The distance between Silicon Valley and the Pentagon is shrinking. As investors continue to pour money into defense tech startups, they’re turning to a new group of employees: veterans and former Defense Department officials.
Andreessen Horowitz has named Matt Shortall, a former fighter pilot, as its chief of staff; Lux Capital has named Tony Thomas, a former head of U.S. Special Operations Command, as an advisor; and Shield Capital managing partner Raj Shah has served in the Air Force.
Hiring ex-military personnel can be a huge advantage for companies, giving them “an understanding of the problems that actually exist on the battlefield,” rather than “sitting in Silicon Valley and just thinking theoretically,” Ali Javaheri, an emerging technology analyst at PitchBook, told TechCrunch.
The boon for veterans comes alongside a continued investment frenzy in defense technology. Silicon Valley has pumped nearly $35 billion into defense tech startups in 2023, and more than $9 billion so far this year., According to a report released last week by PitchBook,. Some big fundraising campaigns have cemented this trend: Shield AI, which makes an AI-powered drone pilot system, raised $500 million last year, and Anduril, a Palmer Luckey defense tech startup, raised $500 million last year. It was secured as stated. Last month, the company secured $1.5 billion in new funding. Despite the slowdown in funding in the sector this year, Jawahery said it continues to show “resilience” in the context of a generally tough fundraising environment.
But the sector is not all rosy. Jawahery described the Defense Department’s acquisition process as “cumbersome,” with startups sometimes taking years to secure a contract. That means startups have to struggle financially without having enough money to show investors for their efforts.
Startups that can provide startups with connections to former military personnel have a huge advantage in competitive deals. “You can get their network where they can talk to the program officer who ultimately is in charge of the budget line for a particular military office,” Jawahery says. “The military is a very network-driven organization.”
For veterans, it’s a chance to enter a lucrative second career with cutting-edge technology. “A few years ago, you would have been an executive vice president at Lockheed Martin — which is not very attractive,” said Chris O’Donnell, a former Navy officer and principal at Franklin Venture Partners. New York times.
But the time to get a comfortable job after military service may be running out. The sector has no exit opportunities, barring Palantir’s 2020 IPO or Anduril’s recent buying spree, which took over engineering firm Blue Force and rocket engine maker Adranos.
Even if the tech IPO window doesn’t close for now, Javari doesn’t see many IPOs in the future. He advises venture capital firms to look at their investments as potential eventual acquisition targets, perhaps from the same unattractive companies these ex-military personnel are currently avoiding.
“There is a good chance that the existing defense contractors will acquire some of the smaller companies,” he added.
But for now, the hype around defense technology is still strong—and veterans and Defense Department officials can end their careers with a well-funded landing pad.
For those familiar with Silicon Valley’s history, this is a homecoming for the tech industry. The Valley’s tech industry began at the intersection of university research and Defense Department spending on technology, and the area has long been home to a variety of military operations. In fact, San Francisco’s Presidio district now hosts a number of venture capital offices, such as the Founders Fund, which backs defense technology.
“Silicon Valley has returned to its roots and is working closely with the Pentagon in this increasingly tense and competitive geopolitical environment,” Jawahery said.