429. TFR Declassified: Olympic Medalist and Navy SEAL on National Security, Deep Tech, and Taking Commercial Tech to Government Customers (Larsen Jensen)

429. TFR Declassified: Olympic Medalist and Navy SEAL on National Security, Deep Tech, and Taking Commercial Tech to Government Customers (Larsen Jensen)

Larsen Jensen of Harpoon Ventures joins Nick to discuss TFR Declassified: Olympic Medalist and Navy SEAL on National Security, Deep Tech, and Taking Commercial Tech to Government Customers. In this episode we cover:

  • Startups Selling to Government Sector
  • Geopolitics and National Security in the Tech Industry
  • Startup Potential in Defense Industry
  • Investing in Tech Startups with a Focus on Government Contracts
  • AI Adoption in Government and Enterprise Sectors
  • Supporting Startup Founders with Differentiated Value
  • Drone and Counter-Drone Technology in National Security

Guest Links:

The hosts of The Full Ratchet are Nick Moran and Nate Pierotti of New Stack Ventures, a venture capital firm committed to investing in founders outside of the Bay Area.

Want to keep up to date with The Full Ratchet? Follow us on social.

You can learn more about New Stack Ventures by visiting our LinkedIn and Twitter.

Are you a founder looking for your next investor? Visit our free tool VC-Rank and weโ€™ll send a list of potential investors right to your inbox!

Transcribed with AI:

Larsen Jenson joins us today from San Diego. Heโ€™s the Founder & General Partner of Harpoon Ventures. With $300M AUM, Harpoon invests in AI, deep tech, cyber security, and enterprise infrastructure. The firm has invested in breakouts including Astranis, Solugen, Genesis Therapeutics, Kodiak Robotics, and Material Security. Prior to Harpoon, Larsen worked with Lightspeed and A16z. He is also a two-time Olympic medalist and served with distinction as a Navy SEAL. Larsen, welcome to the show!
Nick, awesome to be here, man. Thanks for having me.
What a background. There’s a lot of unique backgrounds on the show. But this one may take the prize or Oh,
man, well, I appreciate that. I mean, that’s, that’s saying a lot given the guests that you’ve had before. But I’ve had a couple of different careers over the years. So I appreciate the kind words. Amazing.
So before we hit record, you and I were talking swimming, we both have a background in swimming, you are a bit more successful than me. But maybe before we jump into venture, you know, how do you transition from an Olympic medalist and swimming to to the Navy SEALs? That’s
great question. And I appreciate your bringing it up. I think it was something that I in retrospect was really lucky to have, you know, fortunately, going into the SEAL teams or going to the military, broadly speaking, you start from the bottom, I mean, there’s no chance to laterally go from an Olympic level performer into straight into becoming a Navy SEAL. And I think that really helped me honestly breaking into venture that beginner’s mindset of using those raw attributes that I had to develop in order to become an Olympic medalist in the first place. And as we were talking about before, we kicked off this podcast here, you know, those five hours in the pool every single day doing those morning practices, where you’re in the water at 5am. And then again, in the afternoon, it’s a similar type of thing that sort of required of you from a beginner’s mindset to be a part of any elite military unit. And subsequently, it’s the same beginner’s mindset that I’ve had going into venture where I remember when I was pleading for an internship at Andreessen Horowitz saying that, I’d be happy to show up and scrub the toilets, if it gives me the opportunity to learn from the best. That’s the mentality, you need to have to join the military to be a part of a special unit. And I think that’s part of the mentality that you need to have to change careers, regardless of the career that you’re changing. So that’s sort of the mentality I brought coming into venture. I think we’re a lot of guys, in my opinion get mixed up, whether it be former athletes are former Special Operators, who’ve done something special, it’s really hard to go from an Olympic medalist in one hand to starting over at the bottom of the totem pole the next day, it’s really humbling the military just by virtue of what it is, gives you that natural humbling effect, where you know that you have to channel your inner, your inner beginner’s mind in order to make it.
How long were you in the military, or six years, six years, and I imagine you were deployed.
I was Yeah, so I went through SEAL training class 280, and then ultimately deployed to Afghanistan and Southeast Asia. So did two rotations, was lucky to serve with guys who had done, you know, half a dozen to 10 rotations, who are truly the bravest in the world, I got to experience that. And I think it’s one of the secrets that through my life has helped me in the venture community is just show up and work with the best in the business and good things will come from it. It’s not always predictable how that’ll work. But I like to say that or I like to think that I learned a lot from swimming with guys like Michael Phelps, I learned a lot through serving with some of our most decorated veterans. And I’ve learned a lot now working with some of the best entrepreneurs in the world in terms of how to think about your positioning yourself in that career career field, regardless of what it is,
when it when it comes to selection. And when it comes to working with portfolio companies after you invest. Do you think there are some factors you picked up from seal selection and BUDS training that informed the way I mean, I don’t want this to be too cliche on perseverance and grit. But you know, anything that you think applies to what you’re doing at Harpoon, innumerable
things that I’ve picked up over the years, what I think is interesting is that it’s really the veterans, whether it be the veterans of the startup community, the people who have started a business before, or the veterans in combat that just know what they don’t know. They know how hard it is. And they’re tremendously humble, even though they are the most accomplished. And I think that’s something that we’ve picked up over time, is that when you work with a first time founder, everything looks like it’s going to be straightened up to the right. The same way. It was for me as a new guy in the platoon. You know, just very, you know, borderline arrogant, I guess you could say and always challenging the older guys, but it’s really those reps that they saw in real life that informed their humility, that in the military setting the enemy gets a vote and in this Startups setting the customers get a vote. And so it’s really interesting in terms of working with these two different archetypes of people in the Founder World, we have the first time founders that have a little bit of piss and vinegar and arrogance about them, which I appreciate. And I probably still have. But on the other hand, the elder statesman or the veterans of the startup world who have done it before and are doing it again, have a huge dose of humility because they know truly how Herculean of a task it is to build something special.
