E415: Why Every VC Is Suddenly Investing in Defense

24:23Jake Chapman:i think extremely challenging so always a little bit of luck involved they found i think a market that not a lot of people were competing in where they could sort of get a foot in the door they began i was not a founding investor in andrel so this is maybe an apocryphal story but i think They started with the Century Tower product. They started working with the Department of Homeland Security, putting Century Tower sort of on the border to monitor crossings in an area where they didn't have a ton of competition at the time, and then they've horizontalized from there and expanded into new markets.

25:01They found a beachhead and they executed really well, which gave them the right to go after other products. How would you go about mapping the defense technology market today? what are the different categories that are most compelling both for entrepreneurs as well as

25:15Jake Chapman:investors so there's definitely categories that i think are over invested in the quintessential one there being small drones there's a thousand small drone companies we probably need four of the you know group one drone companies and there's a couple of really good ones out there already Niros announced, I think yesterday, I saw a$500 million contract to make small FPV-style drones. But there's a million companies out there building those. I think areas that are under-invested in right now, manufacturing, a lot of money going into advanced manufacturing, but it will be a 20-year effort to onshore or fring shore a lot of what's left over the last 30 or 40 years.

26:00Jake Chapman:It'll require trillions of dollars. People think of advanced manufacturing as one category, but there are so many different things that go into it. Tooling and dye, forging, foundry work. There's a lot of space in manufacturing still to go, and that's really critical to American national security. Most founders and investors are investing in tactical technologies, small drones, battlefield tech, something that a soldier might use. almost nobody is investing in strategic technologies the quintessential strategic technology being a nuclear weapon or weapons of mass destruction but there are other ways of thinking about strategic weapons or technologies those are things that like are almost political in their use they really reshape the battlefield and i think lend themselves to venture since in venture you really are looking for kind of home run technologies home run wins not a lot of companies working in that space.

26:53Jake Chapman:EW, so electronic warfare, very interesting space. Cyber. And we'll see how all these things get impacted by AI. Cyber, for sure, being heavily impacted right now. The intersection of cybersecurity and defense. That's right. Yeah. The Mythos release where they sort of pump the brakes because it was discovering a bunch of zero days. So what does that mean for the traditional cyber defense firms? What does that mean for cyber offense? Can you build a sustainable business if the frontier models are able to sort of fairly easily work in the cyber domain in ways that humans really can't? So you have like the, if you're going to segment defense, you have like those areas.

27:34Jake Chapman:So you've got tactical technologies. You have strategic technologies. You have sort of your software, your hardware. And then you have companies that are building sort of in a specific vertical. and then you have companies that are building platform plays right so andrel being the largest of the platform plays today i think mock industries being another one i'm trying to to build sort of a very horizontally integrated defense prime contractor someone who can compete with a lockheed or a raytheon not a lot of companies building that today almost always when we're chatting with lps they'll ask like how do you find the next andrel and my answer is usually you don't.

28:15Jake Chapman:You look for a company that's building a great product that has a wedge, and you just hope that the team is smart enough and sharp enough to eventually build a platform company, but very hard to start out on day one with the intent of building a platform company. Side of technology and the quality of the product, what are the other characteristics of things that make the best new defense technology companies. Obviously, technology, market for it, like demand, future demand. Use the Wayne Gretzky quote, you got to skate to where the puck is going, not to where it is today. Founding teams, like all the things you look for normally when you're doing venture investments.

28:58Jake Chapman:But I would say for us, like it really goes back to what I talked about earlier, the way government acquisitions work. We look to see, as we talk to the warfighters, right, who are the end users that are using your product, which means that we don't normally do pre-seed, right? Like we were looking for companies that have a product, maybe not in the market, but prototype they put in a customer's hands, usually. So we talk to those folks. We go to exercises here in the States and then abroad, see how the products are actually getting used and how they work. We talk to the requirements writers. A lot of that is classified.

