Startups & Defense: Katherine Boyle on TBPN

0:02Today on the A16Z podcast, we're sharing Catherine Boyle's recent interview on TVPN. Catherine, a general partner at A16Z and a driving force behind the American dynamism thesis, joins the show to discuss the state of the movement. From the Department of Defense's latest reform efforts to the growing role of startups in national security and beyond, Catherine breaks down how far American dynamism has come and why the work is just getting 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.

0:41Please 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 A16Z .com forward slash disclosures. [♪ OUTRO MUSIC PLAYING [♪ And next up, we have Katherine Boyle from Andrews and Horowitz, the pioneer of American dynamism. One of the top coinages of the last few years. Yeah, for sure. And more relevant than ever. In some ways, mission accomplished. I mean, last week in DC, it was American dynamism on display, right? That's right. Everyone is a believer, and the question is, where do we go from here?

1:19and that's what I'm excited to dig in with her today. Katherine, welcome to the stream. How are you doing? It's about time. I'm so happy to share. You just came home. Long time listener, first time caller. We're going to have you with the flag in the background. Yes, fantastic. Love it. Where should we start? I'm curious about state of affairs with the American dynamism movement, the project, feels like it's maybe time to rest on our laurels. What do you think? We've achieved American dynamism. It feels like it. Yeah. It feels like it's broken through. It's called stream. Cultural victory may be coming before actual victory.

1:57Sure. Sure. And that American dynamism is almost mainstream now, at least in the venture world. Yes. But jobs not finished. Jobs not finished. So what are the key asks in DC from Silicon Valley right now? What are the top projects where should tech be focused in terms of the American dynamism project broadly right now? So it's nowhere near finished. I mean, this is like three or four years into a 30 year project, which is always good when you have those sorts of aims. And I'd say it's even longer than that. When you think of defense 1 .0, it started around 2015, 2016. It sort of has become this very large movement.

2:33But I'll tell you, like last week was a huge, huge week for American dynamism inside of the DOD. And the news sort of got buried in Teclan, but it was just, it's probably one of the biggest things to happen in the first 100 days of the Trump administration. The Army announced what they're calling their Army transformation initiative. It was with Secretary Driscoll, General George. They actually went on Fox and Friends, which was like a huge deal that they actually went public with it. And they said, it's been way too long. We have so many platforms we want to modernize. We want to divest from technologies that are no longer useful.

3:05We want to modernize the force. We want to make sure that we get rid of civilian jobs that are not important anymore. We want to make sure we are not having wasteful spending. I mean, it was sort of like, you know, what I'd read in NBC after it came out, they said like the army is dozing itself. Yeah. I think the real story of what the army is doing, and kudos to them because they truly are the first mover. Is there people inside of the DOD who have been saying these things for years, pounding their head against the wall, saying they want acquisition reforms, saying they want to work with startups, saying they have to have new platforms that come in and actually support the needs of the war fighter, and they've been pounding their head against the with little results.

3:43And so when you have a doge effort going on in Washington and an administration that really wants to see the waste disappear, it allows for those people who are really forward thinking like General George and like Secretary Driscoll to come forward and say, hey, we're going to do this ourselves. We're going to pick out the new technologies that we need. We're going to get rid of things like humvees that we haven't needed in 20 years. We're going to figure out what is actually useful for the Army and we're going to do it ourselves. So it was a huge week. I think it was probably one of the most, it was reported, but it didn't get sort of the praise from technology that it should have.

4:14Like this is an extraordinary movement that I think has really been a long time coming and it's something that a lot of the early American dinamies and companies have been pushing for for a long, long time. So congratulations to the Army. Yeah, so can you give me a dose yourself then get a dose? Always do. Doze yourself. Yeah, can you give me a little bit of a tour of the market map of the beneficiaries of this transformation? Obviously, everyone knows the volunteers years in the Anderals. But I imagine that there are tons of pockets of value and projects that need to be overhauled. Is it mostly drones, weapon systems, vehicles first, or are there other areas that companies that you talk to are focused on in this transformation process?