100% So last question on background, I’m geeking out and then we’ll move on love it. But you know, I’m always fascinated by how people’s backgrounds and upbringing and life experience kind of led to you know, the tracer exhibit in their professional careers. So you you swim with and against Michael Phelps, right? I did, and you hit like, you know, the comparable adventure is you hit multiple unicorns, you got multiple medals in the Olympics, you swam against a guy who like hit, what, six, seven, DECA corns? Yeah. Oh, all the goals? What was it? Like? Do you think that that affected you at all in your professional career, for better for worse, you know, what was it like swimming against, you know, probably the best ever, when you were probably, you know, point 0001 of the elite, it means the most elite athletes ever. I
think one of the advantages of being a swimmer is that you can only control what’s happening inside of your own lane line, you can only control even more narrowly what’s happening between your own, you know, the six inches between your ears, you know, you can only control your own thoughts and your own individual performance. And so whereas it’s inspiring and exciting to see other teammates, and great people do great things, at the end of the day, I can’t control their performance, and they can’t control mine, I can only control what I do. And so I think very similarly, as I think about the world of venture and trying to create a name for myself and ourselves as Harpoon, we can’t control what other people are doing. We have true admiration for the people that have set the stage before us, but and we’re very competitive, and we want to beat them. We want to be as good as them someday. But we can only control what we do. And I think it’s through that discipline. And that long term focus that of saying, hey, if we show up early if we stay late if we put up the yardage, like I did in the swimming pool, and we’re really focused on building what we think is something really special. Over time, we think that we can be the equivalent of an Olympic medalist or a gold medalist in the venture community. That’s not to discredit the luminaries of venture or no more than it is to discredit the luminaries of swimming, whether it be Spitz or Phelps. We want to beat them over time. But ultimately, we can’t control how well they do if we do a good job. And we focus on our own training. And if we focus on our own discipline of what we think we do better than anybody else, we think we’ll find our way onto the metal stand. And hopefully that ends up being a gold medal. Well
said, sir, he is Larsen Jensen. Thank you for joining us today. Yeah.
I’ll see you guys later. Thanks. All right,
sir. So tell us about harpoon. You know, what is the investment thesis? What’s your, your approach to it? For?
Sure, sure. So we started harpoon about six years ago with the overarching thesis that the modern era of technology was going to have further reaching national security and geopolitical implications than any other tech wave in certainly my lifetime, something akin to the 1960s Space Race, where we had this geopolitical impetus to innovate faster than other countries around the world. And literally put a man on the moon at that timeframe. These days, I think it’s actually more consequential because we have multiple waves that all complement each other that are all happening at the same time. We have the AI wave, we have the cybersecurity way, we have a deep technology wave, we have all of these things that are happening together, and they all work together. And so when I thought about starting this, when I was at lightspeed, it was a very contrarian viewpoint, the only proxy out there that we could point to was in Q tel, which is essentially the intelligence community’s investment arm loosely defined, that was investing in what they would describe, as, you know, commercial Silicon Valley technologies that have the ability to impact national security. I honestly thought that was a little bit too small of a vision, because I don’t think it’s just national security. I think it goes beyond that. I think it goes into our relevance as a country on the global stage. And what I saw when I was at lightspeed is that our breakout enterprise technology companies that were about to go public already had 10s, if not hundreds of millions of dollars in revenue from the public sector. But there was this perception that it was too hard for a startup to try it. Everybody knew there was an addressable market there. But the founders that we’re investing in, were saying, yeah, like, I’m so confident can build this new mark this product for this new market, ie there’s no budget for it. And I’m going to do this and nobody else has done it before. But they weren’t confident on the other hand of saying, hey, I can sell into an existing market where literally our defence budget is over $800 billion in size. And that’s just one federal department to say nothing of all the others. I thought there’s a little bit of a disconnect there. And that startups that were currently being invested in Silicon Valley that weren’t being built purely for the government sector had a other market opportunity and expansion market opportunity to make their upside even larger than it otherwise would be. And there was precedents for that already. If you look at the CrowdStrike, the confluence, the Splunk, the UI paths, all of those companies are selling very materially into the government sector. On the other hand, I thought there was merits for new starts to do so successfully. We saw it with Palantir. We saw it with SpaceX, we saw it around the same time, I was forming harpoon as well, around the same time Android starting. So I thought there was this unique time in the market, where startups could expand their addressable market by selling to public sector. And it would be it would help to create companies of consequence. On the other hand, there might be new startup companies that could purely service the government sector, and achieve significant size. And that’s what’s been happening over the past six years, six years ago, I think we’re laughter out of more rooms that were welcomed into. Now, I think the dynamics changed quite a bit in the past six to 12 months, especially with the Russia, Ukraine conflict, you know, Israel, Hamas, so on and so forth. I think Silicon Valley is awakened to the fact that geopolitics and national security is serious business, and there should be emerging technology that service IT services at my nuances that it’s already been happening. It’s just been sort of behind the scenes and no one’s really realised it. This isn’t a new thing. I think it’s become just more popular in recent recent months and years. What do you think
catalyse that shift in mindset amongst the venture community? Is it really the conflicts with Ukraine and ISRAEL PALESTINE? Or is it something else?