29:32Jake Chapman:We all hold clearances at the firm. It's crazy to be investing in this space, maybe not at Precie, but almost anywhere else, if you don't have anyone with clearances at your firm. There's actual information asymmetry in defense, and it's institutionalized through the security clearance process. Requirements are often classified. Some exercises are classified where the technology is getting used. The results of exercises can be classified. Just because you have clearances doesn't mean you get access to that information. But if you don't have clearances, you're definitely not getting access to that information.

30:03Jake Chapman:the budgets are classified other than like this year's budget it's a very like odd space to be investing in when you say all this classified information i think about competitive advantage i think about information alpha how does it work growing up i thought managing money meant paying bills and balancing a checkbook but as you know that is only a small piece of the financial puzzle managing your money takes more than just checking your bank account every once in a while and great financial decisions come from having a complete picture and proactive management of your income expenses and investments.

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32:32Whether you're selling lattes, cutting hair, running a boutique, or managing a service business, Square helps you run your business without running yourself into the ground. I was actually thinking about this the other day when I stopped by a local cafe here. They use Square and everything just works. Check out as fast, receipts are instant. Sometimes I even get loyalty rewards automatically. There's something about businesses that use Square. They just feel more put together. The experience is smoother for them and it's smoother for me as a customer. Square makes it easy to sell wherever your customers are, in-store, online, on your phone, or even at pop-ups, and everything stays synced in real time.

33:03You can track sales, manage inventory, book appointments, and see reports instantly, whether you're in your shop or on the go. And when you make a sale, you don't have to wait days to get paid. Square gives you fast access to your earnings through Square checking. They also have built-in tools like loyalty and marketing, so your best customers keep coming back. And right now, you can get up to$200 off Square hardware when you sign up at square.com slash go slash how I invest. That's S-Q-U-A-R-E dot com slash go slash how I invest. With Square, you get all the tools to run your business with none of the contracts or complexity.

33:32Run your business smarter with Square. Get started today. That a venture capitalist would have access to this information.

33:38Jake Chapman:The old trope that you don't have a need to know is true in the clearance world. You could have a clearance. It could be top secret clearance with sort of the special tickets attached to it. That doesn't mean that you get access to information unless you have a need to know that information. So I'll start out by saying that. So just because you have clearances doesn't mean you get to know where the bodies are buried or the aliens are being hidden. But the government overclassifies things. Some of the things they classify routinely as policy are the requirements. Like I said, they run that process.

34:10Jake Chapman:So the actual requirements are often classified. Now, they might come out publicly and say, we need to buy something that does X and Y. So really what they're looking for is something that does Z and like they're analogizing Z to X and Y so they don't have to tell you what the classified requirement is. But if you want to know what they're actually trying to do, that might be classified. The Department of Defense is actually quite communist in how they set their budgets. They do like five year plans. The extended spends are classified. So you can see what this year's budget is because Congress is passing it other than sort of like the black budgets.

34:45Jake Chapman:But like where the money's going to go long term. they have a plan and not everybody gets to see that plan. So being able to have a frank conversation with the government customer, whether it's about how a company performed at an exercise, what it is they need to buy, or how much money is going to go to it, might require you to have access to that information that is not available to the general public. There's probably a dozen firms that have clearances, but not very many. How do the founders that you look for in defense tech differ from world-class non-defense founders? The trope of like the 20-something Stanford GSB grad, certainly that founder archetype can be successful in defense, but I think defense has a lot of characteristics, kind of like pharma, where it pays to have some folks with gray hair on your team that have been in the industry for a long time, have really good industry contacts.

35:41Jake Chapman:and that is both contacts within the government and with the prime contractors. Early on for a new defense company, if you're cautious and you protect your IP and you sort of know what you're getting into, it's great to work with the primes. The primes have done the hard work of landing large multi-billion dollar contract vehicles to produce a product and their job as a prime contractor is to go hire subcontractors to perform a lot of the work on that contract. so having relationships with the primes knowing how they do business having relationships inside the government knowing how they do business very important that usually means a slightly older founder who's coming from the sector i think it's a very hard space to just have a bright idea and a cool tech and build it and break in and part of that is the r &d part of the government and acquisitions they don't really talk to each other they don't collaborate as closely so it used to be one organization and then it was split between research and development, RDT and E, so research development, testing and evaluation.