4:54And the early days, that's what's been called out. So it's early UAVs that were developed 20 years ago. They're not relevant post -Ukraine war. It's actually sort of, I don't want to say comical because it's not funny. But when you think about the fact that the Humvee was developed in 1980, it went into production in 1985, and that the Army said in 2004, this actually isn't useful for us anymore because there's this new type of warfare called IEDs, and we're not going to use it, and these are still in production in 2025. So that's a perfect example, and I think they're showing certain programs that are so long overdue that they're going to be changed.

5:27But I think it's also smaller things like, you know, the program of record was developed when you had to build out these very, very large platforms, and you had to plan years and decades in advance and when someone won a program, it was understood that they were going to run that program for decades. And now the Army has ways to acquire things where technology is changing at a pace and at a speed that really needs to have a genuine competition every year, every couple years. And so that really benefits all startups, that benefits all, you know, incoming emerging technologies that are going to serve sort of the fight of the future.

5:58They have specific callouts that they're pointing to now. But definitely, this is great news for startups because what it's showing is that there is is actually the will inside the DOD. Is there any movement on procurement reform? I remember I watched this hilarious movie, Pentagon Wars, all about the development of the Bradley Fighting vehicle. And it's a very funny movie. Everyone has a different requirement. They all get put together and becomes this kind of platypus of a vehicle that is part tank, part troop transport, all these different problems. Part of the benefit of modern technologies that we do develop platforms and things like Anderals, Ghosts, can do ISR and also do munitions and a whole bunch of things.

6:37There are projects that do need flexibility, but is there a cultural shift around moving away from exquisite systems or just when folks in defense tech say we need procurement reform? What are they really talking about in 2025? Yeah. Well, I think they're talking about different things because I think what this initiative is going to do is it's going to allow the Army and I think there'll be a lot of replicas of this as well. I think other branches will look at this and say this is a great idea. Instead of being locked into a program for decades, they're going to be able to say, actually, we would love to use that capital for something new.

7:11We would love to recompete that program. We would like to be able to be better capital allocators because now they're hands are tied. And I think when you talk to people who are just in normal business, not in defense world, and you say, hey, if you had to make a decision about a purchase that's going to last for 10 years and get no updates. And you would not be allowed to change it. What would you do? We would say that's insane. Like, how is a CEO going to say they're going to acquire technology for their company that they're going to use for 10 years and there's going to be no software and updates, no nothing?

7:41And if it's not working, you can't get rid of it. You're told you can't get rid of it. I mean, that is literally what the DOD has to deal with. And so I think what's great about this initiative, again, it's one, the fact that the Army is going public says that they mean business and that they have their cover to do this. But I think that the meta story that we're going to tell ourselves is Doge has been very public in the last week of what they're doing. There's been some pushback on, you know, why are you working on IT systems? You know, everyone has sort of their favorite Doge meme of why it's not working.

8:09But the story of Doge, I think when we look back even in a year, is going to be that it gave extraordinary air cover to reform in every department. And the first example inside the DOD, this is the biggest example in the last hundred days, to see General George out there saying like, this is what we need to do and we are committed and we're going public because we are so committed, which doesn't usually happen. I just think it speaks volumes and tech should be celebrating. This is a big, big day for everyone in the American dynamism ecosystem for every defense company that's been fighting for this for a long time.

8:39Yeah, and for all of this to actually achieve those sort of 30 year goals or execute against that 30 year plan, things need to be bipartisan. People need to realize we want efficiency and see an innovation across every branch. I'm curious on the investing side, I'm sure you have this painful experience all the time where you meet companies that probably are gonna be great businesses are good for America, but maybe aren't a fit for venture. What's your sort of updated thinking on understanding if something can be a great important business versus something that can truly be, you know, a generational outcome?

9:15Yeah, one of the biggest mistakes I see investors make is trying to predict ham. So early early days of Andrewl, a lot of people, you know, didn't want to look at Andrewl because of ethical reasons or because they were worried about being involved in defense. But there was another meme that was going around, which is almost comical now, which is, well, it's kind of a small tab, right? Like a border security company, like, oh, they're selling to DHS Department of Homeland Security. Does it really have that big of a, but like these were real things that people said that are hilarious now. You guys can imagine.

