$635M Exit → $600M Fund: David Ulevitch on Building a16z’s Hottest New Fund

0:00Nothing matters more than the talent at the top, the founders of the company. Can they magnetically attract capital? Can they magnetically attract talent? What do you think the biggest difference is between cultures and software and an American dynamism? Natpods. Natpods? Yeah. You had an amazing career beforehand, enough so that Marc Andreessen said, build whatever you want, invest in whatever you want. When you visit the Anderil office, like literally you can feel your heart rate increase as you walk around and see all the stuff being built. If you don't come out of the Andrel factory tour feeling fired up and excited, you need to check your pulse.

0:33You might not be alive. Palmer has always said we will never ship renders. So when you see an explosion in a video, that's a real explosion. They're not doing special effects. So when you see the eagle eye announcement yesterday and you see the camera and the objects like that, it's all real because they will never fake it.

0:58You mentioned a bit on China and DJI. So what kind of vulnerability do you think that we have against their manufacturing and their supply chain? Yeah, I think it's funny. I think we're extremely vulnerable today to supply chain disruption if China decides to cut us off. Now, there's other arguments that they're incredibly economically dependent on us. So I think that there's a very careful dance that gets orchestrated where like they don't want to just cut us off because we also buy so much from China that it could collapse their entire economy. That said, you know, we do know that there are capabilities in manufacturing.

1:35If you've ever been to Shenzhen, which I went to even before I joined in recent Horowitz and saw the manufacturing capabilities of advanced manufacturing, robotics manufacturing, and then now we see the defense like shipbuilding manufacturing they're just far more advanced in terms of capability than we are. We could be that advanced. I'm not sure that the right strategy for America is to say oh they can build 100 ships a year so we need to be able to build 100 ships a year. Like what I would say a better strategy is if China is able to build 100 ships a year what if we just had a missile that could knock out 100 ships a year that they couldn't defeat?

2:12Like let's just have better missiles. That might be better than having it. Because then it doesn't matter how many ships a year they can build. If we have capabilities that can pierce whatever defenses they have. And so I think we always have to lean on American ingenuity. But we have to recognize that we are today supply chain dependent on them. And so a lot of the work that I think a lot of people, not just us in American Dynamism, but a lot of people, whether they're in the government, in the Department of War, or across the administration, and in the private sector are looking at is like, what are the raw materials we need to be independent of China?

2:45I think it's a real concern. I think it's a concern from a cybersecurity standpoint. I think it's just a concern from a supply chain disruption standpoint. But I also believe in America and our ability to counteract it. Again, I read these essays of like, yeah, like China's building this many ships per day. How come we can't build this many? I'm like, I'm not sure we need to build that many ships per day. We just need to be able to destroy that many ships per day from our side, Right. Like if we can just blow up their ships, it's just much better. And it's a strong deterrence. Like I hope we never get into a kinetic fight, but I want to make sure that we just have unquestionable superiority.

3:20If we if we do, I don't want people to ever wonder whether America is just like the global superpower that we've been for the last, you know, X number of decades. What's the most investable wedge for U.S. founders against this China situation? I think we're seeing now that there's a huge opportunity to drive manufacturing transformation in this country. I think we're on the precipice of a robotics revolution. And robotics doesn't have to be like the humanoid robots we see in videos on X. Although I think those are coming, that will be cool. But even just like automation and robotics that are general purpose robotics that can do assembling.

3:57I think we're going to have lights out factories the way they do in China. So I think manufacturing is one. And that's everything from like motors to metal work to all kinds of production capabilities. And then I think if you look even left of that, you're going to see minerals and mining, whether it's lithium, whether it's copper, whether it's steel. Like we don't have very many steel smelters in this country anymore. We used to have a lot. We have almost none now. That's a huge opportunity. Lumber and wood is another one. There's a company called, I'm going to mess it up. the lumber manufacturing.

4:35It's transforming the way we produce wood in this country. And the way we produce lumber in this country is really important. We can't just have it all come from Canada. We can't have it come from other places. And we need to have much more lumber in this country than we currently have because we want to build much more. We want to build much more housing. We want to build lots more things that all need lumber. And so these are places where advanced software is being applied and founders that have sort of a software mindset and an advanced technology mindset are going into the legacy categories, which I promise you, advanced software has never gone into the lumber milling world.

5:06But now it is, and it's going to be transformative in all of the best ways. Given those categories across energy, ships, and manufacturing, what are some of the portfolio companies that American Dynamism has? Yeah. So, I mean, look, we today are investing very actively, obviously, defense, space, public safety, energy. And now we're increasingly looking at mining, manufacturing. And of course, we make like the one-off investments in other areas too when we find an iconic, great founder. Some of those companies in energy, I think of energy as like generation, transmission, and storage as like the three big buckets of energy.