36:47Jake Chapman:So all of the work that goes into early stage prototyping and then the organization that is designed to acquire stuff at scale. So it used to be one organization, now it's two. Five years ago, the research and development organizations often did not talk to the acquisitions organizations and vice versa. And so you might have a lab, we'll say a lab that's working on alt PNT, which is positioning, navigation, and timing. So I think GPS. What do you do when GPS is being jammed or denied? You need a new technology that like helps you figure out where you are and what time it is. So there might be a government lab working on that that is funding 10 companies, R &D for 10 companies, working in different modalities.

37:27Jake Chapman:And then you've got one program office on the acquisition side for the Air Force who is supposed to be acquiring new alt PNT technologies. That acquisition arm might not have been talking to the lab. And so you might have companies that for five years are working with the lab and taking government money, perfecting a product. And then they go to the acquisition side and they say, hey, we're ready for you to acquire us. At scale, on the acquisition side, it says, I don't have any idea who you are. I'm going to go buy this other product from Lockheed, who wasn't doing any work with the R &D side of the house.

37:59Jake Chapman:And that leaves a bad taste in everybody's mouth. It's wasted money. It makes the founders of those businesses feel like the government doesn't care. There's a lot of dysfunction. That is starting to break down. So there's still two different organizations. But like the army, for instance, created this program called Fuse this year, which takes a lot of older sort of disparate army programs. And rather than having them run independently, has sort of like stacked them in cereal. And so companies can enter at gate one. There's one team that's then managing them from gate one to gate two to gate three.

38:36Jake Chapman:And so you're not having that sort of disorganization happen in the Army in quite the same way as it used to. And I think we're starting to see that across the other services. So I'm cautiously optimistic. What's the best economic reason to invest into DefenseTech? I'll table your question for a second and say, I think as an American, it makes a lot of sense to be investing in defense and national security right now. as we talked about sort of the world order is changing dramatically and if you want the outcome of that process to be positive for yourself and your kids as an american i think it makes sense to be putting money to work in this space right now it doesn't hurt that there's a lot of alpha to be had here so talk about all the reasons why this market is broken when you're investing in perfect markets what you get is beta right if the market goes up everybody does well but no one's really generating any alpha, defense is still broken.

39:26Jake Chapman:I mean, it's not as broken as it was five years ago, but that means if you understand how to navigate it, there's still real alpha to be found in this market. So that's one of the reasons to be investing in this space. If you understand it, there's real money to be made. The other reason is the market size, right? So$2 trillion, roughly, let's say, between U.S. allies and partners, defense and intelligence, larger market than most. And a lot more money flowing to it today. And then you look at the macro trends. So you say, we've got potentially a conflict over Taiwan in the next few years with China.

40:02Jake Chapman:We have the war in Iran. You've got the war in Ukraine, which everyone thought I think would have wound down by now, but clearly hasn't. All the terror organizations sort of reconstituting themselves in Northern Africa. There's a lot going on in the world. And that is going to drive a lot of demand in the future. Moreover, that demand isn't going to look like what it looked like 10 years ago. It's not aircraft carriers anymore. It's new technology, right? So there's a lot to be optimistic about from a financial perspective over the next 10, 20 years. No one that I've talked to, whether in this space or outside of the space, believes that defense budgets are going down over the next decade.

40:39I've never heard anyone take thunder.

40:41Jake Chapman:It's crazy to say we might have a $1.5 trillion defense budget, but I think to put that in perspective, I want to say that'll be like three and a half four percent of GDP I mean during the cold war I think we topped out at like nine percent of GDP for defense spending towards the end of the cold war it was like six or seven percent so we're nowhere near historic highs but the world is sort of in a historic bad spot right now so there's still a lot of room to run despite the sort of debt problems we have and then And if you are one of the defense bears and you think that the defense budgets aren't sustainable, what I would say to you is even if that is true, even if it's true that we can't have$1.5 trillion defense budget every year for the next five years, we can't afford it.

