Building The Base

In this week’s episode of Building the Base, Hondo and Lauren join Bilal Zuberi to discuss the future of the defense industrial network. 

Bilal Zuberi is an experienced investor and current partner at Lux Capital with a passion for using technology to solve complex problems. He has worked adjacent to the national security industry and is committed to investing in innovative solutions. Bilal understands the importance of collaboration between the defense community and the private sector and believes in the critical role of emerging technologies. He likewise highlights the importance of investing in passionate people. He has invested in a range of sectors, including enterprise software, healthcare, and climate, and partners with good human beings to build responsible, ethical companies that positively impact the world.

Hondo, Lauren, and Bilal go on to discuss a variety of topics, including:
  1. Public-Private Partnerships
  2. Cybersecurity Collaboration
  3. Innovation and Technology
  4. Workforce Development
  5. Regulation and Compliance
  6. Data Sharing and Privacy
  7. Emergency Preparedness and Response
  8. Economic Competitiveness and Growth 

What is Building The Base?

"Building the Base" - an in-depth series of conversations with top entrepreneurs and leaders from tech, financial, industrial, and public sectors.

Our special guests are weighing in on a broad selection of topics such as: shaping our future national security industrial base, leadership in challenging times, experiences related to the intersection of business and national security, and personal anecdotes related to their positions of influence.

Building the base is hosted by our own BENS member Lauren Bedula who is the Managing Director and National Security Technology Practice Lead at Beacon Global Strategies, and BENS Distinguished Fellow, Jim "Hondo" Geurts who retired from performing the duties of the Under Secretary of the Navy and former Assistant Secretary of the Navy for Research, Development & Acquisition.

Lauren Bedula 00:41
Welcome back to building the base. Lauren Bedula and Hondo Geurts, here with today's guest, Bilal Zuberi. We're so excited to have Bilal here. It is a particularly interesting time; there's recent news around Silicon Valley Bank and a lot of focus on the venture community. Bilal is a key figure in national security investing. As a leader in lux capital, he focuses on finding founders that want to solve big complex problems in several markets such as climate, deep tech, and enterprise software. Again, Bilal has a real focus on national security and defense tech. Bilal has spent time as a technical founder and entrepreneur as well. He's also been on the other side of this equation. He went to MIT for his PhD; he is super smart and can go into technical detail. As an immigrant citizen in the US, he often talks about how grateful he is for the opportunities afforded here. So, Bilal, thanks so much for joining. We're excited to get into your story today.

Bilal Zuberi 01:34
Oh, thank you so much for inviting me.

Hondo Geurts 01:36
Wow, Bilal, you have a PhD from MIT… I guess I didn't know that. It's awesome to have you here with us. You come from such an interesting mix of being a founder, and immigrant. I would say that you are one of the earliest people thinking about venture tech in national security before it was the “cool thing to do”. What got you to this point? How did you come from your background to being at the center of all these interesting communities?

Bilal Zuberi 02:07
As many VCs like to say, I fell into it. However, that's a cop out answer. The reality is, I come from a lower middle-class background in Pakistan, so I have no business being here. Thanks to US taxpayers, who effectively made it possible for me somebody like me to get a full scholarship to study in the US. That's how I ended up here. Similarly, from undergrad to grad school, US taxpayers paying through all kinds of research grants (including Air Force Research Lab), paid for my graduate education. So, in some ways, thanks to my parents and thanks to American taxpayers, I got a great education. Frankly, as I walked into my first job at BCG, then starting a business, I felt a weight on my shoulder. This indicated that I must do something that's bigger than me. I think a lot of immigrants feel that way. It's almost justifying to themselves and why they are here in the first place, proving to themselves more than anybody else that they are contributing back to this country. I think it's the same story that you hear again, and again. So, I'm not saying anything new here. A lot of immigrants realize that and feel the same here. That's how I got into building something that had scale; I had leverage that led to starting a company. Hiring people, firing people, raising capital, and then eventually selling the business made me realize that this is a cycle that not many people who have technical backgrounds and want to start businesses really know and understand. How do we do that again, and again, and again? As it turns out, there's this thing called venture capital, where you give money to startups as an investment. Money is the cheapest thing that you give to capital; what you really want to give them is your time, attention, network and resources. That's what brought me into venture capital. I started investing in things where science and engineering were predominantly important. Today, I do the exact same thing at Lux capital. We manage over $4 billion of capital, investing in what we call the intersection of technology and sciences. Technology enables us to scale, and sciences allow us to build things that weren't possible before. There are life sciences, such as drug discovery companies, health tech, med tech diagnostics, etc. There are physical sciences, including semiconductor chips, autonomy, automation, manufacturing, and computer sciences, as well as the cutting edges of machine learning, AI, crypto and so on.