9:46So I think it is very difficult to predict a growing market eventually what some of these incredibly important technologies are going to be worth. But I agree with you, there are some examples of companies that might not be, you know, stand alone businesses, but will ultimately, you know, Andrews done a very good job of acquiring businesses that aren't going to be these venture outcomes, but work, you know, very well within their platform. But I think in some ways, there's always surprises with companies that were initially passed on or people were very skeptical of their time in the early days.

10:14And then you look back and you see just how much they've grown or how much the product has shifted or how important the platform actually is. Yeah. How have you been ignoring the politics of it all, but reacting to the trade war? In many ways, when you have these big geopolitical events playing out, that doesn't necessarily mean start to make a lot of venture investments because venture investments take a long time to play out. And it's very hard to predict the future. Are you seeing new opportunities related to the events of the last month, or are you still just continuing? I imagine when you guys invested in Hadrian, you weren't betting on a trade war in two years or something like that, right?

10:54But how do you think about timelines? Is the benefit of thinking in that 30 -year timeline that you're able to broadly ignore or not place too much focus on the headlines of today and just think about what America needs in the long run? I would say my bias is a very early stage investor is to not think about the immediate timeframes. These are very long cycles. You can sort of see trend lines, but it's hard to know what actual events are going to happen, obviously. So I think even when we made the investment in hatred as you called out, there was a movement towards reindustrialization and towards investing and manufacturing that was early and decent.

11:28But if you were hearing the signs or spending a lot of time in DC, both sides were very focused in Washington on how do we think about investing in America, reindustrialization, and how do we bring back manufacturing? So it felt like it was a message that was being heard then. It's just a course been accelerated. And I think truly, if you think about the next 10, 20 years, reindustrialization is going to be a very important theme. So it can feel like everything is hot right now or feel like we're in the middle of something. But ultimately, I think we're, again, in this very, very early, three or four years into a 30 -year journey, it took decades for globalization to really hit its peak.

12:05And now we're sort of seeing the pendulum swing again. and so you're going to see a lot of companies that are built in the next few years that become generational companies. Yeah, how do you think about the kind of broader market map of American dynamism? Obviously, Andrew is just a great case study in the American dynamism thesis, but at the same time as you go through the American dynamism website, you can go back to the moon landing and the development of the iPhone as examples. At the same time, there's this question about like like the Anderol of X is Anderol potentially, but then that doesn't always come true if you're talking about something that's truly outside of their purview in consumer or in, you know, flock safety or hatred and these companies are not competitive but maybe fit in the thesis.

12:48How are you seeing the investing landscape of American dynamism kind of evolve as more people come into the category, but then think outside the box and address different issues. I mean, I've seen even like some education stuff kind of fit the broader thesis. So how has that evolved in the last couple of years? Yeah, we define it as companies that are actively supporting the national interest. Sure. So it is a very simple definition and founders have, you know, different interpretations of what it means, but there's common themes. And actually, this goes into why we decided to have a separate fund, why we decided to build out the platform.

13:21It's because these companies need something entirely different than a true enterprise or a true consumer company. And when we looked back at our early portfolio of shield AI, androle, astronomers, these companies that were sort of what I would call space a defense 1 .0, we'd sort of like put them in the enterprise category as though they're like no different than a company that's selling business software to the Fortune 500, right? It doesn't make any sense. They have totally different needs. You know, Androle's famously said that they had a lobbyist on staff on week one. There's things that companies need that our view is that we could build a platform to help support these companies, namely in Washington, understanding who their buyers are on the BD side, which is a very difficult kind of role to hire for inside of early -stage startups, but then also understanding the Washington game, which is very important for companies to understand if they're going to be selling directly to the federal government.

