WSJ x a16z: The Next 25 Years of Defense Innovation

In this episode from WSJ Invest Live, Andy Serwer speaks with Katherine Boyle, general partner at a16z, about the American Dynamism practice she helped launch four years ago. They discuss why saying "America" out loud stunned Silicon Valley in 2022, how Russia's invasion of Ukraine changed everything, and what it means to invest in companies that support the national interest.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Katherine Boyle?

  I think the world has changed. I think people realize that we're in a new reality. Our view is investing in sort of a head of what is the next theater? What is the thing that we need to be investing in in the next 10 years? Is that the next war is actually going to be fought in space. A couple of years ago, if I had said I invested in a hypersonic weapon company in Silicon Valley, I think I would have been kicked out of the room. And in 2023, when we invested in Andreessen Horowitz, there was not a peep out of people thinking that this was terrible. Technology is the backbone of what makes America strong and what is the envy of the world. And if we don't apply that to our national security and our national interest, we lose a lot of that competitive nature. This is something that I think is going to define the next 25 years of innovation in Silicon Valley.

• 0:41Erik Torenberg?

  In 1956, Lockheed Martin had six times as many employees in Silicon Valley as HP Defense investment built the region. Then the pendulum swung to software, and by 2017, Google employees were walking out rather than work with the Department of Defense. Three weeks after A16Z announced its American dynamism practice in January 2022, Russia invaded Ukraine. That changed everything. SpaceX and Palantir alumni started founding companies focused on the national interest: autonomous surface vessels, hypersonic weapons, attritable systems built cheaply and mass-produced quickly. Now every venture firm in Silicon Valley is investing in defense. The question is whether this represents a lasting category of innovation or a one-time thesis.

• 1:25Erik Torenberg?

  In this episode, we share a recording from WSJ Invest Live, where Barron's editor-at-large Andy Serwer speaks with Katherine Boyle, general partner at A16Z, about why this moment will define the next 25 years of Silicon Valley.

• 1:41Speaker 02

  So tell us about the American dynamism practice at Andreessen Horowitz, which is one of the world's most prominent VC firms, and what does it mean?

• 1:50Katherine Boyle?

  Sure. So four years ago, I joined Andreessen Horowitz. And it was a very simple thesis. It was, instead of building a practice around a new type of technology, say, AI, or around a customer set, a go-to-market set, enterprise or consumer, what if we built a practice around a very simple mission, which is companies that support the national interest? And at the time when we announced it, we announced it actually in January of 2022. We had been investing a lot in these categories before. I had been investing, my partner David Yulovich, who was already at the firm, had been investing in companies like Andurall and Shield AI and SpaceX. And when we announced that we were starting this practice and actually going to dedicate capital to it, Silicon Valley was really stunned. I mean, it was shocking. And the fact that we said "America" out loud was even more shocking.

• 2:33Katherine Boyle?

  I think people were stunned because the view that technology is always global was sort of the dominant view inside of Silicon Valley at the time. And four years later, here we are, actually three weeks after we announced it, Russia invaded Ukraine. And I'd say that was the moment that sort of changed everything about investing in defense, investing in aerospace, sort of these categories where if you're in Washington DC or if you're in other parts of the country, that's what you think of when you hear the word "technology." But in Silicon Valley, that was not something that was really done at the time. And so we say, four years later, here we are. I'd say every venture firm in Silicon Valley is investing in these categories. They're not afraid of aerospace anymore. We had some big SpaceX news yesterday, obviously, that I think people are now attuned to.

• 3:16Katherine Boyle?

  But it really, when you think about the last decade of technology, investing in hardware, investing in physical goods, investing in things that support the national interest that most Americans think of when they think about critical technologies was just not in vogue in Silicon Valley.

• 3:30Speaker 02

  And just before I get on to the next question, a quick follow-up, maybe inside baseball a little bit with A16Z. Do you talk to Mark and Ben about this? How does that happen, actually?