Lauren Bedula 04:49
I think it's so significant; our listeners love to hear folks with a background like yours. Many of our listeners aren't familiar with how venture capital works. They think maybe it's just focused on new technology development, but it plays a larger role in our ecosystem. Can you talk a little bit about how you define VC and what VCs look for when investing?

Bilal Zuberi 05:21
Venture capital is (I'm not exactly sure if it's a US invention, but I think it is) using very high-risk capital to support people who are enterprising and entrepreneurial. It is basically doing what used to be called angel capital, but at scale, or an institutional level. Angel capital used to be giving somebody a chance to go build what they want to build. Back in the day, if you read books on venture capital, they'll talk about the whaling operations in the Boston area. These were enterprising people, many of them would go out and never come back. Those who came back brought back whales with them. They became wealthy, and their sponsors became wealthy. That's how venture capital started. The fundamental idea starts with large institutional capital in the US, (endowments, pension funds, teachers, large family offices, etc.). You take a small portion of your net wealth and say, “I want to put that towards building the next generation of companies”. However, these are going to be higher risk endeavors. If they do well, there will be higher return. That money is managed by a venture capitalist; venture capitalists are focused on finding and identifying spaces where such companies can be built. More important than the spaces and the technologies, are the people who can build those companies. We spend all of our time looking for these incredible humans that have the tenacity to build companies out of nothing. They stay the course for a long time and are usually mission driven founders rather than mercenary founders trying to make a quick buck. They are people who have a vision for the world to be a way that it isn't today. In some ways, my job is to not only help them understand that vision, and believe in that vision before even I fully understand it, but to help them figure out the resources that are going to be required along the way. Venture capital for me, has been an extremely rewarding career because you get to interact with not only some of the brightest people, but also some of the most determined and resilient people. It is, in my opinion, the real driver of the US economy today. More important than anything else, it is enabling us to be globally competitive. It is the cutting edge of technology, taking things that we are inventing in our universities, national labs and otherwise, and making it a reality. These are things that you and I as consumers may take for granted. It's not trivial. Somebody had to invent all these devices and all the things that we take for granted. I'll give a very simple example. It's very personal to me. When I came to this country in 1995, with nothing in my pocket, I was on full scholarship. I was working for $1.70 scrubbing toilets and dishes at the school cafeteria and custodial services. It used to cost $4 A minute to call back to Pakistan, which meant that I would talk to my mother for maybe five minutes during an entire month. That was not too long ago. That was when I came to college. Today, my mother calls me for free on video, maybe five times a day. It is to the point where I have to say, “I can’t pick up the phone right now”. That has been enabled by technology in every way. Think about the fact that I have a mobile phone with a screen on it that my mom can dial into and literally look at me while I'm driving sometimes. None of that was possible less than 30 years ago. That's what we see. Technology helps that happen.

Hondo Geurts 09:16
You and I have spent a lot of time trying to figure out how to get these two communities, the national security community and venture community, working together as opposed to sometimes being disconnected. Both communities are mission driven. They're highly determined and they're highly talented. For some reason, we seem to struggle getting the two communities connected. I think most of us have seen that this industrial base we built out of World War Two is not the one that's going to drive us going forward. I've actually heard you talk about how the DoD industrial base is like dealing with the auto industry 20 or 30 years ago. What's your sense on why we've struggled so much to get the two communities aligned towards the same thing, and what are some areas where you've seen some success over your career, getting these communities better aligned than they have been?

