Investing in Innovative Technologies with Bilal Zuberi

ACME General: My guest today is Bilal Zuberi, general partner at Lux Capital, where he leads investments in emerging science and technology ventures. And I just learned is a graduate of Wooster College in Ohio, which is right down the road from me. Bilal, welcome to Accelerate Defense.

Bilal Zuberi: It’s great to be here. And boy, you pulled the Ohio connection. You took me back to where I landed in the US when I first came here in 1995.

ACME General: So that’s your Ohio roots? This was your first stop?

BZ: Ohio was my first home in the United States. Now 27, 28 years ago. Ohio is one of those places that grows on you. I’ve obviously stayed close to the college and lots of friends, lots of alumni. It was a great experience.

ACME General: Yes, Ohio indeed grows on you. I married an Ohio girl. Once we came back here, after my time in the Navy and going back to school, we never left. We’re pretty firmly rooted. My brother-in-law actually graduated from Wooster. My sister-in-law was in your class, although it’s a big class so I won’t out her, not sure if your paths crossed, but you are a senior partner in a bicoastal VC firm now. Pretty circuitous route from small town, Wooster, Ohio, through MIT, where you got your PhD. When did you realize that your future was going to be in building tech companies?

BZ: I was in Ohio doing my undergrad. And as they say, you need to have good mentors. And one of the mentors was a professor of mine who said, “You need to do grad school, because you’re good at science and you should continue the work.” I did not know what that meant really. Commitment of 4, 5, 6 years to do PhD. So I moved over to MIT to start my PhD with the Nobel Laureate. And three years into it I realized through him that what you really want to work on are big problems that affect people’s lives. And his research was that. He got the Nobel prize in 1995, actually the year I landed in the US, for ozone depletion theory and how CFCs were destroying the ozone layer and causing cancer and so on.

And as I started thinking about how my work would impact a lot of people, it also dawned on me that I wanted to move at a speed that was faster than what science took usually. And I wanted to be involved in something that had a greater thrust for acceleration. Very soon, if you’re sitting at MIT, leads you to, okay, startups do that. They move fast, they break things, they defy gravity as much as they can. And if they don’t defy gravity, they fail and if they succeed, then they have huge impact. So that led me into the startup world.

I actually started a company right after MIT to build environmental pollution control systems. So effectively catalytic converters, diesel particular filters, emission control devices and catalytic devices. And commercialized that technology with Corning. And then in 2008, a bunch of VCs came calling saying, “Hey, you seem to have obviously deep technical background, but you’ve now done business. And you’ve hired people and you’ve fired people. You’ve raised capital, you’ve sold the company. All of that can be very beneficial to the next generation founders. How about you hang out with us and help these guys.”

That took me into venture capital in 2008 when I joined a major VC firm called General Catalyst Partners in Boston to help build companies across a lot of different domains and sectors. Did that for five years. In 2013, I realized that a lot of the activity that I was interested in was happening on the West Coast. And we can talk about that if it was relevant. But basically a lot of big ideas that seemed a bit out of the ordinary and frankly too ambitious for some people, were being done on the West Coast.

So I decided to move out here, and exclusively focused on deep technology companies where things are at the cutting edges of technology. Technology is pervasive in our lives and is everywhere. Hence, there’s a lot of companies that we can talk about that use technology to make our lives better. But my focus was on companies where technology is a key driver, where you’re doing something that simply had not even been invented five, 10 years ago. So it’s really at the cutting edges. And most importantly, it enables you to solve problems of the magnitude that affect billion lives. And that ended up being my focus now for the last 10 years or so.

ACME General: You’ve said that you… And this is a direct quote, “You have to be at least a little bit crazy to imagine the future five to 10 years out.” I just heard you reference ideas that were too ambitious for where you were on the East Coast. What were some of the ideas that first drew you out West and got you excited about what was happening there?

BZ: Starting anything from scratch is hard. It’s difficult. Even if you were starting an Indian restaurant in Cleveland, Ohio, it’s hard. There’s nothing easy about building a business. My view is that if you’re going to do something that’s hard, you’re going to do something that’s going to take several years of your life, and a lot of opportunity costs. A lot of us, especially if you’re educated and so on, you can have other jobs, especially in today’s economy. Then you might as well do something that has a big impact. And of course, there’s impact you can have via teaching and politics and other things. But for me, the calling was startups.