14:11Now, you mentioned education, and there's a lot of companies in our portfolio too that are selling to state and local. And that is an totally different sales motion. That is something where, you know, company like Flock Safety has sort of rewritten the rules of how you sell directly to a police force or how you even follow what I would call kind of like a second city strategy of not going to the biggest cities, if it going to the smaller municipalities and getting a lot of, you know, almost circling a big city with the suburbs around it and kind of getting a lot of momentum from the citizens. But all these companies have very similar needs and sort of things that they have to think about early rather than later.

14:45And we've now seen enough of sort of the early success stories and public safety and aerospace defense, like sort of these generational companies that came up in the last several years, that the boom that's happening in these categories, many of them want to replicate those playbooks. And have, I think, with a lot of success. Yeah, can you talk a little bit about almost like lobbying as value -add for venture capital? I remember I was running an Andreessen Back Company a decade ago, and I met the CEO of McDonald's through Andreessen at some happy hour, and there were trainings on B2B sales and PR and all this stuff, but there was no concept of regulatory or lobbying.

15:23But I imagine that's a piece of it, but at the same time, you need to eventually staff your own government affairs team. How are you working with early stage founders to get them up and running in Washington? Yeah, I would say a lot of the founders that we backed are very, I would say sophisticated in their knowledge of who they need to be a meeting myth or the types of people they should be meeting with in the DOD. But the thing that I think we're actually, I would say, even more successful in doing that's really important is making all that knowledge public. You know, we make our playbooks public, like partner Leila, who runs our go -to -market in DC.

15:56She wrote this incredible glossary of things you need to know if you're even going to approach a venture capital firm about a defense tech company. Like, these are the acronyms. These are all the acronyms you could possibly hear at a conversation with the DOD. And it's things like that where we do want to make that public and we want to help educate the ecosystem. And I can tell you, like, you know, five or six years ago, the number of venture capitalists who understood the different types of contracting vehicles that understood the names of, you know, of different people on the appropriations committee.

16:24But these things that are now sort of, I'd say, taken for granted, were not well known. And so I think that's a huge part of it, too, is really helping the ecosystem get up to speed, helping companies sort of speed run that early stage process. If like you can ask any dumb question, we're going to help you with it. But then there is also something to be said of, it is much easier to get a meeting with certain people if you are at a dinner that's sponsored by a group of people who are always in Washington. I mean, we have a Washington office now. We are fully staffed in terms of both Republicans and Democrats and people who work on both sides of the aisle, people who specialize in DODs, people who specialize in certain types of the DOD.

16:58And I think that is like a very important thing to be able to say, okay, you need to meet with X, Y, and Z people or you need to understand the glossary before you can even begin to have those conversations. Do you think defense tech is now mature? It's oversaturated. I was joking with Jordy that I think world peace is like maybe six months away. and then I'm gonna start poaching top defense tech talent to build the next generation of advertising optimization. Because I think that we just gotta get them back in the back. That's a chocolate next company, you know it. Yeah, yeah, yeah. But I mean, seriously, it does seem like - That would be the most - Yeah, the open AI, you know, AGI is always six months away.

17:35Real pieces of defense tech founders need to just go like, yeah, just two billion more and like - And then world peace. Real peace, yeah. But I mean, there is a serious question here. Like, I know some people who are like just so excited that they're jumping into things, but, you know, I'm not even in the industry, but I'm a little bit more tapped in. And I'm like, there are already seven companies working on that exact thing. I don't know if this is the best time. Is it worthwhile to steer, you know, these incredible hackers, these great entrepreneurs, like maybe towards the more tangential heart tech problems?

18:05Like, what I see with like, but base power is doing is like, it's heart tech, it has defense roots, but it's not directly something that's on Andrews Roadmap. What advice are you giving to kind of the entrepreneurs that are like in between things, thinking about serving the national interests, but not necessarily putting themselves on a collision course with a multi -billion dollar founder -mode company? So I'll say deterrence is the constant project, right? So like your whole, like the meme of maybe six months away from World Peace. Yeah, of course. I actually think that was part of the problem of 90s, right?