Bilal Zuberi 10:21
You know the history of technology, industry and military even better than I do. They used to work together. In fact, the commonly known thing in technology is that until 20 or 30 years ago, technology was developed and used by the military first, then it would become available to us enterprises and corporations, when it would be scaled. Then only eventually, many years later, will consumers have access to it. The last big example of that is the internet; we literally had access to DARPA net, and then it became accessible to universities and some enterprises. Then eventually, all of us got access to it, and it changed our lives. Many other technologies before that, GPS, and so on, changed about 25 or 30 years ago, probably after the advent of the Internet. The latest and greatest technology started to become available, being built for the consumer first. I had access to iPhones before anybody else, even before four-star generals did. Only a few years later would it become available to enterprises. There's this big deal “bring your own device to work” concept, because your device is so much better than the shoddy device that we're giving you. Only much later than that did it become available for the military. So, that changed. During that time, the realization set in among the entrepreneurs, founders and the tech community, that the military is very hard to work with and receive commercial contracts. Part of that has to do with the fact that the technology industry started to have bigger ambitions to build bigger businesses. It was no longer enough to build a small business to be bought out for 10, 20 $30 million by Lockheed or Raytheon. It was almost like there was no technology industry that wanted to establish and exist as an independent entity, building the next generation multibillion dollar independent entities. Maybe that was seen as a threat by the incumbents in the defense and technology suppliers. Whatever it was, there was a push made-- a deliberate one in my opinion, to turn that startup industry almost into this super small research segment. It would be part of the R&D, like a research arm. You develop technology, but then you just hand it over to us and we'll take care of it. That was not acceptable to the technology industry. We wanted to build products. We wanted to build products that would be used by the end users. We wanted to be paid for it and only wanted to build companies around it. That created a separation for a while. It didn't matter because there was so much opportunity in the enterprise and consumer side that the startups could continue to function. We were fighting a guerrilla warfare in Iraq, right? We were really welding plates under Humvees so that roadside bombs don't kill soldiers. It turns out that we now have to shift our focus away from ragtag bands in mountains of Afghanistan and Iraq, to state sponsored activities. We are essentially at war in Ukraine, potentially at war with China, potentially at war with Iran and many other flashpoints around the world. These are much more sophisticated entities. These are technically sophisticated entities, where some people have called it the hybrid war, right? So, there's robotics being used in autonomy, automation and AI/cybersecurity. It's a war on technology and war that utilizes data and information. In that kind of warfare, suddenly, we're realizing that all the innovation that we're seeing is coming out of the private sector. How do we get access to that? I think what needs to happen now, (and we've talked about this for enough time, that the processes have been gummed up over the last 20, 30, 40 years) is to enable the military to acquire products from the commercial sector. Some of my friends like to say that in the last 20 or 30 years we've basically built two big companies in the private sector that service the defense/national security establishment: one being SpaceX and the other one being Palantir. I would argue that this is actually in spite of the DoD, versus because of the DOD. DOD would rather not have bought products from these companies, but they had no other choice. They tried their best to not buy from these companies. Eventually, the better technology went out and the better teams went out. I give the example of Pakistan. Pakistan has a Nobel Prize through one of its physicists, one professor of the salaam. It's not because Pakistan has an amazing education system, it was actually despite the terrible education system that he got the Nobel Prize. Instead of accepting it and rewarding him in subsequent years when he wanted to establish a Center for Theoretical Physics in Pakistan, we chased him out of the country and declared him a persona non grata. So, he went and established the Center for International theoretical non physics in CTP in Trieste, Italy. I hope we don't get to the startup sector, because right now we're in the phase where we've shown some success with Palantir, and SpaceX and a few others. We have these next generation companies, the annual rules, the sale drones, the primers, the Shelia AI, and we know we can go down the list of a few other companies. We hope that we're not run out of town. If that happens, the next generation is not getting funded here.

Lauren Bedula 15:58
It's a great point. The two companies you mentioned are fairly large companies, SpaceX and Palantir. There seems to be this trend in government to spur innovation by maximizing the number of new entrants into the space. Some believe that this has resulted in too small awards to too small, maybe unproven companies, just focused on the breath, but not really the success or background. What's your take on what's happening here? Is there maybe a different direction we should be going in?