I think it’s that, and it’s really been a fascinating journey for me to see, I’d be really curious to hear it Palmer and the other Android guys would say about this Founders Fund has always done deals with extreme conviction, regardless of what other people think in the world, it’s one of the things I really admire about them as a venture firm, they’re gonna go do what they think is right, regardless of what other the rest of the venture community thinks. And I try to take inspiration from that myself, it’s hard. And I remember when they were starting, how many venture funds would not want to talk to them? Essentially, Palmer had been very open about this in a variety of podcasts. Because it was viewed as too confrontational, it was around the time that you know, Trump was in office, and there was a border wall being put up, and there was a virtual component of that, that needed to be filled by what Andrew was building. And it was viewed as you know, headline risk, many of those firms have subsequently come full circle, and they become a darling of Silicon Valley in that regard, which I think is truly aspirational. And I hope that we can start a company have a similar consequences, what they’ve done at some point, but really, I think that catalyst changed for a couple of reasons. One, you know, the, the Russian invasion of Ukraine is probably the most acute example of that. And two, it’s been successful. And it’s now worth you know, what, you know, $10 billion in private markets, last valuation roughly, it could be could be off a little bit. And so I think people see that there’s now successes in the market. And I think that that is sort of led people’s preconceptions where there’s no, you know, that you can make money there, and that you can build a business and defence. And so I think it’s led to a lot of fast followers and more venture investors and more founders starting companies in this space. And honestly, it’s something that gives me a lot of excitement about the market moving forward, is back then it was really hard to recruit talent to service that market. And if you just look at the defence primes, they’re not recruiting the top emerging technology talent, the top AI engineers are not going to the defence primes. So if you want to work on that problem set, what would you do? Well, you’d go to the fang stocks, or you’d go to a Silicon Valley based company that’s doing something for the enterprise, which is which is great. But there really wasn’t an outlet for that latent demand of talent. Now through capital coming into the market, whether it be Anduril, shield, AI or others, there’s really an outlet for that talent to go in and build these really audacious products for these for these really audacious markets, which is really exciting to me. One of the things that I look back on in terms of why that is, is you look back at sort of that space race timeframe, the 60s 70s, if you were a 10x engineer wanting to build for a really audacious problem, like putting a man on the moon or building the internet, you sort of had to go to a government sponsored, you know, Problem Set, because that’s where the capital was that the government was investing heavily in those technologies. They’re very capital intensive. They were literal moonshots hence. Hence, the definition of the time. There was no real outlet as a startup technology, business, or certainly private capital to invest the money that’s required to build towards these really audacious visions. That’s all fundamentally changed in the past 4050 years. Now, the venture ecosystem is so sophisticated and so large that if you have an idea of consequence, that can change an entire industry, and it’s going to be hard and take time to get there. And if you’re the best engineers and technologists In the world, you can you can attract capital to go do that, which I think is really an exciting time in our lifetime. And I think that we’re under estimating the upside from here
are some What do you think that means for the primes, right, like so we’ve got the Northrop’s the lock EADS the Honeywell is the Hamilton sons strands. On one hand, they’ve got these locked in platforms with agreements for 20, in some cases, 30 years, right. So there’s tremendous commercial government inertia with the existing platforms, on the other hands, to your point, like the best talent, maybe going to the SpaceX ISS or the palantir’s of the world, right, that are interested in the sector, but want to join more innovative companies. So what happens to the primes? We’re in the early
innings of some pretty detailed analysis on this? And if you just look through what motivates an employee in the startup world, no one its compensation, how much you’re getting paid, that can be in terms of your salary, or in terms of your stock based comp? Two, what’s your mission, like your sense of mission, most of these early engineers, and founders certainly do not get into the business because they think they’re gonna get rich, they get into it, because they think they’re going to have a tremendous impact, you know, with their life. And I think that’s really aspirational and really noble. And only through working at a startup, in my opinion, can you truly experience that because otherwise, you’re bogged down with the traditional bureaucracy of any large company, certainly, here we’re picking on the primes, which maybe is a little bit unfair, but any large, established company, you have to deal with a lot of this bureaucratic inertia inside of their business. So in my opinion, what I think this is going to result in is one of two things likely the latter one is that the defence primes are going to need to figure out how to hire and retain the top emerging technology talent in the world, which in this modern era, I think is AI enabled robotic systems for what they’re doing, I think they’d have a hard time doing that from an organic basis. So what I think that leaves is inorganic acquisitions. In other words, I think that if New Starts raise money, recruit the teams develop novel technologies, that they will be natural acquisition candidates, hopefully at large scale outcomes for this modern crop of defence technology businesses. But that hasn’t happened yet. You know, so that’s sort of like my, my belief that that’s going to have to happen, because nothing has to happen. But we’ll see. I mean, that’s sort of my opinion of what’s going to happen next. And Charles already doing that, in large part, I guess, remains to be seen if the defence primes move in that direction. But they do have distribution to your point, government sales, go to market, et cetera, is a very unique beast, it’s very hard. This is something where like, the the pl, pl G motion of traditional enterprise software companies, is just sort of NA, throwing a bunch of albums out there. It’s Na, it’s not applicable, because you really need to do a couple things, you need to understand your customer, you need to understand the end user, you do need to advocacy from a grassroots standpoint. But you need to transcend that and go all the way up to Capitol Hill and actually inform them Congress that what you’re doing is unique, because they’re going to fund the programmes that ultimately you’re building into, in every every other aspect of that entire value chain. There’s so many stakeholders to align, understanding the contracting, understanding the budgets, you know, helping to shape the requirements for your technology, it takes a long time. And I think that’s one key advantage these defence primes have is they already have distribution, they already have a wide aperture in terms of those stakeholders inside of the building, and inside of these different units that, you know, help them understand what they need. And it’s really hard as we’ve seen for a startup to do that by themselves and want to start up as generally speaking undercapitalized to do so,
in the annuities are so strong, right, if they have a $5 million, or sorry, 25 year platform, not only do they have the OEM victim for that, but the aftermarket is like a cash machine.