5:45And so for energy generation, we have an investment in Radiant Nuclear. I'm very excited about that company. It's been a long time since this country's had a new nuclear power company. I think Radiant is going to turn on the first fueled nuclear reactor of a new design in like 50 plus years. I think they're going to do it next year. I'm very excited about them. Amazing team, amazing pace of execution. Their productivity is just extraordinary. And they're building a reactor that fits in a shipping container and can be transportable. So that's awesome for natural disasters. It's awesome for remote locations.

6:18It's basically a diesel generator anywhere that gives you five years of clean energy when you flip it on. In terms of resiliency and storage, we have an investment in base energy. So base energy, they're starting in Texas, but they'll expand from there. This was started by Zach Dell and Justin Lopez. Zach Dell worked at Thrive, and Justin Lopez worked at Anderil. They got together to say, hey, how can we transform both resiliency in the grid and also start to smooth out the power curves that are happening as energy costs are increasing and fluctuating, as you get more and more natural disasters and things that interrupt the grid.

6:52So whether it's really hot summers or bad weather in the winter, they're doing excellent. We have a company called Exowatt that is using solar energy and thermal energy to create basically batteries that are used at grid scale and industrial scale. So we're excited about the energy space. In defense, we've invested obviously in Anduril. I think we have more cash in Anduril than any other investor. amazing company, really sets a bar on talent, on execution speed. Whenever I go to their offices and they tell me about all the things that they're working on, I go to the board meetings, it's just like I'm blown away at their pace of productivity, incredible CEO, incredible founding team, just really, really amazing company.

7:36We've invested in Sironic that is doing unmanned surface vessels and executing very, very fast, great CEO, great leadership team there. Castellan that's making missiles. Good example of, again, I read these stupid articles. It's like, China's making X number of ships per year. We need to make X number of ships per year, or we're going to totally die in a war. Well, that could be true. But I think an alternative is if they're making X number of ships per year, we just need to have low cost, highly capable, very hard to shoot down missiles that can take out X number of ships per year. That's better.

8:09That's what Castellian's doing. They are building the next generation hypersonic missiles at scale, at cost that will help protect America and our allies. So I think that covers defense. There's other companies that are all wonderful. In space, we're investors in Apex Space. It's building satellite buses. We're invested in Northwood. It's improving ground station communication, which is critically important. I'm sure I'm forgetting others. In public safety, flock safety is a major investment. We also have an investment in a company called Long Eye that's helping police do investigations. We have an investment in Skydio that is a leader in drone first response, so that when you call the police, a drone can respond first and quickly and provide you with real eyes in the sky and sort of situational awareness, and that will ultimately save lives.

9:00This is not funny, but one anecdote I often use is that people don't realize, people will call 911 and say, there's a guy in the alleyway with a shotgun. And if you're a police officer responding, you're going to be responding like guns drawn. But what if a drone can get there first and be like, that's not like a guy in the alleyway with a shotgun. That's like the janitor with a broom. The police response is just totally different. It's ultimately going to save lives. It will keep police officers safer. It will keep community members safer. And again, it makes policing more objective. So companies like Fox Safety, Skydio, Long Eye are all working to reduce crime, make policing safer, better stewards of the community, which is what all cops want, and make policing more objective.

9:42And so it's a big category that we're very excited about. So let's say I covered space, I covered defense, I covered energy, covered public safety. We have a mining company called Mariana Minerals, awesome company. We have a great portfolio. I love our portfolio. I wake up every day super fired up about what they're doing. I get constant email updates from our founders. The best founders send basically these email updates about all the things they got done, very Elon style. And I read them and I'm just like, wow, this is amazing. These These people are really going to transform the arc of history in a positive direction for America.

10:17And it's just it's very exciting. That's crazy. Sorcery is brought to you by Brex, the financial stack trusted by more than 30 ,000 companies, including one in three venture backed startups in the U.S. Nearly 40 percent of startups fail because they run out of cash. Brex is literally built to help founders avoid that. Unlike traditional banks that let your money sit idle, chipping away at it with fees, Forex's designs help you spend smarter and move faster. Their all-in-one solution combines checking, treasury, and FDIC protection into one powerful account. You can send and receive money globally at lightning speeds, get 20 times the standard FDIC coverage through their partner banks, and even high yield from day one.

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12:34For more information, visit carta.com slash sorcery. That's C-A-R-T-A dot com slash S-O-U-R-C-E-R-Y. We talked a little bit about this before. It's crazy. It's an amazing portfolio of which I'm very proud to say that I've covered a good handful. That's true. Yeah. So thank you for providing that. And they're fun companies to cover. When you visit the Anderol office, literally you can feel your heart rate increase as you walk around and see all the stuff being built. And it's like I made the joke last time I was there. If you don't come out of the Anderol factory tour feeling fired up and excited, you need to check your pulse.