Bilal Zuberi 16:30
Yeah, so Hondo referred earlier to this conversation I've had before about the automotive industry. The automotive industry has existed in this country for 100 plus years. If you go back, (and I bought my startup in the automotive industry) it was a terrible idea back then. I wouldn't fund Bilal the entrepreneur as Bilal the VC. It’s a bad idea, not because the technology was bad, but because I failed to understand how bad the market was. I had an amazing product, I still believe I had an amazing product, but the market was not willing to accept a product from the outside. Here's the reason why the automotive industry was structured in a particular way and continues to be to a large extent: you have the OEMs, the GMs, the Ford, the Chrysler at that time, and then internationally, same idea. Then you had the tier one suppliers. As tier one suppliers, the OEMs don't really do much innovation, right? Their innovation is that they have six heated cupholders or cooled cupholders in the car. All the innovation has been outsourced to the primes, or what they call the tier ones. So, these are the Continentals of the world. According to the World, the bosses of the world, these become sub supplier components. The entire dashboard comes from one entity. The power train comes from another, the engine comes from another. The drive train comes from the other, and two seats come from some other supplier. These are established views of more than five (which happens to be the number). This is approximately the number in the DoD, but maybe 20. Then, what you have is tier two suppliers. The tier two suppliers were where all the technology companies went. My company was a tier two supplier; we were doing the advanced technology. We were doing a lot of material science research, manufacturing, technology research and so on. But we are part of OEM, the end user, and the customer was through the tier one. The tier one was getting a great contract. We were getting a cost-plus contract; we were told “you've developed this advanced technology, and all the research you've put into it. What does it cost you to make that at $3? We'll give you 3.50?” I'm like, “wait a second, why did I put $25 million of research into this? And how am I going to get a return to my investors?” At $3.50, you have to now produce this at scale. It takes millions and millions of these products for you to even return the money to the investors, let alone make them a profit, which is why the innovation was very limited. It was incremental. The same thing is happening in the DoD space. We are giving lots and lots of the small amounts of grants. Government officials love announcing that 500 companies and 5000 companies, 27 states got these grants. If you're going to create an entitlement program, you have every right to do that. You should do that and create jobs-- whatever you need to do. But let's not confuse the need for cutting edge technology to be brought to market ASAP. To make sure that our warfighter wins the wars that we put them in, let's not confuse those two things. We're not doing research for research’s sake. This is not to pump out more PhDs like me. There was a utility in doing that and we should continue to do that. But let's not confuse that the money that needs to be given to these companies so that they can show the market that they can then take the technology further and create real use cases and get commercial sales. We need to do that in the automotive industry. “A few big badasses” is the best way to describe it. A few badass people effectively changed a lot of things over the last 10 years. 15 years ago, when Tesla first started, every one of my friends in the automotive industry bet against it. I actually lost a bet in that regard, because for a while Tesla didn't look that good. But, Tesla came in and basically said, “I'm going to build a new automotive OEM. Not even a tier one, but I'm going to build an OEM.” And everybody said, “that has not happened in 50 years and it is never going to happen.” In fact, the industry fought it. As it turns out, Tesla does not have any dealerships. The dealerships are refused by law in all 50 states; they refuse to sell Tesla’s. Tesla said “fine, we'll open up a store inside a mall.” Guess what-- people are buying Tesla exactly like that. In fact, they don't even go to the to the mall anymore. You can just go to your computer and buy a Tesla. Buying Christmas decorations on Amazon takes more clicks than buying a Tesla online. That changed everything regarding Tesla’s success, even if Tesla is worth half of what it is today (which is already half of what it was worth six months ago). I hope it's not turtles all the way down. Even at that at those valuations, it spurred innovation across the industry. We have new tier ones coming up. We have new tier two companies that are saying “we're virtual tier ones”. People are creating direct cars. There's at least eight public companies now that are building LiDAR, which is just one part of the technology stack for the automotive company. There's full stack, automotive companies out there that are building automotive cars, and on the street. Rivian came about; there are Rivian cars around my neighborhood all the time. Would you and I have said that this company should have existed 15 years ago, and that what the world really needed was a new electric car company? Our job is to find them, support them, and then hope for the best. But I think the same thing is happening in DOD right now, or in the national security field broadly. Also, its happening in the DoD especially, where you have these founders that are really putting the life, blood and sweat into this. They're working their tail off; they are facing every other constraint or headwind that any other entrepreneur is facing. The COVID happens, and they're building hardware. The rest of the world can go online, and their friends are sitting at home making dating apps or whatever. But if you're building a hardware device, you're in person. I had people who are risking their lives being in person, building these products and the prototypes to give it to the customers, right? All the stuff we hear about SVB, the war and Ukraine, the economic crisis that's ensuing around, and the world trade war with China showing us that we can't really get parts that we needed, because wholesale moved our supply chains to China…Now we're trying to bring them back. There is this semiconductor access, all the security issues, and somebody like me getting calls about it. You have people of Chinese origin in your companies, and you ask them, do you mean Chinese citizens? What do you mean? What does Chinese origin mean? And they're like, “well, it's up to you to figure out all the moral issues, or ethical issues that come with that.” So, these companies are facing all of those issues. Then at the same time, they have a customer where you have to beat them on the head to get the product. My friend is like, “help me help you.” I am in awe of the founders who are building in these spaces. I think 20 or 30 years out, all of the people within the DOD establishment who are supportive of that, (there are individual heroes who are going out of their way because they see that this is the future), they're fighting their own bosses or fighting their own colleagues to make space for these companies. I think we will look back at this maybe 20, 30, 40 or 50 years down the road and we'll say these people were really pioneers. I think that if we're going to be one of the most successful countries with the one of the strongest militaries in the world 50 years down the road, it will be because the private sector and the public sector work together.