It is it is in their traditionally lower margin. You know, a lot of these contracts are, you know, cost plus versus firm fixed price. And there’s advantages to a cost plus contract in the early stages of r&d, stay of the day, if you’re doing something that has a lot of technical risk, you may not truly know how much it’s gonna cost. And so if Uncle Sam is signing up for saying, you know, essentially, we don’t care how much it’s gonna cost, you get a fixed margin. On top of that, we’re gonna cover your bases and give you a little bit of margin on top of that could be the right decision for something where there’s high technical risk. On the other hand, it’s not a way that you get a high multiple as a technology business over time. It’s not how you get a 10x Multiple on your business. So I think when starting off that cost plus side of the house can make a lot of sense. But ultimately, as you scale into maturity, you want a higher margin profile than that. And that’s something that I think is less less the case in terms of the big you know, large scale contractors. Okay,
couple more quick questions on harpoon before we get deeper here give us broad strokes on portfolio construction stage, Texas.
Sure we’re focused on seed stage, occasionally we’ll do series A as well, our most recent funds 125 and change. So if it’s a Series A, it’s going to be a small one. So we’re primarily seed stage investors at this point. And we want to do about 2025 companies in a given portfolio. Some say that’s concentrated, some says diversified, I think it’s appropriately diversified. And we want to invest in the next generation of infrastructure security, deep tech, as well as machine learning. And I think we have, you know, solid examples of each of those. On the security side, we have companies like material security and some grab, you know, on the deep tech side of the house, we have a strongest solute Jen and others. On the machine learning side, we have companies like Genesis therapeutics and rust robust intelligence. So we try not to be too dogmatic of exactly what we’re looking for. It’s more of having an open mind to what the entrepreneurs are convincing us is going to be the next amazing thing. And when we when we believe that is when we actually invest.
And then geo focus, are you just investing in stateside innovation? Or
I think we’re about 90%. United States, there’s anomalous ones out there, we’ve done some in Europe, we’ve done some in Germany, some in UK and some in Israel, that’s less by design versus coincidence that we’re very responsive to whatever the ecosystem is giving us that point in time. How
do you feel about jurisdictions that are non US allied or fuzzy? like China, for instance? Yeah,
we haven’t done anything there. And that’s a really interesting topic to bring up, because it isn’t until recently that that’s become somewhat of a third rail. If you go back 2030 years, when China was really modernising there’s been some tremendous winners that have come out of that ecosystem. But especially recently, it’s become very much something that’s potentially adversarial to the United States. And there’s a variety of firms out there that have had to cut ties with their China practice where they’ve made a lot of money. And so for us, that’s not something that we do by virtue of our sort of mandate. That’s, you know, more Western aligned, I guess you could say, but certainly in the past, people have done a good job from an investment standpoint, investing in those areas. But I think today, it’s a different market, a different world, and people need to be careful.
You mentioned before about sort of dual use technology, so companies that may be selling a commercial that should be selling to government or or vice versa. I’ve seen examples of this that have been unsuccessful. Like you, sir, you may to focus on too much too early. And like, you’re kind of everything to no one right? Have you seen some successful dual use applications that started with success on the government side, and then effectively deployed and commercialised in the civilian sector,
we’d like to flip that paradigm we want. We think that companies can get faster iteration cycles, faster go to market progress, by selling to the enterprise or selling commercially to normal enterprises and fortune 500 and SMBs. We think that is the preferred way to start, in our opinion, and ultimately using the government as an expansion market, largely because of what you described, but the government sales cycles, like even if you think you know, you’re gonna get something that can be a continuing resolution, which pushes out your contract another six months to a year, there’s just a lot of risk there, that’s really hard to sink your teeth into. So in our opinion, we prefer to invest in a company that has critical mass in the enterprise, and ultimately help them expand their market opportunity into being something that can be much more significant, albeit much more lumpy. There’s exceptions to the rule. However, we invested in a company called Merlin, which is an autonomous, literal AI copilot for fixed wing aircraft fleets, where they can take a pilot starting with one pilot with a goal of going to full autonomy over time. But that has its own barriers commercially. Right now, FAA regulations aren’t there yet, you have to go through significant certification, it’s probably going to be a little bit further out until the American public is is comfortable with doing things like resupply and logistics domestically without a pilot onboard. So where do they start? We think this is the War of the Worlds going, we’re pretty certain this is where the world’s going. We just don’t know the exact timeframe. And so for us with that one, the thesis really was starting with selling to Uncle Sam, and selling into the government market, because the same drivers in terms of pilot shortages that exists, we already can’t keep up with demand exists in the military side as well. But there is unique approvals that exist in the military setting. We’ve already operated with remotely piloted aircraft for the past 20 years, it just hasn’t gone full autonomy. And so I think starting with the government, in that sense, makes a lot of sense as the commercial market matures. So I think that’s one of the exceptions in our portfolio. Over time, I think However, it’s important to note that there’s plenty of examples whether that be GPS that we all benefit from the Internet, we all benefit from, you know, space technologies wouldn’t be where it is today, where it not for government, significant government investment. The DARPA Grand Challenge in terms of autonomy has sort of like led to commercial autonomy as well. So I think there’s a lot of precedent For larger scale things to be developed inside of the government, the question is, is it on a relative? Or is it on a relevant venture bankable timeline, which is really hard. And so for us, that’s why we like to start enterprise or commercial, really refine the product get critical mass get to at least a few million dollars, if not $10 million of ARR. And then that’s sort of like now we have a little bit of breathing room as a company for us to expand into something that’s potentially larger on a single contract basis. But it’s a little bit lumpy or so the business needs to be able to sustain itself through those sales cycles.
