The Countdown Memorandum
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The Countdown Memorandum
Doubling down on the future of American industry
Preface
Most public venture theses are light on details. Sure, we invest in “founders first.” We invest in “world-changing companies.” We invest in “outliers.” But who doesn’t? This manifesto is our attempt to outline how we see the state of the world, success in hard tech, the challenges we must collectively confront as Americans, and our role as a venture capital firm. For founders and investors alike, this document will serve as our statement of philosophy and purpose. You may not agree with everything (or anything) that you see here. We welcome thoughtful discussion, criticism, and everything in between.
What Comes After the Revolution?
Pundits often describe our world as being in the middle of a “fourth industrial revolution,” defined by a wealth of computational power and next-generation technologies such as robotics, 3D printing, quantum computing, alternative energy, and applied artificial intelligence. Grouped together, we like to call fields like these “hard tech” because they’re difficult spaces in which to found companies in. Simply put, they require a fragile blend of sophisticated engineering, technology maturity, and significant capital to start making headway in.
In many of these hard tech verticals, we’re living out Kurzweil’s Law of Accelerating Returns. For example, consider the field of additive manufacturing. What developed in Japan as the relatively primitive practice of stereolithography evolved into commercial 3D printing systems like MakerBot by the late 2000s. Over the last decade, these systems have grown exponentially in utility and cost competitiveness—laying the foundation of complex, large-scale manufacturing apparatuses that underlie part of the global aerospace supply chain at companies like SpaceX and Relativity Space.
Nevertheless, we don’t believe that it’s sustainable to invest off the tailwinds of individual revolutions alone, nor do we believe that this is how generation-defining companies are built. Instead, we’re interested in how companies sustain revolution-level progress for multiple generations. In other words, what comes after a revolution? The most successful technology companies of our time—Amazon, Google, Microsoft, and Apple—have all been around for decades, and this is not a result of the personal computing or internet revolution alone.
Rather than participate in individual technological revolutions, generation-defining businesses instead leverage evolutionary thinking to grow over decades and transcend multiple revolutions. Evolutions entail lasting but accelerating change. When a company evolves, it is constantly getting better; and, that better state becomes the new baseline from which future progress occurs at accelerating rates. Evolutionary thinking encompasses a wide set of behaviors, but a few that we pay particular attention to are as follows: the audacity and intention to monopolize an industry; the willingness to continually reinvest profits into research and development; the open-mindedness necessary to undergo self-reinvention in response to changing technological and societal tailwinds; and an incisive vision, birthed from strong leadership and a powerful culture.
One of the clearest embodiments of evolutionary thinking lies in the most valuable company in the world today, Apple. Two years prior to the launch of the iPhone, Apple was primarily a personal computer company. Apple was also barely one of the 100 most valuable companies in the world. As an example of self-reinvention, it is now worth well over thirty times more just fifteen years later, with personal computers (i.e., Macs) now being the least revenue-generating vertical of its core business. Almost every product Apple has launched in these fifteen years has since become a category-defining piece of hardware that exerts monopolistic market pressure, from the iPad to the Apple Watch to AirPods. Of course, Apple has only been able to rapidly develop these product lines off of the decades of physical, technological, and cultural infrastructure it had already established, thanks to its evolutionary thinking. Each new product was developed with the wisdom gained from previous ones.
Thinking evolutionarily has allowed Apple to produce what we consider to be a flywheel of innovation. A flywheel enables a company like Apple to create, at an accelerating pace, category-defining and lucrative products. Whereas most organizations slow down their pace of product development as they become larger because of inefficiencies associated with scale, generation-defining companies that leverage evolutionary thinking actually accelerate this pace—think Apple, Stripe, and SpaceX. To us, this is exactly what ought to come after the revolution.
Building Industrial Flywheels
Evolutionary thinking is even more crucial for hard tech companies, primarily for the reason that R&D cycles are lengthier. It may take a software company like Snapchat a year to ship a new product like Stories, and it may take Apple three years to ideate, develop, and ship something like AirPods. In contrast, the product development and commercialization timeline for many hard tech startups may be half a decade or longer. Because of these prolonged R&D cycles and the scale required to meet customer demand, the type of flywheel that accelerates the momentum of product development for a hard tech startup must be especially grounded in a strong command of the physical world and its moving parts (e.g., raw materials, suppliers, manufacturing, equipment, and logistics). Without such mastery, a hard tech company may fail to ship a product entirely. As a result, we like to call this particular flywheel of innovation an industrial flywheel.