• 3:39Katherine Boyle?

  Yeah, so I mean, it's interesting. The kind of way we came together was my partner, David Yulovich, and I were just tired of competing with each other on investments. It was like there were very few people that were investing in aerospace, defense, public safety. And after a while, you just get to know each other and you're like, maybe it's better to partner than to compete. But yeah, Mark and Ben, Mark always says, he had been working with the US government since the 90s, obviously, advising in different capacities but also selling to the US government. And so it was not new to him to be patriotic and to think of technology as a patriotic good. But it was, the last 15 years, I'd say, probably after the dot-com burst, all the way up until 2017, we always market as the moment when Google refused to work with the

• 4:21Katherine Boyle?

  Department, then Department of Defense, but Department of War, during Project Maven, when there was a walkout of employees saying, "We will not work with the US government." But things changed, where I think patriotic engineers said, "We do want to work with the Department of War." And that's when Anduril was founded, that's when a number of companies started being founded that are specifically focused on working in the national interest.

• 4:41Speaker 02

  Yeah, I want to talk about the founding of Anduril a little bit because, as you mentioned, you were involved in that at another firm previously. But one thing I wanted to ask you about a little bit is, in a way, this is Silicon Valley going back to its roots, right? So, you know, people sometimes forget. I mean-- Industrial and defense are a part of Silicon Valley's history. It's core, really, in fact, a core of the core.

• 5:04Katherine Boyle?

  Yes. No, no, and even when you look back at the history of what was happening in the 50s and the 60s, everyone always thinks of HP as being sort of the iconic company that was founded, that starts sort of the technology wave. And it's like Lockheed Martin, I think, had something like 16 or six times as many employees in 1956 up and through the 60s as those companies did. And so, we like to say Silicon Valley was built off of defense investment. The Department of War and the Department of Defense was buying so many of these technologies and working hand in hand with these early companies, and then something got lost. I actually think it was sort of the kind of change in sort of the talent that was coming to Silicon Valley. Everyone always thinks of like the Bob Noyce generation. These are people that grew up on farms, working with their hands, and working in the physical world.

• 5:48Katherine Boyle?

  And then when everything moved to software, I always say like the Facebook sort of turn, the Facebook generation, it's a different profile of engineer. It's a Harvard kid in their dorm, working with software. And we're seeing the pendulum swing back to the Palmer Luckys of the world, who was building in his garage, building Oculus, and these sort of moving back to a different profile of engineer. And now you kind of have both. You have the synergy of software and hardware coming together in these iconic companies.

• 6:11Speaker 02

  Oh, interesting, because we talked a little bit about this, the two of us, Catherine, that there was this era, and I think even progressives were getting frustrated at the apps that were being created in Silicon Valley about things like dogs' feelings. Remember that era, when it was Web 2.0, and it was just a pendulum that really swung a little bit too far. So what are some of the most promising areas that you guys are investing in specifically?

• 6:34Katherine Boyle?

  Certainly. So I'd say that we like to break it up into eras. So the first sort of Defense 1.0 era is companies like Anduril. It's companies that see themselves as selling directly to the US government. Anduril, it's no secret when you hear Palmer Lucky talk, he talks about how they want to be the next great Lockheed Martin. They want to be the next great prime contractor working with USG. But there's this whole other wave that's happened. And again, we started the practice almost like the perfect time, in 2022. You know, I said, you know, Russia invaded Ukraine. There was this host of new founders that I think, you know, decided they wanted to build for their country. And a lot of them were coming out of companies like SpaceX, like Palantir. They had been trained and sort of already knowing how to work with with US government. But they started doing some different things where they're not necessarily priming, right?

• 7:20Katherine Boyle?