And so I started to focus on technology sectors that were addressing very large problem. So for example, one of the early problems I got interested in was observing earth. We live on this earth, but so little is known about it. All we know about it is, at that point at least, was a few satellite images that would be shared publicly, “Oh, this is what the China Great Wall looks like from the space” or “There’s some flooding or maybe some forestry in Africa or Amazon forest burning.” But the reality was that I would like to know what developments are happening around me. I’d like to know how food economy is changing around the world. I’d like to know how oceans are rising. Climate change is a big issue in my life.

And the idea was how can you use technology to better understand what’s happening? How can you have a better sense of capture and analytics around the reality of earth? And there were companies that I met on the West Coast that were building satellite systems that were affordable. They were not $600 million to put a satellite in space, but a satellite that was the size of a shoebox and cost a 100,000 dollars. And the idea was, “Let’s put that many of them in space instead of a few hundreds, maybe thousands of them in space and have an image of the earth every hour.”

So now you have real time analysis of what’s happening in the world. Now you can utilize that for defense purposes to understand how adversities are moving or positioning their weapons and whatnot, but you can use it to understand how agriculture is doing, how corn plantations are doing, and how farming is happening in Africa or drought systems or glacier melting and so on and so forth. And the same systems utilized for how Target is doing relative to Walmart by looking at the parking lot count of cars in those parking lots at certain times. That’s one example of an area where what seems like a simple technology is actually pretty complex to implement. You’re talking about satellites and space and electronics and communications and machine learning and AI and all of that included in one. But once you solve that, you actually open up so many different industries as potential applications that benefit from it.

ACME General: How common is it for the people sitting in your chair, the funders to have also experienced the trials of founding and running a startup themselves? You’ve got to bring a perspective that is incredibly valuable in your boardrooms.

BZ: Maybe it sounds self-serving but I would think having startup experience is really valuable for a number of reasons. First and foremost, our business is actually a people business. I invest in people. I don’t run companies. I don’t own majority shares in these companies. Great founders do. We are indebted to amazing entrepreneurs who decide that they’re going to invest their time, effort, money, and intelligence in building companies. So it’s really about managing people and people come with emotions and especially in startups, which is the rollercoaster ride. Having gone through that rollercoaster ride gives you empathy. Gives you empathy to understand what that founder is going through, but when they quit their jobs and they don’t know where their next paycheck is coming from, mortgage is going to be due, they’re hiring people who are themselves quitting jobs, and you feel this pressure on you that, “Oh my God, 3, 4, 5 people just quit their jobs. I better be able to provide for them.” Dealing with those rollercoaster rights requires empathy and you get it if you’ve dealt with it yourself.

But the second most important thing is, as these companies go through various stages of growth, if you haven’t seen that stage before, the advice you’re giving them sometimes could be completely hollow and perhaps devoid of reality. And so you have to understand what it means when you tell somebody to tighten your belt and be conservative with cash and try to operate very frugally. But there are times when you say “This is the right time, that we need to spend money to grow and capture market share.” When is the right time to be able to press the accelerator or not? When you’re interviewing people and these teams that start off as founders, and they’re bringing on heads of engineering, heads of sales, heads of marketing, CFO, if you’ve never hired these people, if you’ve never worked with these people that are world class people, you wouldn’t know how to help these guys hire some of the best talent.

And again, if you’ve done this, you’re more helpful to the founders and entrepreneurs. In our work, investing in a startup is not like buying stock. It’s not taking a bet, it’s actually becoming partners and helping build. And partners that help you build have to bring something to the table besides money, otherwise you’re a dumb investor.

ACME General: How do you manage growth when that maverick streak, when that little bit of craziness, as you describe it, is so essential to getting the rocket off the launching pad? Once you start to bring in those directors of engineering and those outside experts, how do you keep the culture of that company aggressive and insurgent, and still able to take on the establishment?

BZ: Startups stop being startups when they lose that hustle and that culture of walking through walls to make shit happen. It is extremely important to maintain and manage that culture. Obviously, people who join early are not only believers. And founders, especially, are not only believers in the space and the opportunity, but they almost have religion. They will do anything to make that company succeed. But then when you bring on professional management, they are executives that are joining this company when they had seven other options to join. If they don’t see the success that they anticipate they could leave and join somewhere else. There are two, three things that are really important in thinking about it.