Hondo Geurts 24:41
So below I mean, that's that was a great summary of a lot of what we've talked about moving from the you know, admiring the issue and and the challenges we face What have you seen practically your aura, what do you recommend both on the star One of the companies you're working with who are, for all various reasons want to sell into national security? How do you talk to them about good strategies to work with the DOD? And again, I really admire the bridges you built within folks in the DOD, what do you tell them, they can do to best enable that communities that are starting up and want to sell into the deal? What do you tell them as best things they can do to help? You know, push the ball forward, and sometimes in spite of their own bosses and bureaucracies?

Bilal Zuberi 25:33
Yeah, you know, I have a 12 year old son who thinks that he will one day go play for the NBA and I haven't had the conversation yet of like, “but son, your genetics.” While he's still on that mission, I keep telling him play the long game. It's not about getting frustrated one day and then giving it up. It's also not about trying to do everything all at once. In fact, there's this great interview I play for my son of Kobe Bryant, where he talks about when he was 10-12 years old, and he really sucked at basketball. There was tournament he played at one summer where he scored not even one point. Then he says, “But I really want to play basketball.” And he said “I will take this on as a task upon myself.” He said “I worked three hours a day, one thing at a time.” So first, he needed the shooting practice. He put six months and did nothing but shooting got it out of the way. Then, the next thing and the next thing, but working three hours a day, because everybody else was probably spending one and a half hours twice a day or twice a week, but he was doing everyday three hours and said the math just catches up with you. At that point, people just can't compete with you. We know what Kobe Bryant became, although I'm sure that was not the only reason why he became that. The same thing applies for startups, just keep at it, keep at it, keep fighting at it, the others will just give up, the person who was your biggest foe is probably going to move on, and you're going get promoted, demoted, or retire, or if that was at a prime, you're going to move on to something else. Keep at it. The second thing is there are individual champions within the DOD who have small amounts of budget available to them. You have to go find it, you have to go find access to that and build products that somebody will buy. Here's the thing about product that most people don't understand. Product means you have a customer. Without a customer, you don't have a product, you have a technology. If I take a technology and I put plastic wrap around it, I haven't created a product, I've only created a product once I have found a customer, figured out what they're willing to pay, and determined the pricing I will offer to that customer. Based on that, I can figure out what features I can fit into that product for that price. Can I still make a profit? Figuring that out, is really important and is why in Silicon Valley this product manager role is seen really critical. Because you can have many products in a single company. Each product has to be owned by somebody who says “I'll take this technology, engineering, and this customer on the other side, and I'll marry the two and I'll create something that works. The important thing for different tech startups is that people are often technically mission driven who've been working at it for 10-20 years, and they want to build a company around their technologies and they want to serve the military. They wonder -- should I hire a four star general on my board? Should I hire a head of business development in DC? Should I hire a lobbying firm? Perhaps in the long term, you need all of the above. First and foremost, though you need to hire a person that you can call your product manager equivalent that can figure out where the customer is within the DOD, because God is not one model that has you know, hundreds, if not 1000s of individual entities that will be willing to buy your product. The successful companies-- Palantir and SpaceX possess a relentless zeal to figure out how to break through and get money you couldn't. You couldn't build SpaceX with just Elon Musk’s money, even if he had even more money than he has. It just wasn't possible. He could have been killed by not getting the licenses to be able to launch a damn thing. Bureaucracy can kill you in 100 ways. He had to find people who were willing to support him. Same thing for Palantir. They're finding ways to sell their product. The end product is what technology and Silicon Valley does best. It's software that grows rapidly that, but you have to wrap it around something that sells. When we're looking at startups -- you asked, what do we look for? Generally, in every startup we look for an amazing team. That's very unique and important. The second is the product. What is the product? The third is the market, because it's large enough that it matters too, especially to a fund our size. What kind of capital will it need to get there. Nuclear power is amazing, but might require billions and billions of dollars out of our reach. How do we make that happen if you're going to invest in that space and if you build it, and acquire a customer, you will you be rewarded for it--the multiples are going to be high. Those are the things we look for. When it comes to defense tech companies, one thing becomes extremely important. I think it’ll change 10-20 years from now. Right now, though, what I've seen in the defense technology industry from startups, is world class compared to what the defense industry is using today. It's already cutting edge anything hypersonics or computer graphics, or chips or AI. The question is not pushing further on just technology continue to do that. But the important thing is, do you have the team that knows how to sell? If you look at the differences between SpaceX, Palantir, Anduril, SalesForce, and thousand of other startups that are different tech companies, what you find is that these people had not only those motivational founders and leaders, but also they have the capacity and the capability to pound the streets in DC, which why I'm here today. You have to come here and spend time here and build relationships here, because the other side has to be able to trust you. And then slowly, you start making inroads.

