Public sector and defense as opportunity

In this episode of the Capital Stack podcast, host David Paul interviews Ross Fubini, the managing director of XYZ Ventures based in San Francisco. They discuss various topics related to venture funding, technology, and market trends. Here are the key highlights from the conversation: Ross Fubini's Background: Ross shares his background as a computer scientist and his early experience working for Netscape in the late '90s when the internet was still in its early stages of development. Netscape's Impact: They discuss Netscape's role in creating various foundational elements of the internet that are now taken for granted, such as the browser and proxy server, which laid the groundwork for the CDN (Content Delivery Network) business. Ross's Career Journey: Ross talks about his career path, including working for companies like Tellme, Plum Tree, Symantec, and starting his own enterprise software company, which was eventually acquired by SuccessFactors. He also mentions his transition into venture capital and his experiences at KPort Capital and Canaan Partners. Village Global: Ross briefly introduces Village Global, a network-based venture firm that connects luminaries, investors, fund managers, and founders. He highlights the power of networks and the opportunities they create. XYZ Ventures: Ross dives into XYZ Ventures, his current venture capital firm. They have a deep focus on founders coming from the Palantir network and have invested in companies within the enterprise software, FinTech, and SureTech sectors. Public Sector Opportunities: Ross explains their interest in the public sector, driven by his personal background and passion for making a significant impact in areas like defense, healthcare, and government procurement. He mentions their investment in Anduril, a defense contractor, as an example. Identifying Opportunities: Ross emphasizes the importance of identifying changing trends and industries where significant opportunities for innovation and growth exist, such as climate technology and procurement. Software Adoption in Traditional Industries: The hosts observe that traditionally stodgy industries like utilities and infrastructure are now buying software solutions, indicating a shift towards digital transformation and increased adoption of technology. Early Stage of Transformation: They acknowledge that despite the progress, these shifts are still in the early stages, and there are significant opportunities for innovation and growth in industries like defense and FinTech. Missed Opportunities in Healthcare: The hosts reflect on the missed opportunities in the healthcare sector, particularly during the COVID-19 pandemic, where the focus was primarily on telehealth and not enough on tech-enabled solutions and efficiency improvements. Complexity and Competition in Software: They discuss how software solutions that address complex problems tend to offer more value, as the easy problems have already been solved. Additionally, they note that the competitive landscape in the software industry can be intense, requiring constant innovation to stay ahead. Network-Driven Investments: The hosts emphasize the importance of networks and relationships in venture capital. They share their approach of focusing on founders introduced by other founders, as about 50% of their portfolio companies have come through such introductions. Outbound Sourcing: While they don't rely heavily on outbound sourcing, they believe in being proactive in reaching out to potential founders through their networks and leveraging existing relationships. Market Cycles and Portfolio Companies: The hosts mention that they are fortunate to be in a strong position with profitable late-stage investments and well-funded early-stage companies. They advise their portfolio companies to be appropriately skeptical, closely monitor budgets and sales performance, and continue demonstrating growth despite market challenges. Overall, the episode covers Ross Fubini's background in technology, his venture capital journey, the focus areas of XYZ Ventures, and their interest in venture funding within the public sector, including defense and American infrastructure.