41:29Jake Chapman:The world isn't going to get any safer and America's security commitments aren't going away. And so the only way to address that, if you're going to cut the budgets, is to cut the programs where you get less bang for your buck. and that is cutting from the programs that are things that we're not investing in. So that's cutting from aircraft carriers and traditional shipbuilding programs. It's cutting from the traditional cruise missile programs and moving more of that budget to things like Andrel's cruise missile replacement, the Barracuda. So I think budgets are going to go up. Even if they come down, more money is going to end up going into the sorts of things we're investing in.

42:05Old warfare versus new warfare and new technologies. That's right. What's the strongest ethical argument for investing in defense tech?

42:14Jake Chapman:American ideals are some of the best ideals in the world. I think that we don't always live up to them, but I think that we try to. And that can't be said for everybody out there. And so a strong America is good for the world. And that's a reason to be investing in U.S. defense tech. I also think that investing in defense requires a much more nuanced view of ethics. I'll give you some concrete examples for this. Really, I think any investment is an ethical decision, and we should have more nuanced views of how we put our money to work. But I'll give you three companies. So one company makes missiles.

42:54Jake Chapman:One company is an e-commerce company and sells discount goods to folks online. And one company makes drones but won't put a bomb on their drones. which of those companies is the most ethical company, right? And I think that someone's inclination would be, well, it's probably the e-commerce company. But like, let's talk about these companies and these products more specifically. So the company that makes missiles is Raytheon. They're making SM6 missiles. Those missiles could be shot at ground targets and civilians and kill innocent people. But in fact, they generally are used to shoot down missiles that have been fired at civilian populations.

43:34Jake Chapman:That's how we've used most of them in the last couple of years. Track record of them being used. That's the track record, right? So their intent is to protect civilian populations. So is it ethical to buy those missiles or to invest in the companies building them? I would say yes, highly ethical. Those are defensive products, even though they have an offensive use case. That second company making drones, they decided they wouldn't put warheads on their drones. The engineers all got together, they voted, they said, we're not gonna weaponize our drones. But they did decide that they would put a laser designator on their drones.

44:04Jake Chapman:What's a laser designator? are used for it's used to guide bombs to their target so what's the ethical decision here like we won't kill people but we'll help you kill people all right so maybe like the confused that's almost semantics right and then the third company is timu right came onto the stage chinese company selling really cheap products i think they've captured something like 50 of the discount online e-commerce market here in the U.S., put a lot of mom-and-pop businesses out of business, has collected a lot of purchasing and personal information on U.S. persons, and is funded partially by the Chinese Communist Party.

44:45Jake Chapman:It is 100 % economic warfare against mom-and-pop businesses here in the U.S. and selling crap products, some of it made by Uyghur slave labor. what's the least ethical business of those three and i would argue it's timu right so i think if you are not even an investor in defense if you are an investor you have to think critically about what your money is being used for and what the intent is and it rarely has to do with the product it usually has to do with the founders and the company's intent of how their products will be used and how it will influence the world so that's how we think about it right like we would never invest in a company where their first market is to go sell missiles to African warlords of dubious intent, right?

45:28Jake Chapman:And we've, in fact, kicked a bunch of companies out of our diligence funnel because of that sort of thinking. But it requires a much more nuanced thought process. To Steelman, there's really two arguments or two considerations. One is, I think, a genuine consideration, the humanitarian case, and thinking through the nuance of what is the incremental missile doing to society, doing to the world. I think that's a fair conversation to have. I think it shouldn't be had in a vacuum. We don't live in a world that only has one country with one military. The other one, unfortunately, I think is not necessarily cynical but is more of an optical question.

46:13You could use the word virtue signaling, but an optics question, which is what happens if a student activist in freshman year talks about defense and this creates a meanable idea that the university is investing into defense. That, I think, is more of an optics consideration, which, of course, is important to manage, but it's less of an ethical thing. It's more of a self-preservation for the investors and for the investment organizations. It's an economic case, not an ethical case.