  Like they're they're saying, we'll work with the existing contractors. We want to rebuild the defense industrial base. So they see Lockheed Martin, Raytheon, you know, the sort of iconic companies of yesterday as potential customers and partners. And so you are seeing sort of the the shift from we have to sell directly to US government to now companies saying, well, we can shift left. We can be the critical supplier. You know, we we work with many companies that are that are supporting sort of truly supporting the defense industrial base by building criticals, critical parts for all of the companies, whether they're new defense, new space, or or sort of the existing legacy prime. So you are seeing sort of this growth of the market. Whereas I think, you know, maybe a few years ago, people looked at it and said, well, how many SpaceXs are we going to need? Or how many, you know, Andrels are we going to need?

• 8:03Katherine Boyle?

  And now you see actually the market can support that because a lot of the existing players are desperate for innovation, they're desperate for for artificial intelligence, you know, suppliers, but they're also desperate for critical parts. And so we are seeing sort of that movement as well.

• 8:16Speaker 02

  Or specifically, are we talking about drones here? And I saw the story this week that the United States has introduced a new tank, the M1E3 Abrams. And then the headline was, it's this America's last tank.

• 8:28Katherine Boyle?

  Yeah.

• 8:29Speaker 02

  So is this drones? Is it all drones? What are the products specifically?

• 8:34Katherine Boyle?

  Well, I like that question because it depends on how you look at drones, right? So so we always look at it in terms of sort of what is the theater? Is it air? Is it sea? Is it space? And the thing, I think the commonality of the new technologies that are being built by by Silicon Valley companies or by companies that are built in the, I always say the school of Elon Musk, right? They're building attributable systems, they're mass producing, and they're producing from one to 10 to 10,000 as quickly as possible. Is that these are small systems that can be built cheaply. So we're not investing in aircraft carriers. We're not investing in what's known as exquisite systems by the Department of War, where, you know, the the kind of 100-year-old companies, they know how to build those and it's going to take 10 years to build. You know, an aircraft of some kind. We're investing in the products that are 10 times as cheap.

• 9:18Katherine Boyle?

  They're built as quickly and they're built in a way where they can be mass-produced as quickly as possible for the Department of War. So things like, when you said drone, you know, we have a company called Sironak that's building autonomous surface vessels. That is a type of drone, but it's on the water. It's also a boat. And if you build a boat and engineer it so that you can go from 1 to 10 to 10,000 as quickly as possible, they have moved faster than any company that we've ever seen in terms of how quickly they've been able to manufacture and produce and get things in warfighter's hand. They're a three-year-old company. They're already working very closely with the Department of War. But that's a type of drone. And it's manufactured to be attritable. It's manufactured to potentially carry munitions, carry different types of payloads. And I think that's the thing that's so interesting about these companies is, again, they've gone to the school of Elon Musk. It's how quickly can we build?

• 10:03Katherine Boyle?

  How cheaply can we build? And they're building a different component of what's next in warfighting that is not these expensive systems that are sort of, I'd say, the architectures of the past. It's the architecture of the future in that they're building cheaply and very much for, you know, the next domain and the next theater.

• 10:24Speaker 02

  I mean, the next generation of warfare, and we're seeing it in Ukraine and other places, actually in that part of the world, is terrifying. All war is. Because it seems futuristic, it's even more terrifying, at least to me. I mean, our drones attacking your drones. And is that what it's going to come down to? Some of them in the air, some of them on the sea?

• 10:43Katherine Boyle?

