From Thesis to Meme to Fund: Building American Dynamism

0:00The fact that this movement moved faster than any of us anticipated says something about the organic nature of founders wanting to build in the physical world. There is no negative way to interpret American dynamism. That's about improving the state of education, of housing, of defense, of the energy. It's all these things that are in the cornerstone to building blocks. It was shocking to Silicon Valley. It was not shocking to Washington. What would happen to our supply chain? What are all the shipping and logistics issues that would be created? What would be the energy impact? A lot of people say there's going to be a war for space, but I think it's important people recognize there's going to be a war in space.

0:39That work has to start today. It can't start 20 years from now. It has to start now. A lot of our companies are focused on the fight of the future, not the one happening today. The United States of America has embodied excellence for centuries. Whether it was the Wright Brothers taking flight in 1903, or the invention of the transistor in 1947. How about the moon landing in 1969, or the birth of the internet in 1984? All of these humanity shaping innovations were built on American soil. So when did it become taboo to believe in America? While three years ago, A16C General Partner, Katherine Boyle wrote a thesis called Building American Dymism.

1:20Like few others at the time, Katherine's words were unafraid. She discussed America's apathy toward progress and the country's institutional failure, but equally that decline did not need to be our destiny. In coining the term American dynamism, Catherine said, quote, it's the recognition that seemingly insurmountable problems in our society, national security, and public safety, housing and education, demand solutions that aren't simply incremental changes that perpetuate the status quo. these problems demand solutions from builders and it's never been more vital that startups tackle these serious American problems and quote so today for the first time ever you'll get to hear Catherine and her partner in crime a 16z general partner David Yulovich discuss the origins of this thesis which quickly led to a meme and now is a $600 million dedicated fund so why was American dynamism controversial in the first place and what will it take to bring Washington and Silicon Valley back together, plus how dynamic is America in today's great power competition and where are we the furthest behind?

2:26In this episode, we tied these questions together by discussing the third generation of our American dynamism 50 list, a compilation of top companies building toward the national interest with a focus of this year's list on the Indo -Pacific. If you'd like to check out the full list of 50 companies from all over our country, head on over to a16z .com slash 8050. And of course, we'll include a link in our show notes. Okay, let's get started. As a reminder, the content here is for informational purposes only. Should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16z fund.

3:08Please note that A16z and its affiliates may also maintain investments in the company's discussed in this podcast. For more details including a link to our investments, please see a16c .com slash Disclosures.

3:25So it's been about three years since the term the thesis American Dinosome came to be, tells more about the origins and where we've come since then. DU and I constantly reflect on this because I am the eternal optimist, early stage investor, There are only sea roses. And if you would told me three years ago that we would be where we are today as a thesis, as a fund, as a group of founders who are building the national interest, I wouldn't have believed you. There's just no way that anyone could have predicted how quickly this movement took hold. And people inside of Andreessen Horowitz know that I have this little framework for how I describe the sort of meme magic of Andreessen Horowitz.

4:03And I say, we always go from thesis to meme to product. And I would have assumed that sort of meme cycle of putting out something that's a really well thought serious piece of, this is our thesis, this is we're going to focus, seeing sort of the broader community meme it and allow it to evolve with the help of founders, with the help of engineers. I thought that would take 10 years. I thought we'd be sitting here in 10 years saying, okay, we have a fund, it's incredible that American dynamism is something that every fund is taking seriously. So the fact that we've done it in three and the fact that this movement moved faster than any of us anticipated says something about the organic nature of founders wanting to build in the physical world coupled with things like the war in Ukraine.

4:44We launched the thesis three weeks before Russia invaded Ukraine in 2022. And so I think there were just a number of factors. The combination of the founders, the moment, the capital really saying this is something that is needed and it really resonating across the board. Yeah, I think it's happened faster than either one of us ever expected. I think that all of the sort of demand polls that Catherine just mentioned were there. The world needed this, America needed this, people needed change. And they wanted people to start building for things that mattered. But I think there was a supply side change as well.