And you help somewhat with the go to market on that. We do
we do. And that was really our initial thesis is that when we were when we started Harpoon, we were investing in these commercial technologies. And we said, hey, we think we have a large addressable market in the enterprise side, or excuse me, in the in the government side, let us roll up our sleeves and show you how and borderline do it for you, we’ll get you your first government deal without you having to do much in terms of changing your product, navigating that go to market, we’ll handle that as a full service basis for you as a venture firm. And so that was our value add, most venture firms out there have a differentiated value add beyond just capital these days, some really still, you know, lean on their brand, which is fantastic. But for us as a new start venture firm, we had to carve out some we have, we’ve had to carve out something that really puts us on the map and allows the founder to say, Hey, this is why these guys are different. This is why we want these guys involved. And today, we’ve closed about $500 million, and primarily government deals for our portfolio companies. And there’s numerous examples of you know, Kodiak robotics, just this past year got a $50 million deal through the Department of Defence, which we think is going to scale much larger, you know, from here on out. More commonly for the software names, those are much smaller, either, you know, six or seven figures in terms of size. But that adds up over time. And I think for us and for the ecosystem, it’s demonstrated that it is possible. It’s not, you know, it’s not impossible by any stretch of the imagination. And that’s something that, you know, I think is a cause worth serving, we want our public servants to have the best technology in the world. We want our men and women in uniform to have the best technology in the world. That is a world I used to live in. And I’m very passionate about making sure that the United States broadly speaking commercially, all the way through national security has the best technology in the hands of the people that use it.
Do you have to underwrite your investments to a different time horizon? Considering, you know, the sales cycles and the amount of staffs and red tape that you have to get through on the government side?
We’d like to think no, the reality is probably yes. And I think part of the reason why it’s no is there’s a tremendous impetus throughout a variety of government departments and agencies, whether it’s all with top level support, that’s bipartisan, from Congress, all the way to the executive, everybody knows that we need to start bringing in better technology faster. And what you’ve seen is a, I think it’s too, too strong of a word to say reform, we’re not quite towards acquisition reform quite yet. But I think it’s moving that direction, we have more responsive pools of customer capital inside of the government than we’ve had ever before. We recognise that if we do not invest in innovation, as a country, and we do so faster, and we do so in a way that’s, you know, on par with the pace of technological development, we’re going to be left behind, we’re going to continue to have legacy technology today, yesterday’s technology today, we need today’s technology today as best we possibly can. And ideally, tomorrow’s technology, which is a high bar, I think it’s still really hard to accomplish, however, because technology, you know, advancement is just so rapid. And you see what the open AI guys are doing. It’s it’s crazy month to month, like how do you how does an enterprise even understand how to buy something that quickly when things are moving that fast? I don’t think the enterprise can even do it. So having Uncle Sam do it is is you know, a whole nother can of worms 100%
Like, I would like more of your insight on sort of AI adoption. And it’s, it’s something that we think a lot about it and you stack we only have one company that primarily serves government, and its air force, but the majority of our investments are going to be in like these legacy spaces. So think manufacturing, and construction, think like supply chain, and, you know, in a lot of consumer applications, or tech forward applications, you see this jump from completely human workflow to completely AI work. Yeah, right. It’s a huge jump. But we think a lot about you know, there’s going to be this this transition and many of our segments where it goes from, you know, human workflow to AI enabled or AI assisted to maybe human enabled or human assisted. So AI is primarily doing it with some human oversight. And then finally, you know, to AI first, how do you think about AI? AI adoption in these, you know, government segments, and how that will roll out over time. I
think I agree with you on that. I think it’s been fascinating to me to see just the security, the compliance, all of that side of the house needs to be solved before the enterprise can truly roll this out at scale. And same thing can be said in the government space as well. But I think we’re also going to have to deal with, you know, regulation and legislation around this. And there’s early innings of where that’s going. And there’s multiple camps, as you can tell, like there’s camps that are really believers in what this is going to do. And there’s, you know, people who say, we need to regulate the heck out of this. And so I think it’s a little bit too early to tell where this is gonna go. But simultaneously, I, I believe that Accenture last quarter was the biggest winner and the generative AI wave, I think they did like a billion dollars in AI generative AI services on top of these enabling technologies. It’s really remarkable to see because, you know, people are trying to grapple with how do we implement generative AI. So I think right now we’re struggling with across government, or the enterprise, just implementation, we have these new emerging tools and products that are going to transform how we do our jobs. I mean, it’s even transforming part of my job on the venture side of the house. But implementation is a real challenge. Once we crossed the implementation, then, and the security and the compliance around that, then I think that we’re gonna have to go from there, in my opinion, given how fast things are changing, I think implementation is can continue to be a big problem that we’re gonna have to face because this isn’t something where it’s static. And day one, we have this capability, and we’re just going to have to operate it for another decade, it’s not going to change, it’s going to evolve in ways that we can’t predict, which is exciting, but also scary at the same time, especially if I’m a buyer at our organisation, I’m going to have to continually be operating on a refreshed timeline of buying new tools and techniques, which maybe things that we bought a year ago are now legacy and dated, which is a little bit frustrating, I have to imagine 100% 100%,
no room for elucidating AI, and in some of these applications,
there’s not there’s not that’s for sure.