Number one, you see a lot of great startups continue to have their founders stay associated in senior positions in the companies until much later in their lives. Founder DNA is extremely important. Founders believe what this company needs to look like. And frankly, when the company needs to pivot and pirouette, founders have the balls that it takes to say, “I’m going to do it.” Many other people would do what would be the easy path versus making the hard decisions for the long-term success of a company. Founders do that.

The second thing that’s really important is to have everybody aligned on the mission. So whoever is the CEO, their most critical task in the company besides assembling resources is aligning everybody on the mission of the company. What is this company built to do? Not only what it is doing right now, but what is it built to do and are we accomplishing that? And if that goal needs to change, it needs to be communicated throughout the company again and again. The CEO and the founders are the chief spokespersons for the company. They have to keep banging their drum inside and outside the company all the time. It never goes away. You can never enshrine it and assume that everybody else gets it and your marketing or HR department will share it with the company. It is the job of the founder and the job the CEO to be banging their drum inside or out.

And then the third thing is to measure your successes along the way and celebrate them. That helps people see what is celebrated within the company. If you celebrate hard work, people will work hard. If you celebrate diversity, people will bring diversity into your organization. If you celebrate transparency and openness, people will bring transparency. So you have to actively celebrate what you want your culture to be. If you start celebrating nonsense, “Oh, Friday beer parties, and that’s what we celebrate. And we don’t know why we do it.” Very soon it becomes any other company where people like, “I’ve got to go do this because my boss is going.” But they don’t really care about it. But if you celebrate a friendship and an openness relationship, people will want to be at those meetings, people will want to contribute.

So I think it takes a lot of active effort, which is by the way, why a lot of startups that fail, fail because during intense times of hard work and stuff, those founders overlook the importance of carrying the rest of the organization with them. They become too busy doing the minute things that they think they need to do and they forget about the fact that there’s another set of organization that they’ve hired that need to be brought along. Great organizations are usually built by leaders that know how to do that. They have many ways of doing that, they have different ways of doing that, different personalities that they bring to the table. But there’s a ways of doing that.

And I’ll stop here with one example. Take Tesla for example. This is a large company. Their market cap is right now multiple to the market cap of nearly every other American OEM combined. It’s bigger than GM, Ford, Chrysler combined. However, Elon Musk as a leader has created a culture inside Tesla that despite the market size craziness that they have experienced, they all still feel they’re the underdog. Every single employee that comes to work feels like “The world is against us. We’re doing something that people think it’s impossible, but it is really important for us to do that. For the environment, for this, over that.” And they all feel that they’re the underdogs compared to the large companies, despite the fact that they’re larger than all of the OEMs combined. They think GM, Ford are the kingpins and “We are the underdog,” when the reality is Tesla is order of magnitude bigger company in market cap than GM or Ford.

ACME General: What are examples of other companies in the Lux portfolio that are doing that well? I’m going to force you to talk about Saildrone if you don’t volunteer, but give me your top list.

BZ: Saildrone is actually a great example of that. SailDrone is a company that puts in its mission that “We are going to utilize technology to transform ocean economy.” Everybody in that company loves the oceans. Before I met Saildrone CEO, my experience of the oceans was maybe five times being on a boat out on the ocean and you go there and you realize people who love the ocean, what that’s like. They’re sailors. They have salt in their hair when you talk to them. They want to be on a boat when they’re talking to you. That pervasiveness to the organization means that it’s not… Even though they may be sitting on a desk coding at any given time, their brain, mind, all that, it’s around what the oceans are and what role oceans play in our world. They play a very important part in the environment, managing our fisheries and managing our climate. And they also do a lot of things for national security and so on.

That culture is very important, that leader… For example, Richard, who’s the CEO there. Richard is… He would be a prophet if he wasn’t a entrepreneur and a founder, because he truly believes in it. He’s been working on it for 15, 20 years. There’s nothing else he would rather do. This company could be most successful company in the world and he would still be doing it. And this company could be struggling and failing and he could get 10 other jobs, but he would still be doing the same thing. That’s what it takes. Everybody sees that, including the board. All of us see that. And it gives us that additional motivation to put that extra effort in.