13:11like you might not be alive. Well, we were also talking about this. It's like, they're not only exceptional at products, manufacturing, making really beautifully designed things, but like their comms and marketing strategy is insane. Their don't work at and roll campaign was amazing. Yeah, yeah, yeah. It was incredible. So the first thing I would say is that that comes from the founders, right? They have a great new marketing leader, Jeff Miller, who actually came from Snap of all places. You would not expect a defense company to hire their head of marketing, their CMO, to come from Snap. But he did.

13:48He's a really, really smart guy. But the real marketing philosophy comes from the top. Palmer has always said things like, we will never ship renders. We will ship actual videos of our products. So when you see an explosion that an andrel like, um, uh, munition, but like explodes in a video, that's a real explosion. They're not doing special effects. Um, like they will, they will never do basically like vaporware video announcements. So when you see the Eagle Eye announcement yesterday and you see the camera and the objects like that is all real because they don't, they will never fake it. And so that authenticity, I think just permeates as a part of the culture of the company.

14:26And when they did this, don't work at Anderil campaign, um, like it was brilliant because it was actually, it was evocative. And I've talked to Jeff Miller about this, it was evocative of a campaign done like a decade earlier from Netflix. When Netflix wanted to create this line of comedy that they were coming out with, and they had all these comedians signing up for Netflix, they put up billboards that said like, Netflix is a joke. And people didn't know who put up the billboards. Like was somebody really angry with Netflix? Like Netflix is a joke, you can't take them seriously? Or was it like Netflix is a joke because they're launching this huge comedy thing and it's like really funny and it got more people talking.

15:00This was before Netflix was huge. Got more people talking about Netflix. So with Anduril, they said, hey, wait a minute. Matt Grimm, the COO, who's an amazing guy, was like, look, we can just enumerate all the reasons why somebody who just wants to not work that hard should not work at Anduril. We're in the office. It's long hours. You might have to travel. And you might have to travel to not the best places because that's sometimes where our forward operating bases are. And you're going to have to do work that is really mission-driven. and it's going to be difficult and you're going to be on a factory floor sometimes.

15:32It's not a cushy office. We don't have nap pods. That's a very mad grim thing to say. We don't have nap pods here. And so you put those things together and it's like, look, you should not work at Anderil. But if on the other hand, you get super fired up about building the future of defense technology, if you want to go to some of these countries that are less fun to hang out in and some of these forward operating bases and help the men and women who serve and protect our country, well then like you should work at Andrel. So they launched this campaign. They actually had both domains. Don't work at andrel.com, work at andrel.com.

16:05It was an amazing campaign. Applications skyrocketed. They got tons of coverage for it. And you can now see other companies sort of trying to emulate that marketing ethos. And I think that unless it's sort of core to the company's culture of authenticity, it can like fall flat. Like, you know, you have to be authentic about it and it has to really resonate at a true level inside of like what is the DNA and the heartbeat of the company. And then the marketing can flow from that. I think Andruil just nails it over and over again. I think Base Power had an awesome campaign recently where they were trying to recruit in Austin.

16:38And they're like, look, you can change the way energy is delivered and stored and increase people's reliability, or you can work on B2B SaaS. So what is the point of these marketing campaigns? This is something I talked to Eric Christman from Altimeter about because they're also investors in Andruil. But it's like you have a defense company primarily selling to the government. it's enterprise. Why are you creating like this brand halo around it? And it's almost become like a consumer brand, which is, by the way, is like entirely effective and very, very good. Like why? Yeah, I think it's important.

17:10Like, look, Andrel never loses sight of who their customer is. And they have a ton, like, you know, there's tons of like collateral and white papers and documentation for their customers. But at the same time, they're hugely dependent on support from Washington for the work they're doing. And if you want people to believe in transforming the way defense production works in this country, you need the public to come along with you. You need the policymakers to come along with you. And that requires basically a full-fledged marketing effort. And also, it gets people fired up. It makes people feel patriotic.

17:44And so I think they do it for a bunch of reasons. One is they're unashamed of who they are. They want to make it very clear to their own employees and the public who they are. They are a defense company. That includes making weapons and making systems like that. They want to make sure that policymakers know who they are. They want to attract the best talent. So they create a magnet for talent. And so I think for all those reasons, it's important that they have this public face and not just be like a shadowy defense company. And I think one of the things that they get away with is like, you know, people might say like, I don't want to work at a defense company.

18:16That's fine. They can opt out. But like nobody can critique Andrel saying they don't know what andrel does everyone knows what andrel does because they're very open about it it's kind of crazy especially for such like a national security based company yeah um we have to assume that there's capabilities in their systems they don't add they don't talk about of course yeah yeah but it is really cool to see those videos not being altered and go out and like that is that is actually american defense for sure so we got here because uh you had an amazing career beforehand And enough so that Marc Andreessen said, build whatever you want, invest in whatever you want.

