Defense and Capital: A Conversation with Raj Shah of Shield Capital
Oct 31, 2023
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In this podcast, Raj Shah, Air Force veteran and venture capitalist, discusses the intersection of defense and capital. They cover topics such as implementing commercial innovation in the defense sector, the importance of artillery and technology insertion in lower technology areas, challenges faced by companies disrupting the defense industry, and the positive impact of successful national security companies on venture investors and entrepreneurs.
DIU's contracting speed was instrumental in bridging the Valley of Death and justifying new technology adoption.
Supporting startups in the defense tech industry is crucial for national security and presents a remarkable investment opportunity.
Deep dives
The origins of the Defense Innovation Unit (DIU) and its early innovators
Raj Shah, the former head of the Defense Innovation Unit (DIU), discusses the origins of DIU and its early innovators. Secretary Ash Carter is credited as the original visionary behind the importance of commercial innovation and technology in the battlefield. Shah highlights that DIU embarked on a mission to modernize the military by leveraging AI and cybersecurity. However, he also mentions the challenges they faced while dealing with various constituencies in Washington.
DIU's contracting capability and commercial solutions opening
Shah explains that one of DIU's core capabilities was its contracting speed to move from prototypes to production. He mentions the commercial solutions opening as a key contracting tool that allowed them to make quick decisions and award contracts to startups in under 90 days. Winning a competitive DIU contract was instrumental in justifying the adoption of technologies by end customers, bridging the so-called Valley of Death. Shah emphasizes that although the Pentagon has similar authorities, its incentive structure hinders quick adoption of new technologies.
The importance of supporting startups in the defense tech industry
Shah highlights the need to support startups in the defense tech industry due to the critical role they play in preserving democracy and national security. He mentions the unique value propositions of these startups, including their ability to bring commercial and national security use cases together. Shah also discusses how startups focused on defense tech attract founders who are passionate about solving important problems and making a significant impact. He believes that supporting these entrepreneurs is not only imperative for national security but also a remarkable investment opportunity.
Continuing our series of conversations about issues at the intersection of defense and capital, Ryan chatted with Raj Shah of Shield Capital last month in San Francisco. From his service in the Air Force flying F-16s to his time as an entrepreneur to the Defense Innovation Unit-Experimental to his current work in venture capital, Shah has been a critical player in trying to maintain and grow the U.S. military's technological advantages.
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