You know, I talk to our founders a lot in about sort of MVPs and beachheads and like earning trust, like if you can get in with your customers, and show them what it’s like to work with you and earn trust over time, they will give you more and they will take more risks, and you can introduce you know, AI enabled functions and and they will take a shot on those things because they believe in their relationship with you and your ability to fulfil. And you know, I see a lot of whiz bang technologies. He just watched the demo day for yc. Last week. Yeah. Well, let’s just say there’s a lot of wishful thinking in terms of enterprise adoption out there. When it comes to AI. There
is a lot of wishful thinking. But I think that’s also, I think, with a lot of visionary people, just with the the amount of collisions that are existing out there. With the amount of people that are trying to do something on top of this enabling technology and amount of capital that’s going to it, it’s inevitable that there’s going to be breakthroughs. I think that’s one of the great things about venture and technology in the Silicon Valley ecosystem, is that that ecosystem really rewards that behaviour that rewards that risk seeking that risk seeking, in order to try and find that needle in a haystack that’s going to change an industry or change the world. Most industries aren’t like that. And that’s something that really excites me about this space. And honestly, expect excites me about the AI wave. But I think we all need to be a little bit more comfortable being uncomfortable, not knowing definitively where things are gonna go. And that’s hard from an investment standpoint, too, because more often than not, we do have a little bit of analysis, paralysis on the AI side of the house. Because things move so quickly. We’re constantly asking ourselves, like, you know, in this case, it seems like a lot of value is accruing to the incumbents. How do we don’t want an incumbent isn’t going to do this? Is this truly a feature? Are you built on top of somebody else’s technology? Or can you build an enduring moat as a vertical specific solution? Using these enabling capabilities? Hard to know, definitely hard to know. And it’s harder to know, especially if the valuations are inflated, you can take a lot more risk. If you’re if you’re paying something, it’s a 10 or $20 million valuation with an experienced team, then you can pay $100 million valuation. at those levels, there’s just no room for error. So that’s something that really gives us a little bit of pause for
us and you have a super unique background and a bunch of different capacities and domains. You’ve also been at lightspeed and a16z. Talk a bit about how you’re working with your portfolio companies post investment, you know, how do you support your startup founders?
Yeah, a lot of how we think about it was formed through those experiences, and we were all a creature of our circumstance and who we’ve learned from, and I was really fortunate to start my career through working at Andreessen Horowitz and to have been mentored by some of the best GPS over there. It’s It’s crazy to think that when I entered there, it was still on the early innings of their their growth trajectory, they’re probably maybe a 20th of the Aum they currently have. What was the time for? That was in 2015. So there were about seven years in roughly maybe maybe eight. And they really reshaped the landscape in terms of how a venture firm operates was that really services focused giving founders everything they needed to enable their their business, in addition to capital, which was very different than how most venture firms worked at the time. I think we took a lot of that perspective ourselves and tried to intertwine it with us at harpoon. Also, we had to solve the cold start problem. As a new venture firm, it’s really hard to start and solve for adverse selection and ensure getting access to upper echelon deals. That’s something that Ravi over at lightspeed taught me is that venture capital and startup investing is not an asset class, it’s an access class, you need to have access to the top deals, or else your returns aren’t going to beat the s&p. And so these lessons I’ve learned from some of the luminaries of the industry is something that we truly internalise. And so for us as a venture firm, it’s only been around been around for half a dozen years, we knew we needed to solve for access. And we knew we needed to provide differentiated value to our founders, or else we wouldn’t have an opportunity to solve for access. And so for us, as I alluded to earlier in the phone call, it was really specialising in, how do we knock down those first few dominoes of government go to market. And we do that on a timeline of relevance to an early stage company while not distracting them. And that was all predicated on the fact that we thought there was a larger inflection in the market where we could take commercially focused businesses, show them identical pain points inside of the government market and help them capture revenue. So examples that we like to describe is, if we know there’s an incumbent in the space, who’s a big technology business, we can find out who the buyers are of that which contracts they’re on already inside of the government. We think if you have a 10x Better capability that we can help you cannibalise some of that budget. So let’s say hypothetically that confluent is doing a really good job, and we know they have a $50 million deal. Again, hypothetically, well, we want the next generation version of confluent, we want to help them go and capture maybe it’s a six figure deal to start that we give those customers an opportunity to try a little bit of something else. And to your point. If you’re nestled in with a customer and you build trust, over time, you can capture more and more of that market share in that individual account. And so we’re not trying to reinvent the wheel. We’re just trying to show these founders what the what the art of the possible is. And fortunately, over time, we’ve built up case studies of having done that. We’ve done that repeatedly over time in a variety of different technology areas. And now we’re to the point where we have found references and case studies where our founders are introducing us to their friends and showing and telling them about the differentiation that we provide. The big firms and multistage firms do a lot of fantastic things. They have a bazooka of capital that they can put against problems. But we tend to be a little bit more hands on, in my opinion, specific to this value add that helps us differentiate. And I think software access where we can, you know, earn the opportunity to be involved with some of the best founders in the world. It’s a very hard thing to do. But I think it goes back into our shared DNA in the swimming pool. Putting in the yardage, putting in the effort, it goes back to my DNA in the SEAL teams, where I’ve recognised that the best teammates are the ones that truly exude servant leadership. They’re the ones who are in first and outlast, and are really working to with that shared trust to demonstrate that they’re going to be there when you know the literal in that case, bullets start flying, or in our case, it’s figurative, certainly. But that’s the type of mentality we want to bring to our founders. And I think it is discretely different than most other Silicon Valley venture firms. Do
you have any unique methods for testing? For mindset? Like you’ve had some incredible experiences? And I think that there are some characteristics similarities between successful founders and like six successful folks in the seals and maybe in the pool? Do you have any methods that you use to kind of test for that mindset?