18:53So that career is coming from founding OpenDNS, which you sold to Cisco for$635 million? Something like that. Something like that. Yeah. Okay, so I'm curious from your standpoint, and this leads into a Brex question on performance. So Brex is all about spending smarter, moving faster, performance. what lessons did you learn as a founder as an operator that drive your investment decisions into these companies i think the first thing is it starts with team and talent the best companies in our portfolio have the best performing teams and you know it's very easy in venture to fall in love with an idea but what really matters is like is there a team there that can execute can that team magnetically attract the best talent in the world and get people to come work for them people love working for Brian Schimpf at Andrel.

19:42They love working for Palmer Luckey. They love working for Matt Grimm. They just love that team. And they're able to magnetically attract the absolute best talent. Chris Brose is probably the most in-demand person in the defense space today. And he's worked at Andrel since the very beginning. And so you have to be able to magnetically attract the best talent. And every company we look at, whether it's base power, whether it's Sironic, it doesn't matter, Radiant Nuclear, they just become magnetic attractors of talent. The second thing is these companies are expensive. And we've learned that they have to be able to magnetically attract capital.

20:18And sometimes it sounds dumb to say because we're investing in these companies, so obviously they got capital. But they need to be able to attract capital from other people as well. And we found that these companies are so capital intensive. And sometimes the curve to revenue takes a little bit longer because you're doing manufacturing, doing all these other things. And so it just doesn't, nothing matters more than the talent at the top, the founders of the company. Can they magnetically attract capital? Can they magnetically attract talent? Those two things matter the most. And then I think what I've learned, and I learned that in my own experiences, and it took me 10 years to basically have my overnight success.

20:53And if I think about the years that were not that last night before we sold the company, like the lessons I learned were like, every time I had to change the way the company was operating, it always started with talent. I had to change out the executive team, change out the leadership team that we had. At one point, we were a consumer company. We pivoted to enterprise halfway through, five years in, and totally rebuilt the team because the kind of people that were building a consumer company were totally different than building an enterprise cybersecurity company. I think the last thing I learned that was really important, especially to help me set me up for the American Dynamism practice, is that Cisco, at that point, I was running one of the largest cybersecurity companies in the world.

21:30And I recognize at Cisco that when you sell to the government, you need to have the people that know how to interface with the government, know how to sell the government. These are very, very strategic sales processes. They're not transactional. Oftentimes, the customer on the other side of the table is sometimes betting their career on picking your solution. The same thing is true now with government. When somebody who's a procurement officer or a program officer is betting on a defense startup to provide some solution, they're really betting on their career in many cases to say, like, I hope that Andrel or Sironic or whoever, Castellian, can deliver this solution for me.

22:04And so I think you need to recognize and appreciate, and this is what I learned at Cisco, that these partnerships are just not transactional. They're deep relationships. You're going to work with these people for years on these complex, large, you know,$10 million plus deals. And I learned that on the enterprise side at Cisco. I see it now over and over in the AD space. I think those are some of the biggest lessons that I learned. Talent and then really partnership with your customers. On the talent side, do you believe in hire slow, fire fast? What's your opinion on that? I think it's different, especially now in this environment.

22:37It's like increased competition. There's a clear bifurcation between AI native or non-AI native people. And just this increased competition that is making it even harder. I don't think you can hire slow. So you definitely need to fire fast when someone's not working. I think you can do it compassionately and generously, but you have to fire people quickly. What I would say is the most important thing when it comes to hiring talent is doing references. And it's the thing that I find that most founders and most hiring managers forget to do. I would often say, and I've joked about this in the past, that sometimes I don't even need to meet a candidate.

23:10All I have to do is do the references and I can tell you if you should hire this person or not. The absolute best people get just these extraordinarily positive references. references like the kind of references where it's like hey would you want to work for this person again and they're like oh yeah i literally would do anything to go work for this person again i would quit my amazing job i have currently to go work for this person again they were the best manager i ever had brian schimpf at andrel gets those kinds of references people would stop what they were doing their cushy job at palinger and come to go work for him and so people also don't know how to do references properly and they often hear things like oh yeah i loved working with you I'll just use Molly.

23:45I love working with Molly. She's terrific. And it's like, okay, well, that's fine. But like, you would say that about a lot of people, but it's like, would you stop what you're doing? Your cushy job? Would you move across the country to go work for Molly again? And it's like, oh yeah, absolutely. She was the best boss I ever had. Well, that's the person you want to hire. Then I want to hire Molly. And so A, doing references and then B, knowing what a good reference sounds like. That's way more important than like hire slow, fire fast. I do think you need to hire fast. And I always tell founders, they should probably spend at least 30 % of their time on recruiting.