And last but not the least is that he’s very careful in surrounding himself with people who are also very mission-driven. In venture capital and especially for a company like Saildrone that’s very mission-driven, it becomes important that you don’t hire mercenaries. You don’t hire people who are coin-operated, “Where if you give me enough money, or if you give me enough incentives, I’ll come there. But if that incentive ever looks weak, I’ll just move on to something else.” Mercenaries not only you have attrition problems and all, but the most important is that they pollute the culture. You only need one bad apple in a basket to start destroying everything else. They pollute the culture because everybody else around them starts thinking that “What else could I be doing?” And the reality is, there’s nothing else you could be doing that’s more important than the mission of this company.

And I think Saildrone has done an amazing job of bringing people who are really committed to it. Everything from the board level down. There’s former admirals who are on the board. There’re advisors, who are very senior military people who spend a lot of time on it. There’re board members who are… Been committed to it for years now and will stay committed to it. And then every employee, and I’ve met many of them. Every time I go there, I go around shaking hands on the floor. Every single person feels that they’re building something that’s larger than themselves. And they’re proud to be a part of that, whether it’s solving climate change problems or whether they’re solving fisheries problems or are telecommunication problems or national security.

I don’t know if you noticed, but big brouhaha happened in the news. And I woke up to seeing, “Hey, an Iranian vessel had captured a Saildrone and were trying to tow it away.” When that Saildrone vessel was doing work for the US Navy Fifth Fleet. And US Navy had to intervene. And a patrol coast boat had to show up and a helicopter had to show up. And then Iranian boat, which was a IRGC Revolutionary Guard boat, they had to release the Saildrone. Now, it’s an incident that happened, thankfully didn’t flare up to anything larger. It was a historic moment for Saildrone. Like, “Oh my God,” that this happened.

But everybody felt this deep sense of mission that what we are doing for protecting democracies and protecting the US Navy and working with the US Navy, with all the mission that the US Navy has is extremely important. And we almost felt this energy inside us, that we are on a mission and we have to accomplish this. There’s no backing down. Not one of us woke up when we invested in Saildrone thinking one day Iranian Revolutionary Guards will be capturing our vehicles. That was not in my memo when I made the investment. But now that we are in the thick of it, we feel committed because we know Saildrone is on the right path and doing the right things.

ACME General: I’m glad you brought up the incident in the Gulf because I wanted to read one of your tweets. In showing a picture of the interception, there’s a US Navy cruiser pulling up alongside the IRGCN ship that had hijacked this Saildrone. You wrote, “Let’s be clear, Saildrone won’t be intimidated.” It’s not often that you get to be that badass when running a tech company. That has to work its way through the whole organization. That mission orientation must be helped by the fact that lives are literally on the line and you’re helping make the world safer for democracy. Not to be too cliche.

BZ: Ken, I’m glad that you mentioned that because it’s… Has to be underscored, when I say a sense of mission. People don’t start companies to make money. The greatest companies that have been built were not built because people were trying to make a quick buck. They were people who were missionaries, who wanted the world to be a certain way. Whether we like, dislike, hate Mark Zuckerberg, he wanted the world to be connected. That was his mission. The guy is a multi-billionaire. The guy would retire and buy islands off some coast of some country. And we never have to hear from him, but he takes public abuse because he still continues to believe that his mission is not accomplished. Elon Musk is the same way, whether he wants to go to Mars or he wants to do… Whatever he wants to do, he is on a mission.

What motivates people like them or Bill Gates or Steve Jobs and others. It’s not that “I’ve made money and I need more money.” What do you do with that money? It becomes a bigger work. Look for what Bill Gates has been doing for 20 years. He’s trying to get rid of his money and he can get rid of it. The mission becomes very important. And it’s not very often in the startup world where you see that concept of mission awareness, which is often nebulous and diffused, crystallized this way. Why we’re doing this in the first place? Why are we investing in defense technologies? Why Silicon Valley has a role to play in protecting national defense?

People’s perception of Silicon Valley is eating pizza and writing code so you can build dating website is not true. I’m sure there are people who are doing that and lots of people doing that. But there are people sitting here who are building technologies, like they’re building… When Silicon Valley first started, building radar systems and missile guidance systems and whatnot. That Lockheed Martin was based here in the venture capital industry that grew around it. They’re building systems that are protecting lives around the world. [inaudible 00:23:56] have companies like Evolve Technologies that are literally protecting… And I can’t talk about it very much, but preventing mass shootings from happening because people are walking in with long guns, multiples of them inside buildings and they stop them. That’s a sense of mission. That would not have happened without the use of technology. That’s what technology does for us.