We do, but it’s still really hard. And if you look back at or if you look how SEAL training works, we’ve been trying for decades to try and have more than about 25% to 30% of the class who starts make it to training, been trying for decades. They’ve done all the psychoanalysis, the physical analysis, the background, what sports you play, how’d you do in school, all this stuff. And still, for whatever reason, only 25% to 80% of people make it through. And that’s after having much more rigorous like screening processes of people who get into the programme in the first place. I think anybody who’s been in the community would say that Like our screening for who walks in the door has never been better, much more sophisticated, better PT scores, better grades, better leadership, all of that stuff. Still, you don’t know until you go through adversity, who’s going to make it through. So I would like to think that we have some screening mechanism. But I also think if the seal community as a whole can’t screen better than having a third of the people that walk in the door, actually make it into a seal platoon, I’m probably not going to be much better than that myself. So we do have attributes that we look for, we look at the background, we look at the pedigree, we look at all these things, we build the relationships over time. But until you really go through the crucible with somebody, I don’t think you really know who they are. I didn’t know who I was, as an individual until I went through the crucible. That’s part of the reason why I joined the military in the first place, is I constantly had to like ask myself, who am I? Am I capable? How am I going to act when things are really hard. And I’ve had my failures to be sure, like, I’ve really messed things up in the swimming pool and in the community. So I’m not perfect by any stretch of the imagination. But you really don’t know who you are until you’ve faced severe adversity. And it’s interesting to see now, as we back founders over the past six years or so. And a lot of that was during some really good times back during the 2001 or 21 timeframe. And when capital was available, customers were buying. And now since then, we’ve gotten into much more of a slowdown to say the least, customer budgets have contracted, they have refocused towards generative AI, capital is harder to raise, it’s been difficult to recruit the best engineers, you really start to see people’s true colours during those times. And I think that’s something that it’s really hard to diagnose on a relevant timeline to make an investment. That’s why for us, we really have a hard time and a competitive deal. That’s a two week flash to bang. We’ve done it, sure. But I almost say listen, this just isn’t for us, like we can’t get there, or we can’t get smart enough. And more importantly, we can’t know if you’re going to be those 25 30% That’s really going to be there when the going gets tough. And all of these things are hard. I’ve never seen one. That’s not just difficult. At some point in their maturation, there’s always something it’s either a sale, that’s hard, recruiting is hard. Raising money is hard. Even if you read on TechCrunch, that everything is up into the right. The behind the scenes is never that way, as you know, like, there’s all it’s always hard. And so who are those folks that are going to persist, regardless of what’s thrown their way, and sort of like manifest their goal of what they’re bringing to market and iterate and flex on the axes, we would say, you know, in terms of the go to market, or the technology or the team or all the above, it’s really hard to predict, almost impossible to predict in a week or two. Either we do a better job. If we have, you know, a few months to spend time with somebody, a grid, we
found that when we’re in the chase position, our decision making is is not good. And when the founders in the chase position are decision making gets much
better. Absolutely. I agree. But it’s also a very hard asset class, because some of the companies where I’ve had the most time to get to know a sector, you know, by luck, coincidence, or what have you. Some of those end up not working at all. It’s like, man, that’s the one I’ve had the most conviction and I’ve done the most work. This is the one that I thought so clearly through my own ignorance, and hubris was gonna be the biggest. And otherwise, where I’ve had the shortest amount of time to make a decision, some of those end up being the best. And so it’s really sort of like not what do you do with that? Right? Like, how do you how do you take that information and sort of like, apply it? Well, obviously, we can’t do deals that are short fuse deals that are, you know, light on diligence. And obviously, the other end is, is probably not practical either. So it’s a really difficult market and different thing where there’s just so many countervailing variables that make it so hard to predict what’s going to happen in the future. That’s why I think it’s important to truly back the team that you think can iterate and persevere through anything. Even if there’s a technology shift, or a budget slowdown, or Silicon Valley Bank collapse, or whatever it is, there’s going to be something so you better back the team that can iterate through it.
So no, no magic 10 year crystal ball over at harpoon.
I wish I had one if you find somebody that does pay a lot of money for it.
