There’s plenty of private money out there and interest rates are very low — the money will flow into where ever there is a good buyer and market opportunity to see good talent and good products be successful. The government has only has two real billion dollar firms since the Cold War, at least on the Defense side, and that’s not providing that enticing carrot for the venture community to get in.
What’s really coming out here and we’re starting to hear more about — and I like to bang the drum on this — is that the budget cycle is really problematic when you have to program funds 2, 3, up to 5 years in advance. You have to know what was going to be successful years in advance in order for funds to be there on time so that the small companies can get the cash flow and stay alive. If we have budget flexibility, what Trae Stephens of Founders Fund was saying ‘out-of-cycle funding in the year of execution,’ then we can really start transferring some of these technologies and the venture capital will start flowing into the area.
That was me on another Government Matters episode, “The Role of Government in the Innovative Ecosystem.” I like to think from first principles, and everything ties back to budget flexibility and a small number of other crucial concepts. Just like “all roads lead to Rome,” all defense acquisition problems lead in one way or another back to the budget. Contract pricing, testing/accountability, and workforce are other key areas.
In this instance, the set up to the problem was the idea coming from the venture community that government must make “big bets” on new technologies and firms (implying picking winners and losers, deciding what will work to the requirements), but not “playing the role of VC.” See more on that from my Defense News article, which was the basis of the interview above.
FYI – I also gave a shout out to Anne Laurent’s innovation hub master list/tool. See more on that here.
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