When we have cyber security systems that are protecting our railway systems and airports. And every day that we are attacked by ransom artists and nation states that are enemies of the US, that is really technology doing important work. And I think it’s really important to underscore that because we don’t want the next generation, especially because I’m getting to that age where the next generation is going to take over. We don’t want the next generation to think that technology’s just about goofing around on the internet. Technology has a critical role to play in every aspect of our lives and startups can go and build companies that do that. They are needing to solve climate change. They need to solve water issues. They need to solve poverty issues, sanitation issues, and provide security.

I just came back from Pakistan. I was visiting my family there. Massive floods. Third of the country could be underwater. There’s 230 million people who live there. It’s billions and billions and billions of dollars of damage in a country that could barely afford anything. They could barely afford fuel this summer to buy for the cars. When you start thinking, “What role does technology play?” Well, extremely important role. Let’s go figure out how we can do that. And let’s try to build companies that address that rather than only focusing on things that make a quick buck.

ACME General: How’s your family doing?

BZ: Family’s good. Family’s safe. Family is physically safe thankfully, but feeling the pressure, obviously like everybody else. That everything has become two to five times more expensive. We are doing a lot of charity work ourselves and friends who are in the field saving lives. This is a climate change catastrophe unfolding right before our eyes. There’s no other way to explain it. The monsoon season that’s lasted twice as long. The seasonality of it has become… It used to be three times a year, now it’s five times a year, six times a year. Glaciers that are melting, that are completely inundating the rivers and it’s happening… Look, this could be North Carolina or it could be Pakistan, is the same idea.

When levies break and water enters a city, it does not discriminate on the basis of your passport. And people’s lives are destroyed. And I think we have to figure out technologies to solve that. We have to figure out how do we understand it? At this point, not only do we need to become a carbon negative economy, but also we have to figure out how to deal with climate change. Because it’s happening. Unfortunately it’s a little too late. So we have to figure out how we going to deal with the effects of climate change. Whether it’s geoengineering or resiliency built into our supply chain and built into our housing systems and all. Technology resolve the problem. We can’t solve that problem by using legacy techniques.

ACME General: You are very outspoken in your advocacy and your activism. Does your humanitarian streak inform your investing? I mean that intentionally provocatively, because I imagine there are some real risks to that when you’re investing other people’s money.

BZ: Look, first and foremost, I truly believe I’m a human first before I’m a technologist or a venture capitalist or whatever. Humanity trumps everything else. Second, I am one of the beneficiaries of US generosity, that they accepted me into this country, made me a citizen and gave me all the freedoms that US enjoys. Because I was not born into it, but I was given these freedoms, I take them very seriously. I think this is an important role I have to play in society. I don’t have any grandioseness about what I can achieve, but the fact that I have freedom of liberty, freedom of speech, liberty and matters of justice are really important and enshrined in being American. And I think it applies to everyone around the world so I should speak out for it.

And then the third thing is, growing up I was a big fan. I remember growing up, I had posters of Einstein in my room. I thought I would become a scientist, maybe physicist, but maybe wasn’t good enough. One of the things Einstein said when he started working on general relativity back in the day was “Why are you working on this?” And he says, “Because I can afford to work on it.” A lot of younger scientists cannot because it’s such a crazy idea. Or it was at that point “What does this mean? Are you going against religion? That all of the world can be explained with one general formula or one general equation?” He could afford to work on it because he believed in it. And it led to obviously lots of interesting science down the road by other scientists.

I feel a little bit of the same way. That if I can’t speak out about issues that I care about, whether it’s human rights issues or protecting democracy in this country and around the world or investing in what I believe is the right technologies to be able to advance humanity, then how can I expect anybody else to do that? And if we all stay quiet because we just protect our own self-interest, then I think as a society we truly suffer. So to me, yes, there’s been negative ramifications of that every now and then, but you know what? I still believe in the goodness of humanity more than the evils that come with it.

ACME General: The last sentence of your bio on the Lux website is… Well, I find it moving. It says “He is an immigrant citizen in this country, and thankful every day for opportunities that he has been afforded here.”