5:17I think all the engineers and founders were hungry for doing something that was more meaningful. I think they wanted to tackle bigger problems, they wanted to do things. They saw things like SpaceX starting to like really actually happen. like launch was happening and this idea that that would be made real just seemed much more tangible than ever before. People watched what happened with Tesla, remember I started with the roadster, then all of a sudden it became commonplace and there was a supercharging network that was created. I think people just recognize, hey wait a minute, I don't need to be optimizing ad clicks, which is fine if they want to do that.

5:49But instead they can really spend their time building things that they feel really, really proud about. They really serve an important mission. And even in some of the origins where some of the AD companies started, it was after Google bailed out of Project Maven and people in Silicon Valley were really trying to figure out what was important, how do I want to spend my time? And those early seeds blossomed into it now. Chatham and Corrine is the American dynamism practice. So even though the practice and the fun came a little bit later, there were lots of seeds that had been planted even as early as 2018.

6:19So I think you're seeing a crescendo that had gained momentum. time. And then I think we were able to really capitalize on that. And I actually still think we're just in the earliest innings. Completely. Can I just ask about that in particular? The note about the fact that there was a period of time where actually many technologists were not just careful with supporting the national interest, but actually in some cases actively against it, right? They weren't able to support some of the initiatives that now quite frankly, I think the over 10 windows changed and now they're not just willing, but jumping to support those things, but you mentioned memes, Catherine.

6:56Like the term American dynamism did this idea of supporting the national interest, didn't need a rebranding. And how effective do you think, again, something like American dynamism, which is so compelling, what role did that play, if any? You said something interesting there, which was didn't need a rebranding, and there was no brand. There was no concept. The idea of building for the national interest, when we said it, was extremely controversial, even three years ago. Like, the reason why I think people were stunned was partially because of the name, because we actually said the word America.

7:28For decades, it was very taboo to say you were building only for one country. Tech was by its nature global. You build software. You want to see it go completely international. Like the idea that you would say, no, actually there are companies by law that can't sell to other countries. And we have an entire regulatory regime around how those companies are built, who they can work with, who our allies are. And we need to respect that. we actually need to build a practice because those companies are going to be the next phase of innovation. Today it's seen as this is an obvious thesis. But even a couple years ago that was seen as, are you crazy?

8:00Are our limited partners going to get behind that? Are our engineers going to want to say they're building for the national interest? The language that we use was very specific because it's signified a specific type of company that is highly regulated, that builds in the physical world that has to worry about the status of their engineers and can they get top secret clearances. So I think in some ways we named it that one because it exemplifies what we are doing here. We didn't name it defense tech, right? We named it dynamism, which is so important to the actual thing that we are building. But the fact that we said America, I do think was shocking.

8:33I still think it shocks people. But when you actually look at the companies and how they're building, they're working with the different states that they operate in. They're selling to various levels of government and they understand the seriousness of building a company like that where the language which actually does matter. Do you, can you comment on that from the perspective of it being controversial when it first came out? And obviously you take a firm like A16Z. We do have LPs, we do have other funds even within the firm. Can you just talk a little bit more about that inception period and the reaction within the industry?

9:04Yeah, it's always been funny, I think, to Katherine and I when we think about the occasional criticisms we would hear, people sometimes would say American dynamism, like it doesn't mean anything, but it obviously means something because it's galvanized the whole movement. And they would say, it's just this marketing thing. And I would say to myself, wait a minute, what company doesn't have marketing? Like what enterprise software company is not going to have a marketing team or a marketing department who doesn't put together marketing materials to explain what they're about, what they stand for, what they do.

9:31Like who doesn't want marketing? Like you say it, like it's this pejorative. But it's like, what kind of idiot would run a company without marketing if we went to a board meeting and a company said, we're getting rid of marketing. That's not happening. And the mental gymnastics that people now go through to avoid saying American dynamism when And they really, really want to say American dynamism. We have competitors that go to just incredible, incredible lengths to come up with alternative phrasing to not say American dynamism, industrial revolution, resilience. It's like, okay, those are all good words, but they're all encompassed by American dynamism.

