not like a real true in space economy yet but it does seem like that's coming at some point um i know that like the asteroid belt has something like you know a hundred sextillion dollars worth of like mineral wealth in that in in asteroid some insane number um and like single asteroids have like you know more gold than all the gold that's ever been mined on the earth right like not that you want to mine all that gold because then gold isn't doesn't have any value but like the the resources themselves self are valuable for things we need to build or do right so all that's coming and if that's coming then like someday there might be space pirates right and so you need the ability to like defend your assets in space um so yes like i think it's real there's like tons of economic value being created today mostly for terrestrial businesses but then eventually there will be like true in space in space economy stuff we'll see if the aliens come or maybe they're already there

17:10Daniel Robbins:oh they're totally here big debate right like they're they're gonna release the files of alien if aliens or i don't know what do you think about aliens well okay so i think uh statistically

17:22Jake Chapman:they're almost certainly intelligent life somewhere else in the universe there's a clip of dan driscoll secretary of school who's now he's secretary of the army from maybe six months ago where he's he's talking to someone about um talking to like a news anchor and he's like yeah i was just like talking to some of our astronauts like in space and he said that he was talking to a soldier on the moon and then like like there was no follow-up question and like nothing nothing came of that um and i was like he just said there's a soldier on the moon and like i think maybe he was he was like a he didn't mean to say that like he meant to say something else i mean that just like sort of slipped out like i don't think we actually have soldiers on the moon But he said it, you can find the video clip.

18:07So I don't know.

18:09Jake Chapman:Why would we have soldiers on the moon if not to fight aliens? No, but like to your question, do I think aliens exist? I think there's a decent chance. So if you look at UFOs from like the 1940s to today, if you believe that like we've witnessed certain things, We've witnessed things that accelerate faster than any known object could possibly accelerate or make turns faster than anything could turn and still survive. So there's alien tech out there. There's lots of explanations for that. But I think actually the most compelling is that it's alien. Because if it were an adversary, right? So if it's like Russia or China building this stuff, or even if it was the US, the thing that you're seeing from 1940 would not look like the thing that you're seeing in 2025.

18:59Jake Chapman:Right. Like we would expect to have seen a tech curve, some advancement in that technology. It wouldn't just be like, wow, we have this amazing thing and now it's frozen in time. It's always going to be the same thing. And the other thing is, if it had been Chinese tech or Russian tech, like we would be speaking Mandarin or Russian probably and not English right now. So, you know, there's like other explanations, right? Swamp gas, weather balloons, like it's, you know, sensor problems. but like the stuff that's come out in the last couple years is like uh it's like some of it is verified by multiple sensor types right so you have like a pilot in an f-35 who sees it the radar picks it up the shipborne radar down below picks it up and like the ir sensors see it it's like i can imagine a scenario where like one sensor doesn't see it but when you have all this like overlapping corroborating sensor information the chance that it's a totally made up sort of figment of their imagination is like infinitesimally small so i don't know man i think maybe it's

20:01Daniel Robbins:aliens i mean like you said we might even i might i've been thinking about this like i think we might even have become like we might be from aliens like you know like prometheus style like they came down and they put something in the water i don't know i mean depends on like the religion that you believe and what people believe but i have been thinking about things around aliens lately. I was in Joshua Tree once and I looked up in the sky because there's no light pollution like in the middle of the desert in Joshua Tree camping. And I saw something going in like a diagonal really fast across the sky, like zooming like this.

20:36Daniel Robbins:And I told my wife, like, do you see that? And she saw it. And I was like, what the heck is that? And interestingly enough, I found out too that Joshua Tree is right next to like one of the largest military bases in the US in 99 Palms. And I was like, this is I don't know what I don't know if they're related, but I was fascinated. And I was like, I'm not going to tell anyone about that. Yes, people are gonna think I'm crazy. I don't know what it was. But this is the first time I've ever publicly said it. But I thought it was very strange. They do a lot of like experimental

21:05Jake Chapman:aircraft testing out there. So it could have been that. But it's also true that there are there are more UFO sightings around military sites and nuclear sites, which may or may not be related to the military doing testing of things it could also be that those sites just attract the attention of whatever the the ufos are i used to live in new mexico and so you know