BZ: I truly mean it. I truly believe it. Look, the freedoms I have, my own siblings who live in other parts of the world don’t have. What I can say about my own government here they cannot say even about their neighbors. And that is something that we truly have to cherish in this country and we truly have to protect it and defend it. To be honest, I have my own political views that tend to be very left-leaning, but that has never stopped me from investing in somebody who has political views that could be very right-leaning. Why? Because the day I do that, I’ve gone against my own ideas. And I think it’s little things like this that truly do matter. When I show up at a protest. There were protests when immigrants were being banned from Muslim countries and whatnot. Just as a citizen, I showed up at these protests and I have to tell you, I didn’t know what to expect. I was just there as a young man at a protest. I met a whole bunch of my young CEOs of portfolio companies who were there. They were all there.

And so many of them came up to me and to my surprise, were like, “We’re so happy you’re here because now we feel that we’re not doing something wrong. We’re not putting our companies at risk. We’re glad to see you here.” And yes, there was a little bit of they thought I was a more important person than I probably really am. But the reality is, man, it really matters. Role models matter. What do I tell my kids? I want my kids growing up knowing what truly matters. Yes, they’re going to be more privileged because of where they’re growing up and the life that they’re leading. But if that’s what they do when they hide away in their compounds and whatever, this is a tremendous loss for the country and for their own lives.

So for me, everything comes down to what I say is what you get. I wear my heart on my sleeve because I truly do believe that we’ve built an amazing country, which gives us these freedoms. And I think this protection’s… Risk is everywhere, you brought that up and I think about it all the time. But at the same time, this country also is… There is rule of law in this country after all. And I truly still believe in it.

ACME General: It wasn’t long ago that it seemed like Silicon Valley was just… There was a cultural anathema to working with DOD. There was damn, near a revolt at Google. I have asked some of our previous guests about this. There was something of a mood shift after the invasion of Ukraine. This realization that, “Oh my God, the world is a dangerous place after all. And there are good guys and bad guys.” Lux has a pretty long and robust track record of partnering with the DOD. How have you managed that tension if it exists at all in the companies you’re guiding down that path?

BZ: Look, this is an important topic. First and foremost, I was in this country when 9/11 happened. And I could see the sense of patriotism that was in people’s hearts. Many of them didn’t know what to do with it. Many of them enlisted in the army when they were young and others were working on technologies and companies like Palantir came out and others Evolve Technologies’ founder built, same idea preventing bomb from getting onto the planes. There was a real palpable sense of “What do we do? How do we protect ourselves against this?” And I think that has sustained. And obviously what has happened in the last few years has even heightened that realization that we may be at war with large nation states that we may not want to say we’re at war, but frankly we are. Whether it’s China or Russia or whatever, we may be having proxy wars and we may be having cyber wars or whatever, but we are in a conflict and our freedoms depend on us prevailing.

That’s not lost in anybody. What happened, however, was during the same timeframe when the internet came around in mid-nineties, people very young started building companies before they really experienced life. They were 13, 15 year old coders. They never went to work in the military. They never had a real job that… They had to flip burgers even. They frankly never lived in places like Ohio. They were 14-year old, 15-year old, 18-year old who would ship out to Silicon Valley, in some office complex here, coding away and becoming rich and not knowing what to do with it. So they were wealthy, but they had no real connection to life in Ohio and the troubles that people do deal with in states around the country.

So in some ways, they had wealth which started to get spent on stupidities. Real estate prices here went up, people started buying islands and other parts of the world to just go party and whatever, not realizing that… What I realized, which is I come from a country of 230 million people. Everybody else is relatively poor and I just a lucky guy who got this lucky golden ticket to come out here and become a citizen and build a life here. There’s nothing that makes me any special than anybody else that’s back home, that didn’t have that opportunity. So these people did not realize that. And I think that’s where it started to become more of a… It’s all kumbaya. Why are we doing war? Why is there war in the first place. Almost philosophical questions that they chose not to read on, but just form opinions on, not realizing that you have all these freedoms you have because there are people who enlist, like yourself, who enlist in the military and go out there and put their lives at risk.

