Categories: Tech

Startups should absolutely work with governments to support defense projects

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In these times of heightened tensions and global volatility, I believe start-ups can play a critical role in our defense, aerospace and national security ecosystem by bringing cutting-edge innovations to public institutions, some of which are alarmingly lagging behind.

Startups and active investors in the sector are uniquely positioned to support the West’s defense efforts and mission to keep our societies safe. Let’s not mince words: at the moment we are already locked up 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 can predict that will change anytime soon.

But despite all this, much of the technology and venture capital industry has shown little inclination to engage with the defense establishment. Prior to the Russian invasion of Ukraine, over dinner with friends and colleagues, you risked anguished disapproval (and much worse) by stating that you think startups should work with the likes of the Pentagon, NATO and Western governments in general. These days, for the most part, you get a very different answer: murmurs of agreement.

The very latest, most powerful technologies provide an edge to those who create and own them – as we’ve seen with some of the Western firepower deployed in Ukraine, in addition to Ukrainian battlefield innovation. The cruel truth is that by resting on our laurels, the West has allowed those who wish to harm us to catch up. some casesexceeding our capabilities – and the tech industry is partly to blame.

In 2018, for example, thousands Googlers signed a letter to their boss, Sundar Pichai, declaring that “Google should not engage in war”. In particular, they protested their employer’s involvement in a US Department of Defense initiative, Project Maven, that used Google AI tools to analyze imagery from military drones. “Building this technology to aid the US government in military surveillance – and potentially lethal consequences – is not acceptable,” they wrote.

This uncompromising and combative attitude ultimately led to the decision of Google’s management not to renew his lucrative Maven contract, and soon after it also withdrew from the battle for the Pentagon’s cloud computing contract known as the Joint Enterprise Defense Infrastructure cloud (JEDI) — reportedly worth $10 billion over ten years.

Google employees were far from the only ones to confront their bosses over alleged collaboration with the Trump administration, which has been widely reviled in progressive tech circles. Around the same time, Microsoft employees called on CEO Satya Nadella stop working with Immigration and Customs Enforcement (ICE), Amazon employees protested their company’s development of surveillance technology, while Salesforce employees signed a petition calls on its leaders to review the company’s contract with U.S. Customs and Border Protection (CBP).”

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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 US or in the West since WWII, and increased tensions with China have led to a sharp rethinking of much of the technology and venture capital industry about its responsibilities to government.

In stark contrast to most other industries, investment in aerospace and defense start-ups is booming today. Between January and October 2022, according to pitch bookVCs invested $7 billion in 114 aerospace and defense technology deals, putting the industry on track to surpass the all-time high of $7.6 billion in 2021. In 2018, VCs invested just $1.4 billion in those sectors. (Part of this, notes PitchBook, may be due to the fact that defense and aerospace are more likely to be recession-proof than, say, consumer or corporate products.)

I am extremely proud that Techstars is one of the most active investors in this category. With nearly 100 total investments in aerospace, defense and space technology, we are one of only three VCs to have participated in more than 20 aerospace startup deals since 2000, while 25% of companies selected for 2022 NASA Small Business Innovation Research contracts were Techstars backed companies. One of our portfolio companies, Catapult Space Travel recently closed a $40.8 million Series A-2 funding round. Customers include the US Air Force, US Space Force and NASA.

Still, there is much to make up for. A blog post of defense technology company Anduril which was quoted in The Information put it like this:

“Despite spending more money than ever on defense, our military technology remains the same. There’s more AI in a Tesla than any US military vehicle; better computer visibility in your Snapchat app than in any system owned by the Department of Defense; and until 2019, the United States nuclear arsenal operated on floppy disks.”

The recent relative calm has wrongly convinced us that we live in a stable, post-conflict world where threats to our way of life and maneuvers by bad actors can somehow be ignored or wished away. In this scenario, much of the Valley could convince itself that it could refuse to build products designed to harm and kill (even if that’s not their overt goal). Such views now seem naïve and idealistic at best; attitude at worst.

In 2018, the hashtag #TechWontBuildIt was used to protest Big Tech’s government contracts. Not only do we have to build, but there is also little time to lose.

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