  Yeah. I mean, it's a good question. I was fortunate enough to go with some people inside of US government about a year and a half ago to the border of Ukraine and kind of see how we were helping operations there. And I asked a bunch of people who were, you know, very much in the thick of it, what's the technology that's most critical? And I actually thought they were going to say drones are the most important technology for this theater. And the answer that every single person gave me was actually Starlink. Which I thought was fascinating, how that is sort of the architecture, sort of the most important thing that's driving the ability to communicate on a battlefield of the future. What's also interesting about that theater is that it's very unique to a Soviet war, right? Like, this is a trench warfare, they're bordering each other. In some ways, if you look at the bottom without thinking about Starlink or thinking

• 11:27Katherine Boyle?

  of the drones, it looks like 1914, which is very unfortunate, it's a very brutal war. But then when you look at the new technologies that are sort of in the air and in space, it's very applicable to other theaters and very applicable to what could potentially happen in the Pacific or what could happen elsewhere. Our view is investing in sort of a head of what is the next theater? What is the thing that we need to be investing in in the next 10 years? Is that the next war is actually going to be fought in space. And that means that we need to be thinking about attritable systems in space, we need to be thinking about offensive capabilities, need to be thinking about how Golden Dome can potentially be a part of that. But I think a lot of the companies that we're working with on the space side are very much thinking that the infrastructure in space to fight the theaters on the ground is actually

• 12:12Katherine Boyle?

  where we need to be spending the most time.

• 12:13Speaker 02

  I mean, it sounds like there's one most important person on the planet, at least from our standpoint, the United States, when it comes to this, which is Elon. Because you're talking about SpaceX and Starlink, never mind XAI. I mean, are there other people out there besides him, and maybe Jeff Bezos?

• 12:30Katherine Boyle?

  Well, no, and I actually love that question, because when I say people went to the school of Elon Musk, I think that Elon's most important contribution to this country is training two generations of engineers, really, 20, over 20 years, on how to work with their hands again. We had lost that capability in the US, and again, the pendulum had moved so far to software that we didn't have someone who was thinking from first principles of how do you actually build as quickly as you possibly can and build in new ways and capabilities that didn't exist before? You don't learn it. At university, I mean, you certainly don't learn it at one of the existing primes, where they're given a list of requirements by the Department of War and they're told, "Build it exactly as we say." Whereas Elon's way of thinking about things, and you know, there's been many books now written about this, but we see it every day in the companies we support, is he always

• 13:15Katherine Boyle?

  thinks about, "How do you engineer something for production? How do you build for manufacturing?" You don't separate out those two capabilities. You're an engineer, you want, "The best part is no part," is sort of his, his number one rule. You want to make it as simply and cheaply and as quickly as possible so that you can mass produce something. That, of course, is the capability of Starlink. And so for every single one of our companies, we, you know, we've watched the diaspora out of SpaceX. I'd say there's SpaceX talent in them that is really taking sort of that Elon knowledge and building for a new capability, whether, you know, we have a company called Castellion that's building hypersonic weapons. It's an all SpaceX team that had worked very, very closely on, on Starshield and worked with the US government. And now they're taking everything they've learned from that, that, you know, that disciplined sort of methodical approach, and they're bringing it to a new capability that SpaceX isn't working on.

• 14:00Katherine Boyle?

  So, so that, I think, is what you're seeing when you see the diasporas out of these great companies like Palantir and SpaceX and Anduril. They all know something that they've learned from the previous generation of companies.

• 14:09Speaker 02

  Right, I guess Palmer-Lucky is another person, I mean, the Palantir people. Is hypersonic weapons another name for that missile?

• 14:15Katherine Boyle?

  Yeah, so, so, yes, it can be. Hypersonic can mean many things, but in the case of Castellion, they're building hypersonic missiles that go Mach 5, so five times the speed of sound. And the reason this is so important, I actually think the, the better story about this is how, a couple of years ago, if I had said I invested in a hypersonic weapon company in Silicon Valley, I, I think I would have been kicked out of the room. Like, like, really, I would have been called horrible, horrible names. And in 2023, when we invested in Andreessen Horowitz, there was not a peep out of people thinking that this was terrible. And the company came in, again, they'd worked for, for Elon and they'd worked for SpaceX many years, and they said, "This is a deterrence company. If we cannot build hypersonic weapons," which is the thing that the Department of War is saying is the most critical on their list of things they need to build as quickly

• 14:59Katherine Boyle?

  as possible, "We have lost the, the next war." This is so incredible, incredibly important. And I think that the shift and the cultural shift that moved from saying, "It's horrible to be working with any of these departments," to "We have to build for deterrence." Happened so quickly in Silicon Valley. I'm not even sure that the people realize sort of the sea change, the 180c change that happened. So I think that is what's really, really exciting about these technologies is you have people who are able to build them. They've gone to the school of Elon Musk, but now there's investors. Now there are people who are saying this is actually really important for the national interest, for America's security, and the deterrence is really the important part about it.