And we have an army and a navy and an air force for a reason. The fact that you can buy your fuel at a dollar a gallon is because we have partnerships around the world that can protect US national interests around the world. People don’t think about all of these things and started to have opinions. And that started to pervade in the technology companies more. But it was never throughout the technology industry, it was a few organizations that happened to be very loud. Look, mid-nineties, early two-thousands Google was it. Google was at the kingpin of everything. So people didn’t want to speak out if they disagreed with that point of view. But I think what you’re seeing over the last five years is entrepreneurs in every sector have stood up and said, “Look, we need to work with the US government. We need to find ways to support the US government.” Whether it’s a digitization of our technology or whether it’s working with the Defense Department and military and so on.

But we have to provide technology because it just so turns out that until 30 years ago, advanced technologies in any sector were mostly funded by DOD or somewhere by DOD. They would be accessible to the defense sector first, then they would become available to the large enterprises who could afford it as they became a little bit cheaper. And only many years later, would they become affordable enough for ordinary consumers to have access to it. But over the last 20, 25 years, the most advanced technologies, especially in machine learning, AI, software enterprise tools, consumer devices, you and I have access to it first. Then it goes to corporations who might say, “Okay, you can bring your own devices to work.” So we had iPhones before corporations allowed us to use iPhones. And only six years later after iPhone invented but if it was a four star general able to get access to it. So military now gets the technology last. And I think we need to change that.

Though all these advanced computer vision systems and advanced machine learning systems, many of them are being developed by commercial companies. Facial recognition technologies was available on Facebook and Google 10 years ago for your photos. And only now it’s becoming available to DOD to say, “Who are the suspects entering government facilities that could be creating problems?” I think we have to figure out how do we change that. And I think entrepreneurs are building companies to change that. Entrepreneurs are also realizing that governments work on large-scale problems. And large-scale problems usually represent very large markets. If you’re capitalist and you’re driven to build companies, you say, “I need to address those. I need to address mobility problems. I need to address food availability problems.”

Steve Jobs with all his smartness could not have imagined that one of the biggest companies that will be built on the iPhone platform would be an app to call effectively a cab. But that’s what it is. Turns out that Government could not build the transportation system that was needed in cities around the US so Uber and Lyft emerged to say, “Let’s go build that transportation system.” It’s not as affordable as a bus ticket, but it’s also not as expensive as having to own your own car just because every now and then you have to go somewhere. Government should be building… “Hey, climate change, we should be building solar power.” Because we built power plants. Consumers didn’t have to pay for power plants, but consumers are having to pay for solar panels. So we built the technologies that were required, including financing technologies and so on to say, “How do we make solar cheaper?” So we can get solar on our homes because we need to not be burning coal and not be burning oil and gas.

Again and again, you see sectors where we might believe that the government should do that until we realize, “Well, the government is… Guess what? We are the government. And so let’s do it ourselves. We can do it better, faster, cheaper.” I think these are great commercial opportunities for people. And I think you’re seeing it in spades across. All of us don’t think twice before we buy a bottle of water with a lot of plastic and a little bit of water, we do it every day many times a day. The reality is there should be government providing us clean water. “Why do I have to have a bottle of water that I have to buy to make sure that I’m not getting sick?” This is something the government should be doing. But if the government is not doing, if they don’t have budgets or if we can do this better, faster, cheaper with building distributed, reverse osmosis plants, we can put in our homes and put in our offices. That’s a commercial opportunity for us.

Look at drugs. COVID comes around. Biggest disaster that the whole world experienced together and you would’ve thought, “Oh, government will come up with some solution to this massive problem.” Imagine this was a bio-weapon. Government will come up with a problem. Guess what? It was Pfizer and Moderna and AstraZeneca. They had to come up with the solutions and the scientists. And in Pfizer’s case it was a startup. It was BioNTech and Moderna, that was a startup funded by VCs that came up with the vaccines that we all just take without realizing that this was a startup creation to come up with this new technology of mRNA that led to these vaccines. I think we will see again and again, in all sectors, it’s not just about robotics and automation and systems that look big. Across the board, we will see technologies that will improve our resource utilization, resource availability and distributed systems that are more resilient so that we can sustain both attacks from the outside, but more importantly, the growth that we want our society to have.

ACME General: Last question, which is the whole point of Accelerate Defense. And we could do a whole show on it, but I want your top line words of wisdom on how non-traditional tech innovators can break into the DOD ecosystem. What is the first thing they should start thinking about?