18:36Like seriously, that was the problem. Yeah, democracy will end up history. of history. We flourish and we don't need to be working on these things. So it is very important that we've gone back almost to the roots of the DOD saying like, hey, actually we remember what it's like to be a country at war and we need to be constantly focused on the next technologies. We need to be focused on deterrence. Thinking about as deterrence because we want to prevent war, but we have to be continuously building. So from that perspective, I think again, we're only a few years into this real movement of Silicon Valley caring about working with the DOD.

19:06And I hope that it's a 30 year project. I think that's what we all really should be focused on is making sure it's a 30 year project and even longer than that. But to your point, what I think is so interesting about companies that are founded out of Andrew or out of SpaceX, we've done an analysis where we looked at all of the founders who've left SpaceX in the last like 10 years. And there's hundreds of companies that have been formed and just wildly different sectors, whether it's radiant nuclear working on nuclear energy, you know, Castellan, which is in our portfolio and they're building hypersonic weapons.

19:35I mean, some of the best founders are trained. I always say they go to the school at Elon Musk. They learn manufacturing, they learn production. And then they want to take that to something that is pretty low -hanging fruit. Like, they want to make sure that they're competing against the incumbents of yesterday who have not modernized their production, who've not modernized a lot of the technology that they're working on. And so, I think you see that with a lot of the, yes, there are some extremely crowded fields, but then there are also areas of defense that are really just boring and completely untouched.

20:03And you're seeing founders realize that too, that it's not something that's interesting to any of the existing companies and it's low -hanging fruit. It'd be interesting to work on that or they're interested in being a Tier 1 supplier. We have a number of companies that are really focused on the supply chain aspect of defense and their partners to Andrewl and their partners to SpaceX and other companies in the ecosystem. So you really are seeing founders like understand that question in a very sophisticated way and say, okay, we're going to go after the parts of the supply chain or the things that DOD needs that no one is focusing on.

20:33And that's been exciting to see too. Can you talk about M &A in defense tech broadly? Androles done this very well. Seronic announced a deal last week acquiring golf craft. That feels super significant. I'm curious, you know, how you advise founders kind of broadly when thinking about that. We actually had Augustus on from Rainmaker earlier who had acquired a company in his space. But when's the right time to be, you know, thinking about that as somebody in defense tech. and yeah, what kind of opportunities do you think make the most sense? Totally. Well, I think, I mean, both Andrew and Serrana, they have incredibly unique stories in terms of where they're operating and sort of what they need to do in order to grow and scale, and they've done it at a speed that is just incredible, right?

21:17Like they have very sophisticated teams that know a lot about acquisition. I'd say for earlier stage companies, we're seeing more companies that are potentially interested in doing that. It can speed up innovation. It can speed up being able to work with certain customers. That's for sure if you're acquiring a certain capabilities so that you can sell to a major prime, that's something we've seen more of too, which is interesting and exciting. Like, I don't think we were seeing that several years ago, and now we're certainly seeing companies experiment with that. But when you said, actually, M &A, I actually thought you were going towards something that I think is actually more likely to happen in the future that hasn't happened in a long time.

21:48When you look at these existing prime companies, the big five say, they've really only acquired companies that have not raised any venture dollars, right? Like, they don't acquire companies that are kind of seen as these bleeding leading edge companies to shore up their capabilities. And my instinct, we're talking about Army transformation initiative. We're talking about a government that's becoming far more sophisticated and a DOGD that's becoming far more competitive. It hasn't been competitive for decades. And now you're seeing all of these startups come in. My prediction, if we're looking 5, 10 years out, is that the companies that have not been inquisitive for the best engineers and the best technologists and these capabilities that they need, are going to find that as their only solution.

22:25And I think we could potentially even see another last supper situation, which of course, in the 90s was the famous case where the government came to all these primes and said, you have to merge, you have to have kind of forced mergers and acquisitions because the budget's going to decrease. And of course, that was probably the wrong strategy given sort of the results that came out of that. But I do think it is something that I would not be surprised if in five or 10 years, you're seeing the existing primes that have been around in many cases for 100 years saying, we have to work with these startups in a much more tangible way.