• 15:39Speaker 02

  Yeah, I mean, it sounds like the old rules still apply, Catherine. Deterrence, mutually assured deterrence, right? I mean, escalation, is that an issue? Or are the rules still the same?

• 15:49Katherine Boyle?

  Well, I'd say that things have changed in that, you know, if we're focused on a space war, that's very different. But I do think that, you know, there was a long period of history in Silicon Valley. Palmer talks a lot about this, where he says, you know, people thought it was the end of history. That we are not going to ever see another, you know, live war. We're not going to see a land war in Europe. That would never happen. And so you had people who said, okay, we should only be focused on software. We should only be focused on consumer technology, and it's actually wrong. Not only should we not be focused from an investment perspective, but it's wrong to be focused on supporting the national interest or supporting defense. And I think if what happened in Ukraine teaches us anything, it's that we have to defend our allies. We have to support not only the US interests, but the things that, you know, that are happening

• 16:32Katherine Boyle?

  around the world and that the US government says we have to. And we have to have a defense industrial base that is already built. I think one of the things that, you know, the current Secretary of War talks a lot about and previous ones have as well, is that if you stop building for it, it becomes depleted. So if you have 15 years where everyone says, oh, we're not going to build this, or the best engineers are not going to go into these companies, then it ultimately leads to a decay. It ultimately leads to you haven't done research and development, you're not fighting the next theater, you're not thinking about where things are headed. And so I think that has been the sea change, is that now Silicon Valley is all in on this mission and sees how important it is.

• 17:11Speaker 02

  And not to sound like a peacenik, but you know, I'm afraid you're right. I mean, every time you hear about a war, it's like, and they were woefully unprepared because of a long period, you know, and then they have to ramp up again. So I guess that's the way human nature is.

• 17:24Katherine Boyle?

  And the defense industrial base, I mean, this is something that, you know, in some ways, it is the reason why America, you know, is so strong and is so mighty, right? Like, we won the, Ben always likes to say this, we won the defense industrial, or we won the industrial revolution, right? Like, the technology is the backbone of what makes America strong, of what is the envy of the world. And if we don't apply that to our national security and our national interest, we lose a lot of that competitive nature. And so, you know, having a kind of defense-focused and sort of what I would say, really a national interest-focused practice in Silicon Valley, where a lot of the bleeding-edge, you know, technology is being produced and where it's thriving, that is really important. And the other thing that I think is really important to call out about Silicon Valley

• 18:08Katherine Boyle?

  is, you know, we're very memetic people. If one firm is doing something that another firm often follows on, if there's one, you know, founder who proves that you can build, you know, the next space company, other founders will follow suit. And so that leads to this just explosion of talent, explosion of capital, explosion of people focused on sort of something that was untouchable 10 years ago. And so it's our view that the ultimate success story will be when every firm has an American dynamism practice and when every institution looks at it as something that is, you know, it's not just a one-off thesis, but it's really something that can be a lasting, enduring category of innovation, which we think it is.

• 18:43Speaker 02

  When I read about drones, I'm always reading about them being made in Turkey, in Iran, in China. Can America make drones? Does America make drones? And these hypersonic weapons as well, in the United States, not farmed out to somewhere else?

• 18:57Katherine Boyle?