Lauren Bedula 31:48
It's so many great points there. The product first technology conversation is something that comes up a lot, but not framed exactly that way. I think that will really resonate with our listeners and gets to the aspects of the automotive industry that I think you've highlighted as so relevant, and emphasizes partnerships, too. When we're seeing all these small, individual companies, they don't have to be small. Maybe have one aspect of the product that they're offering that make it hard to adopt or hard to sell. I think the teaming aspect is something we see as important and reflected in your automotive example. The question I wanted to ask you is-- how do you think the current economic state impacts defense and national security as a market? How are you thinking about what’s ahead?

Bilal Zuberi 32:51
Sometimes when I'm quietly by myself, I realize that I mostly invest in industries that I wish did not need to exist. Unfortunately, the reality is that those problems exist, and they need to be solved. My early investments were in a gun and bomb detection technology for preventing mass killings and mass shootings. I wish there was no need for that company to exist. To the extent that company needs to exist, my company is really saving lives. If you were to ask an average investor in Silicon Valley today where money is going, they will tell you three areas: 1. Generative AI because we believe there’s been a sharp turning point around the corner of what that technology can now enable and do. 2. Climate tech - this generation is starting to catch up to the fact that climate change is no longer floods happening in some other part of the world. This is happening everywhere all the time. There's been about 10 Atmospheric Rivers in Menlo Park this year, where 10 years ago it was like drought. Today, we have trees falling everywhere, flooded streets, entire towns that you cannot enter. It's crazy. People are realizing that and investing into that. 3. Defense. - because you don't have to be the brightest tool in the shed to be able to figure out that we're at war in Ukraine. We have Saudi Arabia and Iran signing deals with each other. We have all the conflicts in China and the South China Sea. North Korea is just off the radar right now, but the first chance he gets he's gonna rear his head again. We haven't even started to touch Africa where there's a lot of extremism in certain parts that is just waiting to emerge. It's a very unstable environment. Of course, economic instability around the world exacerbates all of those issues. Economic issues can easily turn that into a religious issue or a political issue. Unfortunately, the U.S. hasn’t done the best job in creating friendships around the world. You know, no matter how good we want to do, somehow, we end up looking bad. I haven't quite figured out how we successfully managed to do that every single time. That is the case though, right? We have shown all kinds of support for Saudi Arabia through some pretty tough times. We don't have to go very far. Even with the Khashoggi murder, we took a little bit of a step back and said, “yeah, we'll let it slide.” Then we said sign this peace agreement with Israel, and we're going to try to make some good things happen in that region. Now they're signing peace deals and trade deals with Iran. This all means that there's going to be continued conflict, and there's going to be continued need for us to assert what we consider to be fundamental American values around the world. I really believe in that. Look, I, I grew up in Pakistan, my family still lives in Pakistan. I'm a US citizen, but I'm probably the only US citizen in my family. Actually, my sister is a US citizen too, living in Chicago. Either way, it is clear that we're not out to just make war. It might appear that way if you're sitting in that part of the world. However, there's no soldier I've ever met, who's put me in the line of guns and weapons coming at me. That's not why they sign up. Perhaps, they sign up so that somebody pays for their education. Regardless of why they sign up, they're willing to fight for what we believe to be American values. American values to me are really important. We want to do good for the world, but we may not know exactly how to do it. Moving forward, I think we will have to do it more