46:40Jake Chapman:We definitely come across folks where the optics is their biggest concern, right? They don't want to be seen as investing in a company that like maybe their product someday is misused by somebody or there's an accident or something and it finds its way back to them. I would say for those people, if you are interested in the, through the patriotic case for investing in U.S. national security, but you are worried about the optics. There are lots of ways to go about it. Certainly investing in manufacturing, investing in the sorts of like logistics and sustainment companies that make it possible to build sort of the national security base on top of that here in the States are all ways where you can put your money to work in a patriotic way that doesn't expose you to the same kinds of risks.

47:29Jake Chapman:But I would say if you were willing to take those risks, there's return to be had because lots of people aren't willing to take those risks, right? So generally, when you're investing, you want to be putting your money where other people are a little bit afraid to go. Also on the relative aspect of it, the ethics, when you think about American defense, unfortunately, defense is more or less a zero-sum industry. And who are the other players? Our main adversaries are China, Iran, and Russia. If you look at the ethics of a Russia invading a neighboring country, or Iran murdering tens of thousands of civilians, or China with a totally authoritarian and no freedom of speech, and literally modern-day slavery.

48:14On a relative basis, America is by no means a perfect country, but on a relative basis, there's no comparison to be had.

48:21Jake Chapman:100%. One of the most common fallacies that people fall into is they say, oh, I don't want that to exist. So I'm not going to invest in that or I'm going to advocate against it. I'm going to protest or whatever, which I get, but the option isn't that this thing that you don't like just goes away and then there's no consequences. You have to live with the world that we live in and then do what you can to make it better. And so in that world, defense is an important aspect. Maybe someday humanity grows beyond needing to build defense products and all that capital globally can go to climate projects and housing and those sorts of things.

49:06Jake Chapman:That's just not the world we live in, right? So we can choose to unilaterally disarm. But if we do that, I don't think the world ends up looking better than it does today. I think the world ends up in a pretty bad spot. Speaking of underwriting, we've had this evolution where VCs have wanted to go nowhere near defense companies. In fact, most were prohibited by their LPAs. So now a lot of VCs able to and actively building out teams to go up to the space. What about on the LP side? Have you seen since 2019 LP sentiment towards defense tech and defense-focused venture funds? In 2019, 2020, most of the institutional LPs didn't want to touch it with a 10-foot pole.

49:51Jake Chapman:it was kind of funny because they might have had an investment in andrel but at the again when andrel first started they weren't building sort of things on the kinetic end of the spectrum they were working century towers and stuff like that so i think some of the institutions were able to get stuff through their investment committee that they might not have been able to get through in 2020 2021 yeah they didn't want to touch anything kinetic for sure and defense as a category was pretty scary for most institutions. Family offices, it was definitely a mixed bag. You certainly had some patriotic families in there who were interested in the space.

50:28Jake Chapman:But no one really believed in the sector from a financial standpoint. So I think most of my early pitches when we were raising our first fund was pitching the sector as much as I was pitching our team and our expertise and why we thought that times were changing. Turns out we were right, but not everyone believed us, which is fine. Now I think the institutional piece, some of them are actively investing in defense, which is great. If they're not actively investing in defense, they're at the stage of, we are still thinking about how we're going to approach the market, but they've already decided they're going to approach it.

51:03Jake Chapman:So they're trying to figure out how it fits into their portfolio. But very few people today are still dead set against it. I will say every once in a while, we come across an institution usually in a in a blue state we're a non-political organization but usually in a blue state it's a little bit more progressive where they're managing public funds and they still have requirements or restrictions on investing in certain kinds of defense products but it's getting rarer and rarer even in europe their lps are starting to change the way they approach the sector. You've seen this evolution where first, probably five years ago, LPs would sometimes have to divest from funds that ended up getting exposure to defense companies.

51:48Then if they just, something like an andrel ended up in their founder fund portfolio, they were fine with that. It wasn't the intended consequences. Then it was about, well, it could be defensive warfare, not offensive warfare, and now we could do everything. So there's been kind of almost these four stages.

52:04Jake Chapman:It's moved through the spectrum for sure. I can remember, this is only a few years ago, we invested in the seed round of mock industries. They just closed their series C or valued it, I think around 2 billion now, but we were investing in their seed. And I was talking with the founder, Ethan at a coffee shop. We had already committed and he was telling us that he was evaluating a couple leads at the time, one of which was Sequoia. And I did a thing that I think maybe no VC has ever done until I did it. I tried to convince him not to take money from Sequoia. And Sean McGuire over there who leads the defense investments is brilliant.

