Venture Capitalists Should Bet on America

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Pictured below, Karl Marx Jr enjoying the fabulous new Spritzler Palm Beach resort.

Venture Capitalists Should Bet on America

Washington can cooperate with the private sector. Elon Musk’s SpaceX showed the way.

By Katherine Boyle and David Ulevitch, WSJ

May 8, 2023 5:34 pm ET

Shortly after the final space-shuttle mission in 2012, an eccentric entrepreneur named Elon Musk appeared on CBS’s “60 Minutes” and made the case for exploring outer space. America was still recovering from the Great Recession; Occupy Wall Street had flared months earlier; and Washington was focused on the Arab Spring, a war in Syria and a new supreme leader of North Korea.

Heading back to space seemed outlandish, maybe even wasteful, and astronauts Gene Cernan and Neil Armstrong were skeptical of the private-sector approach. But Mr. Musk said he hoped his startup might get Americans excited about space once again. “We’re a little scrappy company,” he said of SpaceX, which had launched several rockets. “But every now and again, a scrappy little company wins.”

SpaceX has now launched rockets 226 times, sticking nearly 80% of its landings. In 2019 it launched Starlink, a satellite constellation that brings the internet to remote corners of the world. Last month, in a dazzling feat of American engineering, the company launched a skyscraper-size rocket intended to take people to Mars some day. Where the federal government lacked will and resources to build a decade ago, this startup picked up the slack.

SpaceX’s influence extends far beyond rockets and the tens of thousands of American men and women it has trained in bending metal. Mr. Musk’s company is inspiring a generation of innovators to dream bigger and build companies that solve America’s hardest problems. At a time when policy makers are skeptical of technology, we’re seeing patriotic founders excited to build for the national interest. As leaders of one of the largest venture-capital firms in the country, we believe it is time to invest in America.

Sadly the reasons for this aren’t exactly rosy: war in Ukraine, rising tensions in Taiwan, and global supply-chain fragility have reminded our entrepreneurial class that America’s dominance isn’t guaranteed. But more founders are building technology companies in the areas that Washington cares most about: aerospace, defense, manufacturing, supply-chain and physical infrastructure—all sectors that Silicon Valley ignored a decade ago. We call this movement American Dynamism, because these companies help keep America the country from which people want to be, to which they want to immigrate, and in which they want to build a family, a career or a company.

We’ve invested billions of dollars in American Dynamism companies, and we call on other venture firms to do the same. As SpaceX reveals, partnerships between a company and the government can often lead to engineering feats faster and cheaper than government would be able to accomplish alone, and that private industry wouldn’t be able to achieve at all. To access needed technology, the Defense Department has experimented with startup incubators and trusted capital networks for small and midsize companies. We believe many of those initiatives are unnecessary, because venture capital is better able to assess talent and risk as companies form and grow. As the Economist recently pointed out, America is booming relative to the rest of the world. There’s never been a better time to invest in American Dynamism companies or for Washington and venture-backed companies to build together.

Two trends in the past decade make this collaboration urgent. The first is the decline of the civil service, which a 1987 study by the National Commission on the Public Service deemed “a quiet crisis.” Fewer young people are working in the federal bureaucracy as more choose industry over public service. This means federal agencies struggle to recruit the best talent and often lack the advanced expertise to build their own technology tools to ensure that agencies and government initiatives don’t crumble.

The second is a more recent phenomenon that bodes well for government innovation: More young people are studying computer science and engineering, leading to a far more tech-savvy workforce, both inside and outside government. Public servants and veterans who understand complex problems but once lacked the technical skills to solve them are now becoming founders themselves.

As the pace of technology accelerates, Washington and Silicon Valley must build together to maintain America’s leading global position. Fortunately, the two ecosystems’ goals are more aligned than headlines often make it seem. The two largest venture capital fund-raises of the past year (in both of which Andreessen Horowitz participated)—SpaceX and Anduril—are American aerospace and defense companies building solutions for the Pentagon. That would have been unthinkable only a few years ago.

Covid also transformed the opportunity for innovation, aligning tech with the needs of citizens outside the coasts. Silicon Valley isn’t merely a place in Northern California but an idea that spans the country. In the past year alone, we’ve invested hundreds of millions of dollars in more than a dozen companies based in Texas, Georgia and other states. Among our American Dynamism investments last year, not a single company is based in Silicon Valley or San Francisco.

Perhaps most important, venture capitalists are now aware of the crucial role we play in supporting America and its allies. While some American investors previously chased investments in adversarial countries such as China, it’s now clear they bet on the wrong government. Unlike communist China, America fosters a competitive private sector and the desire to build new things. While Beijing clamps down on entrepreneurs, Washington celebrates job creation and innovation.

We invest in scrappy little companies with small teams and big dreams. We often work with founders knowing the mission is all but impossible. But it’s in those moments—when we’re simply hoping to get off the launchpad—that we see the greatness of the American spirit. Venture capitalists are good at helping founders build companies, but we need Washington to support small startup innovation, in its rhetoric, regulations and partnership on important problems. This era of American Dynamism is only beginning, and it’s our collective responsibility to support upstarts that strengthen the country and those who devote their lives to defending it.

Ms. Boyle and Mr. Ulevitch are general partners at Andreessen Horowitz, a venture-capital firm, where they lead the American Dynamism practice.