  Absolutely. I mean, part of what's, why it's so necessary is because the US government doesn't want to buy drone technology from other countries, they can't, I mean, in many cases. So you can build it here. I'd say that, you know, the actual problem with a lot of the drones that are being manufactured in the US, it's that some of the dumb parts, most of them come from China, most of them come from other countries, and that's something that we have to get better at. The component parts that go into these larger systems, even if they're small-scale drones, we have to figure out how to manufacture those and incentivize companies to do that. But certainly, there are, you know, there's companies like Skydio, which is a portfolio company of ours that's been operating for 10, 11 years now, that works with the Department of War and is built in the US.

• 19:39Katherine Boyle?

  But we do have to think more about what we call shifting left, these component parts. We can't be, you know, taking Chinese parts and saying that that's going to be the solution to how we build for, especially the Department of War, but also things like public safety, where drones are also being used every day.

• 19:54Speaker 02

  But shifting?

• 19:55Katherine Boyle?

  We say shifting left in terms of it's not, you know, not these primes, but it's the component parts that go into the supply chain. So it's always confusing because people are like, is that a partisan thing?

• 20:05Speaker 02

  I was like, excuse me?

• 20:06Katherine Boyle?

  No, it's not a partisan comment.

• 20:08Speaker 02

  Not that shifting left.

• 20:09Katherine Boyle?

  Yeah, the types of component parts that go into a product that you're...

• 20:12Speaker 02

  Well, shouldn't President Trump put tariffs on those components?

• 20:16Katherine Boyle?

  Well, I think, I mean, in some cases, yeah, we've seen different pieces of legislation and policy. I mean, we've certainly seen new executive orders around public safety in particular, not working with Chinese drone companies, for example. For a long time, if you were, you know, seeing any sort of police force, local police force working with drones, oftentimes they were working with DJI, they were working with Chinese drones. And that is definitely a national security threat. So now you're seeing sort of a kind of a wake-up call and a policy shift that we don't actually want that data returning to China. We don't necessarily want those drones operating in communities across the country. So you are seeing sort of this shift through various types of policy, whether it's executive orders, to make sure that these components and make sure that this technology is actually American-made.

• 21:01Katherine Boyle?

  And we certainly, you know, we've been investing in it. And I think there's going to become a huge opportunity for people to invest in these companies that are working across various sectors that are important for national security and the national interest.

• 21:12Speaker 02

  And never mind just delivering for Walmart.

• 21:15Katherine Boyle?

  Yes.

• 21:15Speaker 02

  I mean, that's becoming a huge business right now.

• 21:18Katherine Boyle?

  Yes, I would say that's the national interest, right? Very, very, very quick delivery.

• 21:22Speaker 02

  I went to one of those facilities. It's really amazing. And you really, you know, at first you like laugh at it and then you see it actually working. It's really pretty remarkable. It's not for everywhere, you know. It's not going to happen in Manhattan necessarily.

• 21:33Katherine Boyle?

  Yeah.

• 21:34Speaker 02

  Anytime soon, but most of America is not Manhattan.

• 21:37Katherine Boyle?

  Totally. And it's interesting too, because, you know, for, for us, you know, we've been investing in this category for a long time. But the early drone companies, you know, they were, they were not focused on defense as a mission. Again, it's like no one was thinking about that in 2015 in Silicon Valley. When we were talking about drones in 2015, we were talking about delivery. We were talking about sort of the consumer applications of this. And it goes back to, I think, how, how technology is, is built in this category. A lot of these companies are what's known as dual use. You know, they, they want to provide for the consumer, they want to provide for the enterprise, but they're also working with the Department of War. And so drones are actually a great example of that. A lot of the companies that are now working directly with the Department of War started off as sort of these toys, or they started off as, as something that was going to be, you know, focused on a consumer application.

• 22:20Katherine Boyle?

  That's now, you know, they've pivoted to, to working with public safety and, and working with, with Department of War because that's such a willing customer. So I think we're seeing that too, that sort of movement of, of even companies that were built 10 years ago saying that this is a real opportunity.