52:45Jake Chapman:He's a friend. I think he does great work. Definitely want him on cap tables. But at the time, Sequoia hadn't divested from their China entity. And Sequoia really even couldn't invest in defense. They still had restrictions. But it was for Mock that Sequoia got rid of their own internal restrictions. They had to amend their documents to invest in defense. And then they sort of finished their Chinese divestment. So I'm thrilled now that Sequoia ended up investing in the seed round. But yeah, the industry has just dramatically changed in terms of like how they are willing to approach defense. And then, as I said, whether or not they're willing to take Chinese money or sort of adversarial capital onto cap tables, like all that's a work in progress right now.

53:28When a defense company gets hot, what are they looking for from their VCs that's unique to DefenseTech?

53:35Jake Chapman:That's a good question. I can only speak from our perspective. For us, because this is all we do as defense, earlier in their life cycle, most companies do not have a really strong round game in D.C., so we help out a lot with that. So we spend a lot of time, like I said, there's four committees in Congress that work in defense. We spend a lot of time with those committees and their staff, and we help companies sort of build their early congressional engagement strategy and start building up those relationships. So we do a lot of that work. We connect a lot of founders with the right program offices.

54:11Jake Chapman:Program offices are the organizations inside the Department of Defense that make the purchasing decisions. Now they're called program acquisition executives. and so the department can be fairly opaque from the outside so finding the right buyer can be challenging we help founders with that so it's a lot of blocking and tackling that we do for founders early on and then i would say up through series a once they've raised a substantial series a most of them start bringing all those functions in-house and paying for it themselves And the way we do that, which I think is relatively unique to us, and we kind of stumbled into it, it really wasn't an intentional strategy, is we run a fellowship program where we take active duty personnel and government civilians, usually like mid-career to senior, so majors and criminals generally, or like junior political appointees, folks like that, staffers from the Hill, into a mark, you take them into the venture firm.

55:15Jake Chapman:For two months, we basically train them on how to be a mark associate, what we're looking for in companies, how we do diligence, how we evaluate founders, what technologies we think are compelling, teach them how venture works generally. We send them back to their day job. We now have 100 alumni out of that program. We do 10 people a quarter. We have, like I said, congressional staffers, folks who run program offices, colonels and generals who all come through this program. They live in our slack and our signal. So we actually get a lot of deal flow from these fellows and they help us evaluate companies.

55:49Jake Chapman:But really like the true value is there is no office in the Department of War, Department of Defense or the intelligence community that is more than one hop from one of our fellows. And so we are able to leverage that power to help our companies find the right person to evaluate a company or a product or a technology. All around this like educational program we built, which really we did out of a sort of a patriotic sense that we wanted to give back to the community and also bring a little bit of education about how private markets work. But it's become this like secret weapon for us. What about as companies get larger?

56:26How did the top founders pick VCs as these defense companies start to scale?

56:31Jake Chapman:It's a great question. We don't generally do growth stage investing, although we do a little work with our LPs to help facilitate that for them when they're interested. and real is a great example it's a team like a founding team of iconoclasts i think trey stevens is on record having said something along the lines of like they've never had a vc or maybe with one exception deliver like the value that was promised at investment and i think the team there generally is aligned with that thinking and so they're very skeptical on value add and so then i'm thinking when you are picking which investors you want on your cap table, it's either those investors are bringing like value in hand, like on day one, you're going to give me some equity in your company and I'm going to deliver some value to you today.

57:21Jake Chapman:So to prove it, almost a pay to play. Almost a pay to play. Sure. You are just looking for people you want to be sitting around a table with or having a beer with. They're not going to provide any value. Who do I want to be around and who do I trust? If you could go back to 2019 and give yourself one timeless piece of advice about how you could be better as a defense tech investor. What would that one timeless piece of advice have been? Oh, man. So many. You could give a couple. Yeah. I would have stocked up on whiskey for those late nights where I'm just sitting in a dark corner crying. The government does so many things that feel personal and just screw with your life.