assertively—it is going to be less passive. While that is happening, there will be more investments going in. However, capital intensive projects do tend to become slower during these times. The you know, what, as an example, would and will, has been able to do, which is, you know, we will take on the full r&d Bet on our own hands, we will take the cost upon ourselves and sell you the product is going to be possible, but for future product, even annual didn't take on, we're just going to go build a tank for you. They were creating technology products that weren't that capital intensive. We will see certain slowdowns in that. By and large, though, the investment appetite remains high. It is necessary to see successes on the other side. At the end of the day, we are fiduciaries of money for other investors and those other investors are mothers and grandmothers in the Midwest whose endowment and whose children's tuition money and their pensions are being deployed, and we must provide returns to those. If we're not able to do that, then there's going to be a problem. Hundreds, if not thousands, of companies have been funded by venture capitalists in the last five years or so. We need to start seeing successes and real revenues, not large exits. The military needs to show that there isa pro duct market fit. We continue to see price improvements in products and technologically. However, the companies don't get the contract because they don't have employees in over six states. Which startup has employees in six states? If you don't have six states, we have 12. Senators, we're not going to vote for you. That's a big problem. How do we solve that problem? The most brilliant technical founder is probably not the savviest DC hand holder. How do we solve that problem? This is where we're all trying to figure that out. I haven't served in the military. So, I always look towards Hondo and ask “what does this acronym mean? who are we talking about here?” There are organizations here who could be helpful. SVG is an example of an organization that could be helpful. A young grad student at UC Berkeley can build a new database technology or machine learning AI algorithm, and decide they want to start a company around that. A lot of these companies only came into being 6, 7, or 8 years ago. Then you decide I need to hire a VP of engineering, VP of marketing, VP of sales, and so on. In Silicon Valley, you can interview these individuals-- there are people who will help you interview them, lots of. There are a lot of these people available. You determine which flavor of it you need and go hire them. Imagine a defense tech company and you decide I'm going to sell to the Navy. I have this autonomous ocean-going drone that can carry any number of sensors on board. It does not require any fuel aad it can be out at sea for months, if not years at a time. The Navy is the obvious customer. Who do you hire? Do you hire chief acquisitions officer within the Navy?

Hondo Geurts 40:37
He's not that good.

Bilal Zuberi 40:41
This company obviously has developed thanks to you. They've developed an entire team in DC, but where do you even start? What do these characters look like? There’s a change you end up with the wrong person and base your entire effort off that wrong person for two, three years, run out of money, and not make any inroads. Those are the kinds of things that startups need the ecosystem to solve for because every startup doing it on their own simply doesn’t work.

Hondo Geurts 41:12
That's a great point. One thing I really admire with you, Bilal, is that you are not afraid to get out of your comfort zone. You're not afraid to go introduce yourself to somebody, meet a diverse set of folks and approach it with a level of humility, make connections which not only for business reasons, but personal reasons. What advice would you give to those folks wherever they are in the ecosystem? I think, until folks get to know each other, they can't respect each other and until they can respect each other, they can't trust each other. That's hard to do by reading LinkedIn articles rather than meeting folks. What's your experience been of the value of getting out and making connections across diverse communities? What would you recommend to those young folks, whether you're in the DoD or in the startup community?