BZ: As you said, we can talk for an hour about the problems with the US acquisition system. First and foremost, most entrepreneurs don’t understand how the government works. If you were a young kid who left Ohio to come to Silicon Valley or New York or Boston or wherever you went and you started building a company, or if you were doing it today in Ohio or North Carolina or whatever, you’re not sitting there thinking about “How does the money flow in the government? What does the legislature do that creates appropriations?” And then it goes to programs and the programs have these acquisition officers. So even if a general wants your technology, the general has no money to buy anything. He has to find an acquisition group that agrees to buy it. And there’s a whole process that goes through it, maybe seven layers of approvals and so on.

First and foremost, you should understand that it is a process. It’s highly bureaucratic. It’s somewhat unfair, but it is a process. So find people who have done this before to at least get a sense of what it takes. Just like if you were to sell to automotive industry or biopharmaceutical industry, you would need to find people to take you through that process. You want to get an FDA approval for your drug. You don’t just show up as a young person, “Hey, I want an approval.” There’s a process you go through to do the clinical trials and so on and so forth. And if you don’t do them right, you basically throw all your money into investment. First and foremost, that’s important. But the most important thing is understanding that even within the most bureaucratic organizations, there are people who understand the importance of innovation. You have to find those champions.

Now, in addition to finding those champions and they exist in every part of the armed forces, they usually have small budgets, they’re R&D guys and so on and so forth. You have to find pools of capital that are already available. Unlike corporations, that if they see value in your product, they can move money from one bucket to the other easily to buy your product, that is very hard to do with the US DOD. So you have to find existing pools of capital that they don’t advertise. There’s no website you can go to and find that, but you have to network your way in to figure out who has a pool of capital to focus on a virtual wall or a reconnaissance mission in the Middle East or space-based AI systems that are used for monitoring North Korea, mission operations and so on and so forth. The pools of capital that you go after.

And the last but not the least is, as you’re starting to build companies in this space, talk to other CEOs and talk to people who have built companies in this space because they will guide you to people who can get this done faster, better, cheaper for you. Most CEOs often ask me, “Should I hire a lobbyist first? Should I have a business development person? Or should I hire a salesperson? Should I bring on a four star general on my board? Is that the way to do this? Should I have a US Congressman on my board or ex-Congressman on my board?” Stop. Before you start piling all kinds of people into your organization. That gives you a feeling that you’re accomplishing things, but you’re not.

Understand the vector on which you want to accomplish things. Are you trying to sell something initially to US Special Operations Forces because they have a small pool of budget that they can use for this. If that’s what you’re trying to do, a US Congressman is not exactly going to be very helpful for you. But if you are trying to figure out an appropriations budget that needs to happen, because money has to be appropriated for a particular technology or a testing or a POC, yes, a US Congressman can be very supportive of you because somebody has to raise that somewhere. Somebody has to say, “This is important for economy or for our country.” You have to figure that out. And I think unfortunately in the past that has not existed. There’s no place you can go and learn that. There was a lot of black art. And a lot of people became these black art dealers and made money doing so.

But I think it’s starting to open up and there’re organizations now such as Defense Innovation unit, such as Silicon Valley Defense Group and others that are emerging. Silicon Valley is not Silicon Valley geography. Silicon Valley is the entire tech sector spread across the country, in my opinion. So Silicon Valley Defense Group and others are now creating classes and materials to help you understand how to do this, but this is extremely… This are really large sectors. US military budget is $700 billion plus, and there’s additional budget on top of that, that we don’t hear about. That is massive dollars that you can get access to. And not only is it a massive market for you to go after. We are in conflicts all around the world in every which way and your technology is deeply required. When some other places in commercial sectors, it might be nice to have, US military requires it and really needs it. So I think if you can find your way on how to sell, this represents very large opportunity.

ACME General: That was incredibly illuminating. It almost felt like you were reading from the manual, Bilal. We might turn it into a white paper. Thank you so much for your time and for your leadership.

BZ: No, thank you so much, Ken. Thank you for inviting me, but also just everything that you’re doing to continue to push the ball forward. These conversations and others are really important because we’re all learning and we’re all learning together. That’s the amazing thing about Silicon Valley, we all learn from each other. There’s no book about how to build great innovative technology companies. And if there’s a book, it’s probably full of shit.

ACME General: You’re probably right. All right. Thanks, Bilal. Great having you.