So Larson with regards to technology startups in the defence and national security space, you know, talk about the areas and the sectors you’re most excited
by. There’s something that really excites me right now. And it’s a little bit terrifying. But I have some friends of mine that have spent time in areas around the world and to understand how you my former job and our former job in Special Operations is fundamentally changing through drone and counter drone warfare is something that I think is under appreciated right now. There’s a lot of drone companies that are being stood up lots of individual solutions. Same thing on the counter drone side of the house, we did one of the early counter drone deals, when I was at lightspeed I helped to lead that in the market was just very early, then. I think it’s here. Now, I definitively know it’s here now. And how our militaries are going to be able to successfully deter threats around the world, and the next 10 years, I think, is fundamentally changing. Now, adversaries around the world have the opportunity to have significant capability at a very low price point. That didn’t exist 510 years ago, it really required large scale significant budgets from nation states, like the United States in order to employ very sophisticated technologies in a combat environment. Now, that’s changed. Concretely, and we’ve seen it in Israel, we’ve seen it in Ukraine. And so we know that that’s absolutely happening. One of the big concerns I have is that our behemoth acquisition process here in the United States, I don’t think is best setup, to truly iterate with the new capability that’s coming online. And I think that if you have a much more agile adversary that’s less beholden to vendor lock, they can run circles around us and a lot of that, and so that’s something that I think is an opportunity, I’ll be a little bit, you know, scary. But also in line with my background, you know, and it’s something that I do think is going to reshape the power dynamic in the next 10 years, there’s going to be a whole new strata that is, is put into the warfare mix. And there’s companies like Andrew that are building towards that, which is super interesting. You know, again, I don’t want to belabour the point and say that we’re defence tech investors, as we’ve talked about before, we prefer to invest in enabling, you know, commercially viable technology that has the ability to sell across the public sector, state, federal and local. But I do think that that is something that we probably have unique insights into that most organisations don’t. And we’ll see where it goes over the next decade. But I think there’s something there that’s beyond just an Andrew. So
lots and lots of different opinions on the next question, but the US has the largest defence budget by a significant margin. Why is continued strategic investment in critical infrastructure and defence capabilities important to our nation’s future? Or is it not
the same way it’s important for our domestic venture capital ecosystem, without capital, we can’t support innovation, we can’t support hiring the best engineers, and we can’t keep that here on our home turf. And so innovation is going to go elsewhere if we don’t. So I think it’s it’s important for the exact same reason that our venture capital ecosystem that you and I are involved in is we want that to be we want we believe in technological progress. We believe in entrepreneurship. And at the end of the day, you need capital into in order to instigate that because you can’t do it for free. So I think it is really important. That said, I do think there’s a lot of bureaucratic bloat. I got into a conversation not too long ago at a conference where, you know, the, the fellow panellist was saying, we need to spend more on defence, I actually think that we could spend a lot less, because I’ve seen how much vendor lock we have. And in terms of some of these big monolithic programmes and the solutions that are just becoming far outdated. I think you see it with what Andrew is building, they’re building far greater capability on the software and integrated systems and robotics side than what our traditional primes are building. And they’re doing it for cheaper, and go figure, because I think they have a different incentive. I think we need to reframe the incentive structure of how we acquire innovation here in the United States. And if we do that successfully, I think that we can accomplish a lot more with our existing budget versus just layering on more and more taxpayer dollars in the pursuit of something that constantly evades us. And I think that we could do that much more intelligently with new enabling technology. That’s 10x. faster, more secure, and cheaper. Arson,
if we can feature anyone here on the show. Who do you think we should interview and what topic would you like to hear them speak about?
I’d love to see Trey and Palmer and those guys from Andrew will come on the show. I’d love to I mean, they’re it’s always a colourful conversation. Maybe
you can help us set it up happy to Larsson give us a book article or video that you’d recommend the listeners.
I love the book The Endurance about Shackleton’s voyage and down to Antarctica how they got trapped in the ice and how they ultimately I guess I don’t want to spoil it for everybody how they they got out of that without losing a single person. It is the single greatest story of human in that I’ve ever read. I think it’s an absolutely fascinating story. And I although very different than building a bit Asmus I think the leadership that was exuded in that book, the team orientation in the diarist of circumstances and how he got everybody safely home, sort of like being a founder. You have your boat, but sometimes it gets stuck in the ice. How do you get everybody out alive? Well,
Larson, do you have any habits, tactics or techniques that are a secret weapon. We’re
all juggling a lot. I have three kids. Four, if you count Harpoon, managing all that is very difficult. So finding time at the beginning of the day for me to have my own personal time to get a workout in get the endorphins, endorphins going is absolutely critical to my day. I’m a vastly different person. And you would probably know it today on this podcast. If I wasn’t up in the morning, get my workout in with my neighbour. It’s it changes my entire outlook on life and my entire outlook on the day. So that’s what I would recommend to anybody is to wake up, get the blood moving, do something because I think it positions you well for the rest of the day, regardless of what the world throws at you.
All right. And finally here Larson, what is the best way for listeners to connect with you and follow along with harpoon? You
can check us out on our website harpoon.vc as in Victor, Charlie, or on LinkedIn. Awesome.
The man is Larsen Jensen, and the firm is harpoon ventures Larsen. Thanks for all your thoughts today. And thanks for your service to the country and the amazing representation at the Olympics.
I appreciate it so much. Thanks for having me on. This is a lot of fun, really honoured to be on this podcast again, you guys are probably the first in the venture landscape to really put this stuff out there. So I really appreciate it. And I’m glad to be here.
Thank you, sir. Appreciate it.
All right, that’ll wrap up today’s interview. If you enjoyed the episode or a previous one, let the guests know about it. Share your thoughts on social or shoot them an email, let them know what particularly resonated with you. I can’t tell you how much I appreciate that some of the smartest folks in venture are willing to take the time and share their insights with us. If you feel the same, a compliment goes a long way. Okay, that’s a wrap for today. Until next time, remember to over prepare, choose carefully and invest confidently thanks so much for listening.