10:03And the other thing about American dynamism was just so clear early on that it's only positive. It only has a positive connotation. There is no negative way to interpret American dynamism. It doesn't mean that the rest of the world has to be conquered or sufferers. It's not any of those things. All it says is that we want to promote American dynamism. And people can hear that and say, you know what? That's about improving the state of education, of housing, of defense, of energy. It's all these things that are in the corner, so it's in building blocks. And so there wasn't as much criticism. People just brushed their aside like any new thing or they didn't want to acknowledge how good of an idea it was.

10:39But because it was such a good idea, and really I think resonated with the builders and the founders. It really did galvanize this sort of overwhelming momentum, kind of like Catherine says. The meme takes hold quickly. Like good ideas do spread by really very, very fast. And with our LPs, even today, there is still a little bit of an effort to convince them it's not just about defense. Defense is an important part of it, but it's not just about defense. But I think now three years in, they recognize that there's things like public safety, which they had never really imagined as being part of American dynamism were now increasingly important cornerstones of what we're doing.

11:16One thing I'll add to what do you just said, it was shocking to Silicon Valley. It was not shocking to Washington. I think that's also really important. The term American dynamism is a term that you would hear in DC and all sorts of context to refer to the innovation they care about. It was not surprising at all to Washington. I actually think it was embraced immediately. But that goes to show you just the the golf between how DC views innovation and how Silicon Valley views innovation and how in some ways this practice wants to push those two worlds closer together. But it certainly wasn't controversial in Washington.

11:51I think when we go to DC, it is exceptionally embraced. People are so excited that Silicon Valley is building for these categories and from day one, the people in Washington got it. It was more of a surprise for the people in Silicon Valley, many of whom who still had funds that were operating in China, it was more of a surprise for them. And now I don't think it's a surprise for anyone. I think everyone gets the thesis and is on board with the message. There were so many other terms that people would try to use before American dynamism that I think they made no sense, which in capture. I mean, forget about the fact that they didn't galvanize a lot of excitement, like deep tech, frontier tech, hard tech.

12:25And it was like, what does hard tech mean? Lots of things are hard. What does deep tech mean? We never use those terms because frankly, they just never made any sense. and they also were just boring stupid terms. They weren't galvanizing, that's for sure. Maybe one thing to clarify for folks, because I think you called it out, do you? A lot of people associate American dynamism specifically with defense and maybe aerospace. But there's so much more to that story, so I'd love for either one of you to just clarify what are the other areas of American dynamism? How do you view the overarching nature of supporting the national interest?

12:58Anybody that thinks that they're building and the national interest can take a really broad lens as to what that means. And we welcome those people. I think it's comfortable to say, the tent is big and we welcome anybody into that tent. Doesn't mean we're going to be investing in all those areas. But if somebody, whether they're working in areas of education, agriculture, manufacturing, material sciences, battery sciences, different kinds of chemistry and chemicals and things that are really critical to our national and our industrial supply chain energy, we have this sensational thirst for energy in this country.

13:27All these things are part of American of the defense is obviously a part of it and the manufacturing base and the entire defense industrial base and supply chain that goes along with that logistics trucking. There's all these things that people, I think, underestimate the impact that technology can have in these categories. And all these things have such a positive and beneficial impact on America. Obviously, healthcare and education, those things are just key parts of what people think of as part of the American dream. Yeah, I always say if there's an executive department in Washington that exists to regulate or oversee an industry that is likely American dynamism.

14:01So I think Department of Energy, Department of Defense, Department of State, SBI, like we see public safety as a huge component of American dynamism. And it really is these categories where there's just strong civic interests, like where Americans say, this is why we have a government. These are the services that government is supposed to support us on. And as do you said, it's a very wide array of places that we cover. But the real fundamental reason why we built a fund at a practice is because these companies sell in very different ways than all of the other companies in our portfolio. And this is something that I think, do you and I saw in the early days before we even had a practice where these one -off companies had these extraordinary business models, whether it's something like Andral or SpaceX or Flock Safety.