• 22:33Speaker 02

  Do your endeavors speak to both sides of the political aisle? Or is this just a GOP thing?

• 22:38Katherine Boyle?

  Oh, this is, this is a bipartisan, bipartisan initiative. I mean, we've been investing in this category. I personally have been investing for over a decade. You know, Republican administrations have been supportive. Democratic administrations have been supportive. At our summit, we've had, you know, many, many years now. The Deputy Secretary Kath Hicks spoke a few years ago. You know, it's, it's exciting to see, if you go to Washington, you know, there's not many things that people agree on. The one thing that people usually agree on in Washington is the NDAA, the National Defense Authorization Act, and supporting our troops, making sure that the best technology ends up in the hands of the warfighter. And so I don't think there's ever been pushback on investing in the defense industrial base.

• 23:20Katherine Boyle?

  It's something that whether you're talking to House Dems or House Republicans or Senate Dems or Senate Republicans, they usually get to alignment and agreement on. And again, like the people who serve on those committees, most of them are veterans, or a good many of them are veterans, or they've worked in the intelligence community. So they know the realities of what you're dealing with if you have a faulty device, or if you're up against an adversary that has better technology than you. And because they've experienced that, they sort of put away their partisan affiliation. You know, I think the old saying, there's no atheists and foxholes. There's really no Democrats or Republicans in foxholes either. You know, it's like people want to work together and they want to solve the problem at hand. And so I think you really see that in Washington. And when we go, we work with everyone. And no matter who is in power, we're always supporting this issue in the same way.

• 24:05Katherine Boyle?

  We need to make sure that our men and women in uniform have the best technology in their hands at all times.

• 24:09Speaker 02

  And what could government do better?

• 24:10Katherine Boyle?

  What could government do better? Oh, goodness. Well, I think for...

• 24:14Speaker 02

  I'm going to extend this session a little bit.

• 24:16Katherine Boyle?

  Yeah, so I think, you know, it has been a 10-year, I mean, it's been a 10-year journey of saying the same things over and over and over again about needing to bring Silicon Valley companies into procurement. So we've worked very closely with members on both sides of the aisle on how important it is to bring in new technology. There have been memes, you know, for many years that actually the companies that are 100 years old are going to produce the best technologies, or it's cute to work with a company like Andro, but they're still a small company compared to the public companies that have been around forever. I think those people have changed their tune in recent years, seeing how quickly the capabilities can be built. I mean, Elon has talked a lot about this in terms of his experience with SpaceX, where

• 24:58Katherine Boyle?

  the government didn't want to work with SpaceX, even though it is arguably the best engineering company on the planet, in terms of talent density, in terms of how many products they've been able to build. And so in the case of both SpaceX and Palantir, I mean, they both had to sue the US government to be able to compete on contracts and be able to win those contracts and supply the Department of War. And I think that that sort of mindset shift, that the riskiest thing you can do is bet on the companies of the past and believe that they're going to be all you need to solve your biggest problems. That has changed. People realize that they need to bring in, and particularly, I'd say this administration, you know, Secretary Hegseth has been very vocal about bringing in new technologies, making sure that they're part of the supply chain, making sure that

• 25:38Katherine Boyle?

  they have, I would say, a level playing field to be able to compete for contracts. And a lot of the changes that are happening now are around just allowing for more fair competition between the existing, sort of, you know, legacy prime customers or companies that have been around for a long time, and the new entrants that really just want a level playing field.

• 25:57Speaker 02

  I wanted to follow up quickly on something you said about Starlink, and that is, is there a competitor to Starlink? I mean, they said that's the most important thing, like, it's a generic property, right? Are there other Starlinks? Are there opportunities that you see there?

• 26:11Katherine Boyle?

