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Jun 06, 2023 385

Startups should absolutely work with governments to support defense projects

#Global

In these times of heightened tensions and global volatility, I believe startups can play a critical role in our defense, space and national security ecosystem by bringing the very latest innovation to public institutions, some of whom lag startlingly far behind.

Startups and active investors in the sector are uniquely positioned to support the defense efforts of the West and the mission to keep our societies safe. Let’s not mince our words: Right now, we are already locked in hybrid warfare with Russia, a nuclear-armed superpower, while tensions with another, China, simmer just below the surface. Despotic regimes threaten our values and way of life, and few would predict that is set to change anytime soon. Yet despite all this, much of the technology and venture capital industry has shown little inclination to engage with the defense establishment. Prior to Russia’s invasion of Ukraine, over dinner with friends and co-workers, you risked triggering anguished disapproval (and far worse), by stating that you believe startups should work with the likes of the Pentagon, NATO and Western governments in general. Today you largely garner a very different response: murmurs of assent.

The very latest, most powerful technologies offer an edge to those who create and possess them — as we have seen in some of the Western firepower deployed in Ukraine, alongside Ukrainian battlefield innovation. The brutal truth is that in resting on our laurels, the West has allowed those who wish us harm to catch up, and in some instances, surpass our capabilities — and the tech industry is partially to blame. For example, in 2018, thousands of Googlers signed a letter to their boss, Sundar Pichai, declaring that “Google should not be in the business of war.” Specifically, they were protesting their employer’s involvement in a U.S. Department of Defense initiative, Project Maven, which was using Google AI tools to analyze military drone footage. “Building this technology to assist the US Government in military surveillance – and potentially lethal outcomes – is not acceptable,” they wrote.

This uncompromising and combative stance ultimately led to the decision by Google’s management not to renew its lucrative Maven contract, and soon afterwards it also withdrew from contention for the Pentagon’s cloud computing contract known as the Joint Enterprise Defense Infrastructure cloud (JEDI) — reportedly worth $10 billion over 10 years. Google employees were far from alone in confronting their bosses over perceived collaboration with the Trump administration, which was widely reviled in progressive-leaning tech circles. Around the same time, Microsoft employees called on CEO Satya Nadella to stop working with Immigration and Customs Enforcement (ICE), Amazon workers protested their company’s development of surveillance tech, while Salesforce employees signed a petition calling for its leaders to “re-examine” the company’s contract with U.S. Customs and Border Protection (CBP).

What a difference a few years make. Fast forward to 2022 and a combination of COVID-19 and its legacy, stressed and unstable global supply chains, Russia’s war with Ukraine, the first threat of food insecurity in the U.S. or in the West since WW2, and increased tensions with China have prompted a sharp rethink from much of the tech and venture capital industry on its responsibilities toward government.

Today, in marked contrast to most other verticals, investment in aerospace and defense startups is surging. Between January and October 2022, according to PitchBook, VCs invested $7 billion in 114 aerospace and defense tech deals, which placed the sector on a trajectory to surpass 2021’s record $7.6 billion total. In 2018, VCs invested just $1.4 billion in those industries. (A part of this, notes PitchBook, may be due to the fact defense and aerospace are rather more recession-proof than, say, consumer or enterprise products.)

I’m immensely proud that Techstars is one of the most active investors in this category. With almost about 100 investments overall in aerospace, defense and space tech, we are one of only three VCs to have participated in more than 20 space startup deals since 2000, while 25% of the firms selected for 2022 NASA Small Business Innovation Research contracts were Techstars-backed companies. One of our portfolio companies, Slingshot Aerospace, recently closed a $40.8 million Series A-2 funding round. Its clients include the U.S. Air Force, the U.S. Space Force and NASA.

Yet there is much ground to make up. A blog post from defense tech company Anduril that was cited in The Information put it this way: Despite spending more money than ever on defense, our military technology stays the same. There is more AI in a Tesla than in any U.S. military vehicle; better computer vision in your Snapchat app than in any system the Department of Defense owns; and, until 2019, the United States’ nuclear arsenal operated off floppy disks.

Recent relative calm convinced us, erroneously, that we were living in a stable, post-conflict world where threats to our way of life and maneuvers by bad actors could somehow be ignored or wished away. In this scenario, much of the Valley could persuade itself that it could refuse to build products that are designed to harm and kill (even when that is not their overt aim). Such stances now seem naïve and idealistic at best; posturing at worst.

Back in 2018, the hashtag #TechWontBuildIt was used to protest Big Tech’s government contracts. Not only must we build, but there is little time to waste.