14:42They're all very different, but government is like their core customer and they have to figure you're at how to work with their core customer in a very bespoke way. And in DC, they have what they call federal practices, right? But Silicon Valley had no concept of, what does a federal practice look like? You never heard that word in Silicon Valley. I often say DC got what we were doing a lot earlier than the people in Silicon Valley, but now it's just an obvious thing. Of course, there's all these companies that want to work with government. They're going to need different types of operating teams.

15:10They're going to need a different go -to -market motion. They're going to have to understand this weird term called government affairs. So in some ways it's like these companies operate very differently. So I want to pivot to talking about the American Dynos and 50 and talk about some of those companies that are building toward the national interest. This is the third year of the 8050 and every year you've chosen to shift its focus and talk about something specific. This year it is the Indo -Pacific. Can we just start there and maybe for some folks they hear that question and it's a trait one.

15:39But for others maybe it's less obvious. Can you speak to why this year's 8050 is focused on the Indo -Pacific? I think it's a good call at that every year we sit around and we say, what is the big story of American dynamism for the year? So, last year, we really focused on the intersection of artificial intelligence and American dynamism. And I think we've been very focused on investing in that trend, but also we've seen a lot of robotics companies. And this year, I think we really said, what is the commonality between our portfolio? What are our companies talking about? And what really, really has been to focus not only in Washington, but also of our companies is this sort of Indo -Pacific, but Taiwan.

16:13That is the thing they are talking about. That is the thing they are preparing for. And we looked through our portfolio. It actually came up because I was fortunate enough to go with a group in government to the border of Ukraine. And one of the things when I came back, I looked at our portfolio and I said, we've really been investing more for the fight of the future. And to use David's term, a lot of our companies are focused on the fight of the future, not the one happening today. That is something where when we sat down and looked at our portfolio, We were overwhelmed with just how many companies are really focused on this.

16:41I would say five to ten year out. What could the world look like versus what's happening on the ground today? And we really wanted to highlight that in the companies that we chose this year. The other thing that has shifted us toward what is happening in Taiwan and what could be the ramifications for the United States and her allies. We have a company that makes drugs, it's American made -drone manufacturer. Most of their parts and components come from the United States. But they have a battery that comes from China and they sold some drones to an organization in Taiwan and they got sanctioned by China And they were no longer allowed to buy batteries from China and obviously that company figures out some alternative path to get batteries from another country and not to okay Although it's difficult because a lot of batteries are manufactured in China But that moment really for me have said hey wait a minute This isn't just about getting ready for the next kinetic fight with a near -peer or exact peer adversary But it's really about understanding what are all the different components and things that would be affected if we actually got into a major conflict in the Indo -Pacific region.

17:44What would happen to our supply chain? What do we get? Whether it's motors, actuators, components that we need for all the things that go into our manufacturing base, our defense industrial base, what are all the shipping and logistics issues that would be created? What would be the energy impact if we lost our ability to trade and bring in goods from from the entire region, not just from China, but from elsewhere, from Vietnam, from the Philippines. What are all the things that would change if we actually got into a kinetic fight in the Indo -Paycon region? Do the old platform carrier groups work where we can bring a flotilla around an aircraft carrier of destroyers and have a week to get ready for a fight?

18:21Or do we need a thousand drones that are autonomous and a swarm? Do we need to rethink the way some merciless work and the way that unmanned surface vessels work? And so I think when we saw a little taste of this in the Ukraine, this is the moment in time to start asking those questions and say, what are the companies that are going to matter if we get into a real conflict? Which hopefully we never do. But if we do, what are the things that are going to matter most? This is just the beginning. I think you'll expect us to spend more time thinking about the fight of the future, but not just from a kinetic lens, from an actual armed conflicts lens.

