00:00This wave, this movement into a realization of real industrialization of defense tech needed in the U.S., are you
00:06seeing enough, well, buyer activity, the government realizing this and allocating money for you to put your money to work
00:13in an early stage?
00:14Yeah, well, thank you so much for having me, Caroline. It is so interesting to see what has happened in
00:19a really short period of time.
00:21We launched Construct Capital early in 2020, pre-COVID 2020, with this belief that we needed to see productivity, technology
00:31enter what we describe as foundational industries, areas like manufacturing, supply chain, logistics, certainly defense tech.
00:38Because when you look at the numbers, productivity was declining in these spaces.
00:42It was literally taking longer to do the work. 100 hours of work was taking longer than it had 10,
00:4915 years ago.
00:50And, of course, in other sectors, we've seen tremendous growth from a productivity standpoint.
00:54So we really felt like now was the time to focus on these spaces.
01:00But as you point out, you know, there is a tremendous amount of interest, a tremendous amount of investor interest
01:06coming into these spaces.
01:07There's been a 20x increase in Series B dollars going into these spaces since 2020 when we launched the fund
01:13to today.
01:14And certainly Hill in the Valley Forum was a knockout event, sold out.
01:21You couldn't get anywhere near the space if you really didn't, you know, you hadn't really been building something legitimate
01:28in this space.
01:29And so we're very excited. We're very encouraged by the amount of interest.
01:33But the contracts have to follow.
01:36And, you know, but these spaces are big.
01:38They're important.
01:39And we're convinced, you know, that there are a set of companies that are really going to break out here.
01:43You and Dana Grayson have, as you mentioned, been doing this since 2020, let's say, before it got cool.
01:50And now everyone piling in, how have you distinguished yourselves with LPs?
01:53How have you managed with, we're looking at your portfolio companies, the growth in Hadrian, for example.
01:58Is that what's brought people forward to want to back the next fund?
02:02Well, I think, first of all, we didn't turn our attention here.
02:05You know, we weren't a crypto investor, Web3 investor in 2020, 2021 when that was cool.
02:10We have been dedicated our entire careers, really, to investing and operating in and around these spaces.
02:16I joined Uber in 2011 when they had just had a Series A.
02:19Everyone told me I was crazy to go join a taxi company.
02:22Their words, not mine.
02:23But it was slow moving, heavily regulated, high cap X.
02:27And, of course, Uber is none of those things.
02:29Dana, similarly, investing at NEA, you know, in and around the earliest SaaS in the cloud, the earliest 3D printing
02:36companies.
02:37These companies that were not seen as venture scale outcomes when, you know, when we made those moves.
02:43And I think founders, LPs, certainly recognize that.
02:48There is a distinction between an effort to re-industrialize and what's happening in defense technology.
02:53And there is a distinction on the policy side with artificial intelligence.
02:57But what broadly connects all of those is this administration focusing on cutting red tape, expediting permitting,
03:05and basically giving political will to bring more things back to America.
03:10At the early stage, how does that present an opportunity?
03:15Yeah, that's a great point.
03:16And I really see, you know, many of these companies are dual-use companies.
03:20And I think that's important to distinguish.
03:23There are a lot of amazing companies in the defense tech space.
03:26But companies like Hadrian didn't start just selling into governments.
03:30And I think, particularly at the early stages, the sales cycles are still long.
03:35You need to have a lot of different compliance requirements.
03:38Getting into one of these government contracts can be critical, can be company-moving.
03:44But fundamentally, you know, what excites us about these companies is half the GDP sits within foundational industries.
03:51These are massive spaces.
03:53There has been almost no technology incumbents.
03:56And when you think about AI and you think about sort of what we can do, we can really leapfrog
04:03forward.
04:04We are never going to be as good as China or other countries at sticking a large number of people
04:10doing repetitive tasks over and over.
04:12And software can change that.
04:14Software is what we are excellent at.
04:16Innovation is what we are excellent at.
04:17And I think there's broad recognition there.
04:19Do these companies have a future that's more focused on selling to government and the public sector?
04:27Or is there an addressable market where all of these different companies are doing business with one another?
04:34I think there's a real distinction there, too.
04:38Yeah, I think – look, I think you need volume.
04:41You need the supply chains.
04:43You need – and those things happen in a very symbiotic way.
04:47You know, what we see is there are a lot of companies that are using maybe their commercial non-government
04:53contracts to sort of build up initial capabilities, to build up supply chains, to start developing the relationships they need.
05:02And then you get one of these massive needle-moving contracts like Hadrian just announced last week with the Navy.
05:08And that can just completely accelerate a company's trajectory.
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