  Yeah, so I mean, I think that there's definitely competitors, there's definitely companies that, you know, can support that infrastructure. But I think the thing that Starlink has figured out is how to do it cheaply, how to do it efficiently, and how to support in, you know, in what would be contested environments. And so, you know, I think the thing that we always say about the Department of War and how they make decisions about who they work with, is they have to work with the best companies. They have to work with the ones that work time and time and time again. And so, you know, are there companies that build the same thing that can be redundancy? Of course, there's many companies that are working on various types of new technology. In the case of SpaceX, you know, I think the big news yesterday was about space data centers. You know, we're

• 26:53Katherine Boyle?

  early-stage investors, so we see dozens of companies that are wanting to build in different, you know, different architectures, but wanting to build the same sort of technologies. But ultimately, the Department of War is going to work with the company that can continue to deliver in contested domains and in harsh, harsh environments. And so I think in that respect, talking to operators who were saying how critical Starlink is, you know, they were, that was their reality on the ground, that this is the most reliable technology, and that this is the technology that they use to make sure that they survive another day.

• 27:24Speaker 02

  Fair enough. Okay, we're at WSJ Invest. There's a lot of talk about IPOs, deal making. What's going on in this space? Are there going to be IPOs coming out of your world?

• 27:34Katherine Boyle?

  Well, you know, I think they're, you know, we invest in companies because we believe that they can be standalone public companies. You know, there's a number of different founders in our portfolio that have said publicly that they are aspiring to that. So I think we are going to start seeing more and more founders taking their companies public. But I think the interesting thing that I think will also happen, that isn't probably as obvious is, I think a lot of these prime legacy public companies who haven't been thinking about M&A, who really haven't been forced to think about, you know, research and development and how they're investing in research and development and new capabilities. I think they're also going to start looking at some of these companies and saying, well, maybe we should partner and maybe we should acquire them. And so I think, you know, it was for 10 years or so, there was sort of this meme in Silicon Valley.

• 28:16Katherine Boyle?

  None of these large companies are going to be acquisitive. Your companies will have to go public and, you know, this is not a market that is excited about these types of technologies. I think that has changed. I think the world has changed. I think people realize that we're in a new reality. And if you look back to sort of the 1990s, what's known as the Last Supper, when all of these companies were told that they needed to merge. There were something like 17,000 different defense contractors in America. They all merged. They were told by the Department of War they had to merge because the war was over, the Cold War was over, we weren't going to need them anymore. I think you're going to see a lot of more acquisitions and a lot more companies realizing that there's a new sort of view of what's going to happen in the future. And these companies that are supporting the national interest that are venture-backed and building faster than ever thought possible,

• 29:01Katherine Boyle?

  those are companies that are going to have to be part of their suite of products as well. And so I think you could see that in the next few years as well, too.

• 29:06Speaker 02

  Sounds like some exits for A16Z coming up.

• 29:10Katherine Boyle?

  Well, and Silicon Valley, I think Silicon Valley is going to become even more excited about this category. And this is not, again, this is not a one-time thesis. This is something that I think is going to define the next 25 years of innovation in Silicon Valley.

• 29:27Erik Torenberg?

  Thanks for listening to this episode of the A16Z Podcast. If you liked this episode, be sure to like, comment, subscribe, leave us a rating or review, and share it with your friends and family. For more episodes, go to YouTube, Apple Podcasts, and Spotify. Follow us on X at A16Z and subscribe to our Substack at A16Z.substack.com. Thanks again for listening, and I'll see you in the next episode.

• 29:52Erik Torenberg?

  This information is for educational purposes only and is not a recommendation to buy, hold, or sell any investment or financial product. This podcast has been produced by a third party and may include paid promotional advertisements, other company references, and individuals unaffiliated with A16Z. Such advertisements, companies, and individuals are not endorsed by AH Capital Management, LLC, A16Z, or any of its affiliates. Information is from sources deemed reliable on the date of publication, but A16Z does not guarantee its accuracy.