18:52But what does it really mean if our supply chain lines got disrupted and we got a taste of this during COVID? But what happens when it really frees and really paralyzes how does America respond? on how do we get ready and what are the opportunities for our companies? Yeah, what does it mean to be really prepared and at the outset of the 8050, you actually paint the scenario, which to your point, hopefully this never happens, but you say this is not an abstract risk. The piracy is engaged in the largest peacetime military build -ups since World War II with an industrial advantage in worship, drones, and other weapons of war.

19:22It has spent years pressuring the US and its allies attacking civilian vessels, cutting undersea cables, and engaging in simulated war games just miles from Taiwan shores, it is an expansionist power preparing for war. So if this is true, how do we prepare and also maybe how prepared are we today? It's not abstract as do you mentioned our companies are getting sanctioned. It is in some ways surreal to work with great founders that are finding out that they're sanctioned by China. And so it is a very real risk. But I think the thing that in some ways should be hopeful for us is that this is why the American dynamism practice exists.

19:58Five years ago, people didn't see that this was an actual reality. We now have a generation of founders who have started building in our meeting that demands the 8050 list, which I've been courage everyone to read because I think it answers your question very deeply is what are all of these companies across different sectors doing and how are they going to help prepare. But I think what we hope people take away from this list is there's a lot of sometimes hysteria about okay, it's terrifying that we're not more prepared or it's terrifying that this could potentially happen. And here are 50 companies that have been working on this, putting their head down, building in the physical world, doing the hard thing, day in, day out, recruiting talent to this mission.

20:35And we should be celebrating that they were early and right. So let's jump in there. What are the categories that you would maybe break down as really critical to us being prepared? And then maybe let's talk about some of those companies in each of the categories. I think our view that's shared by I think many people in the government that having just overwhelming capabilities is the best deterrence and it's the best defense. And that means making sure from a kinetic capability, do we have the most advanced missiles? Do we have hypersonic capabilities? Do we have the most advanced electronic warfare capabilities?

21:08Can we navigate and contested communications environments? Do we have total space domain awareness? Do we have complete superiority in the space domain? I think people kind of laughed a little bit in Trump's first term when he created the space force, you know, and they had the Star Trek eating uniforms, but people don't understand, like, you know, that wasn't early. Maybe it was on time, if anything, it was late. That the space domain is one of the most important domains as we think about the fight of the future, what that looks like. I think cybersecurity, not just cybersecurity for enterprises and for individuals, but cybersecurity for our entire industrial sort of manufacturing base.

21:44All these machines and systems and industrial control systems we have, the water treatment plants, the electrical grid, the utility, like cybersecurity for that entire domain, is critically important. We've now connected all these things, whether it's on warships and the naval fleet, whether it's in the air force and in the air, or it's just like how we actually live our lives in the United States, we have all these things now that are interconnected, internet controlled, internet monitored. So there's a lot more cybersecurity companies today that are completely focused on an entirely new threat surface around the defense industrial base, that needs to be protected, the utility and energy grid in the United States.

22:22And then the other thing is we need to be able to generate and transmit move energy very rapidly and at massive scale. And so there's a lot of energy projects that I think are critically important to just having robust and reliable defense in the United States and abroad wherever we need to bring the fight. To your point about the fact that we can even call out 50 companies each year building towards these spaces versus maybe the perception that the everyday American has, which is that there's like a few primes and that's it. I think that's important to highlight, right? That there are numerous companies building these new capabilities and it should be household names.

23:00Yeah, not only was it not hard to find 50 companies, there's way more companies. We can't possibly include them all. We actually could have made it the AD 250, but we just tried to draw the line somewhere so that we think it's a great list, but it is not the exhaustive canonical list. Katherine, do you want to talk about some of the defense companies? Yeah, so defense, but I also like to call out production. These companies are a little different when people think of, as you said, the primes, what the primes are really, really falling behind on is how quickly and cheaply they can produce what's known as a trinable systems.