58:05Jake Chapman:And I've since realized that it is not personal. It's just the machine grinding away. but there were a couple of years there where it felt very personal. And so I had some just bad days. Things were like you get an email and you're asked to apply to a program, right? They've got an RFP out. They want some folks to do some things and then you do it. And then you don't get selected for the program. And it's like, well, why did you email me and ask me to spend a week of my time and my team's time to do this? And then it's very personal, right? But it's not personal. It's just the machine grinding away.

58:37Jake Chapman:So understanding that I think would have like helped my mental health a little bit earlier on. Made you push through those times. Because when it's not a bad day, it's a great day. Like the team that we have, I just love working with them every day. I wouldn't tell my LPs this. I guess I will tell my LPs this. I would do what I do for free if I could afford to do it for free for sure. I just love it. I get to play with cutting edge technology, work with mission driven founders who like really care about the problems they're trying to solve. I get to be part of a bigger mission and sort of live my family heritage.

59:14Jake Chapman:Your family has roots going back to the American Revolution. My grandma was in Adams, but goes back to John Quincy and John. Every man in my family all the way back has fought in essentially every American war. As a kid growing up, like probably a lot of kids of my generation, I wanted to be a fighter pilot. Because I watched Top Gun and he doesn't want to fly F-14 Tomcats. but I was fat and uncoordinated as a child. And I was told by my family that I should go to law school. One of the consistent patterns in all great entrepreneurs, especially these category creators like Palmer Luckey from Anderle or an Elon Musk from SpaceX, is that they're almost by definition early.

59:59And it's understanding that when you're early, you're either super early, you might be five to seven years early, and then you're kind of out of luck. but you might be one to two years early. Suffering is the sign that you may be onto something extremely lucrative.

1:00:13Jake Chapman:It's true. I mean, you asked like what lessons or what advice I'd give myself, and there's lots of advice, but I would never change anything, right? Like there's that sort of like dinner party question, like what would you change if you could go back in time? I'd never change anything. Like I love where I am in my life and what I do, and there were lots of painful moments, but I worry if I change those painful moments, I wouldn't be where I am today, right? So literally, I'd change nothing. Alex Hermosi has been on the podcast twice, one of my favorite guests. He has a saying that you don't work on the business, the business works on you.

1:00:47And sometimes it just takes that suffering, that pain is what actually forms you as an individual.

1:00:52Jake Chapman:100 % agree.

1:00:56Five, 10 years from now, is there an optimistic view of the future of defense tech?

1:01:01Jake Chapman:Definitely an optimistic view of the future of the industry. like we talked about. The macro trends are sort of bad for global stability, which is good for this industry. Actually, one of the reasons I think makes sense to invest in defense is it's pretty counter cyclical. So it's just a good piece to have in your portfolio. But the broader question, like do I have an optimistic view of the world? And the answer to that is definitely yes. And actually, as I said earlier, I got into investing, doing deep tech investing. And then from there, really got into national security. The reason I was doing deep tech investing is I was inspired by Gene Roddenberry and Star Trek.

1:01:36Jake Chapman:And I was like, why invest in apps or consumer goods like when I can be investing in something like really trying to drive humanity forward towards that like post-economic vision that Gene Roddenberry had, right? Really, I think Star Trek is a whole separate topic. And I think Star Trek is really an allegory for like self-actualization, right? Like basically technology has made it such that everyone in the Federation can be an explorer. And sometimes it's literally an explorer on the Starship Enterprise, and sometimes it's an explorer more metaphorically in terms of doing research and writing and that kind of stuff.

1:02:11Jake Chapman:A beautiful vision for humanity, and I think it's one that's possible and enabled by technology. So like macro, I think I'm very optimistic. Over the next like five to 10 years for the world, I think we still have a lot of disruption that needs to shake out. on that note thanks so much for jumping on absolute masterclass on defense looking forward to doing this again soon thanks for having me this has been fun if you enjoy this conversation want to hear more conversations with many of the world's leading investors subscribe below