Bilal Zuberi 42:08
When I came to this country in 1995, I'd never seen a McDonald's before. I'd never ordered at a McDonald's before, which is something my 10 year old takes for granted now. So, I walk up to a McDonald's and at that point, I was not eating meat, so I wondered ‘what do I eat?’ A cheeseburger comes down and of course it's a burger with cheese on it. I wondered—if it's a cheeseburger, why is there meat in it? You can imagine the guy on the other side of the counter looking at me, thinking ‘what in the world?’ The reason I bring that up is to demonstrate how important it is to know what you don't know. Sometimes, you learn by doing and somewhere along the way you realize that you don't know what you must learn. I had to learn which fork goes first, which fork is for salad, and which is for dessert. The ways to figure that out by either looking at other people and replicating what they are doing or simply asking other people ‘how can I do this better?’ More people need to be willing to do this.
Hondo, you and I have talked about this a lot. Silicon Valley was happy go lucky for 25 years. The prototype was ‘dorks’ and ‘geeks’ who sit on their couches, eat pizza, drink beer, maybe code and write dating apps. That was the stereotype of a technology geek. They were making a lot of money doing that They would launch a game that let you feed virtual fish and a lot of people would play it, and they’d make millions of dollars. People thought of them as the quirky, weirdo dudes. It posed no problem until the companies that were building these games were supposedly helping topple governments around the world. Suddenly, we’re talking about our elections going kaput because some young guy called Zuckerberg decided to allow certain amounts of data to be shared with some other entity. It’s important that technology guys understand that they do not know how DC works, how the government works, the responsibility that elected officials have and how their technologies impact the rest of the world. It’s the same thing with the DOD. Maybe think of a situation where you’re sitting in the airport and a guy in uniform comes by you and you stand up and salute and say “thank you for your service.” You’ve almost taken the uniform for granted and assumed everything was right, but it’s not. There’s corruption within the DOD. There’s bad stuff done by DOD and a lack of accountability for people who do it. The DOD was going about their own business and nobody was looking into it. The DOD has almost a $1 trillion budget and in the next few years there will be very little accountability with that budget. The accountability comes almost as a line item-- “did you spend $27 million in buying this? Yes? Okay, good.”-- and then we move on. The same methodology doesn’t apply to people who are fighting on the front lines and don’t have any capacity to change what they need to do based on the circumstances they’re facing. That’s not accountability. I’ve talked in the past about how to turn DOD into more of a company like environment, with a board of directors that you convene, but give the executives the capacity and capability to make decisions. Let them figure out the organizational change they need to make those decisions.

Lauren Bedula 45:28
Bilal, thank you so much for the many great ideas. Your emphasis on the importance of people, partnerships, and teams combined with your incredible story is encouraging, especially during the uncertain times ahead. You made a great point-- there are still problems to be solved here. The government is a great customer during an economic downturn. So, your advice to founders is important. I can't help but call out your sweatshirt here – defense, technology, and democracy. You are championing these issues out on the West Coast is so important. We appreciate all you're doing.

Bilal Zuberi 46:01
Thank you, thank you so much. Thank you for doing what you're doing and bringing out the champions of defense technology innovation here. I'm just a financier, so I'm the least interesting person here. I've heard a lot of your podcasts. Some of the people you brought in within the DOD are the champions, and these are the people we look to for help in advancing the cause. Much of the change must come from within the technology industry and the DOD. I think the two are talking to each other, but there is a long way to go. Any nudge that we can give could move in the right direction. The time is right now, as there is a primordial soup of change within politics and economics, and during those times is when important decisions get made and we’ve got to get our act together, but we need to do this the right way. This is not peacetime-- we are at war and we have to figure out a wartime stance and make sure we have the appropriate technologies available. For example, in the last two, three years with COVID, we went from ‘I don't know what COVID is’ to ‘we don't have masks’ to ‘we're going to vaccinate the entire population.’ Despite all the problems, differences, and issues that came with it, we've dealt with it. You and I are sitting face to face right now and we're not worried about giving COVID to each other. I think the same thing can be done on the DoD side as well.

Lauren Bedula 47:24
It's awesome. Thanks so much.