Broadly speaking, we believe these industrial flywheels uniquely involve (i) extensive digital and physical vertical integration of product and (ii) radical ownership of development and production by individual engineers. Leveraging these ideas will accelerate progress in both yet-to-be-disrupted multi-trillion dollar physical industries like construction and energy and ones already undergoing so-called revolutions, like aerospace, defense, cybersecurity, and manufacturing.
To illustrate the force of the two concepts outlined above, consider the most famous and successful aerospace startup in recent years: SpaceX. It took SpaceX six years to successfully launch its first rocket and many more years to begin generating market-leading revenue. In order to do so, SpaceX has steadily increased the vertical integration of its supply chain by bringing most engine and electronics production in-house and creating custom firmware and software. Thus, SpaceX can rapidly prototype new rocket designs and components without being significantly hindered by inevitable supply chain delays from external suppliers or manufacturers. This also increases the force multiplier for capital invested in paying engineers. Instead of paying contract manufacturers, SpaceX can often pay in-house engineers to do the same work, making them more competent for future engineering tasks.
Second, SpaceX, like many other successful hard tech startups, has made responsibility and accountability compulsory for its engineers in spite of its scale. Almost every engineer at SpaceX owns something, whether it be a piece of hardware or a specific production process. Not only does this force engineers to develop well-rounded product and design competency, but it dramatically accelerates communication. Rather than being caught up in hierarchical bureaucracy, engineers know exactly who to talk to in order to understand how a particular part or production process works. The extraordinary responsibility engineers have—coupled with vertical integration—has allowed SpaceX to accelerate its pace of rocket launches and “product” releases (e.g., Dragon, Starlink, Starship), rather than stagnate like other hard tech companies might.
Of course, SpaceX’s success is built on top of an already-robust aerospace, defense, and manufacturing ecosystem. For the past century, aerospace and manufacturing have been anchored by behemoths like Ford, Boeing, Lockheed, and Northrop Grumman, who built their own industrial flywheels to survive on a timescale incomprehensible to most startups. Ford, which inarguably reinvented manufacturing, took vertical integration to an extreme under the leadership of the company’s founder. While better known for his assembly line, Henry Ford also purchased thousands of acres of timberland and dozens of coal mines to control the production of his raw materials as well as freighters and entire railroads to control the transportation of them. Doing so helped him cut costs and increase efficiency at every step of the manufacturing process, accelerating vehicle production.
The American Vision
Building industrial flywheels is not only an economic imperative for companies, but it’s also a crucial geopolitical one for the Western world. The conflicts of the twenty-first century will be primarily technological and fought between ambitious, powerful nations like America, China, and Russia. Should we lose technological ground, we will almost certainly also lose ideological ground to our closest rivals, with a country like China potentially displacing us as the world’s value arbiter.
“Our country is more divided than ever before” is a line repeated so often that it has almost lost its meaning. Nevertheless, when it comes to our geopolitical interests, we must rally together and ensure that our technological infrastructure is unsurpassed by any other nation. China, our closest technological rival, has arguably unmatched control over the physical world today. As a brief but particularly egregious example, in the fourteen years since California launched its high-speed rail initiative to connect San Francisco and Los Angeles, less than 120 miles have even begun construction. In roughly the same amount of time, China has constructed close to 25,000 miles of high-speed rail, spanning quite literally its entire country. In addition, China appears to be rapidly developing its hypersonic arsenal and is the largest outbound investor in alternative energy technologies. On the geopolitical battlefield, the country with the strongest energy leadership and defense capabilities will amass increasing amounts of soft and hard power.
We also cannot afford to delude ourselves into technological and infrastructural stagnation with ideas of inevitable American exceptionalism. The past century of prosperity cannot be extrapolated to the next one, and it is certainly not a given. Despite a repressive and authoritarian political system, the Chinese citizenry has experienced more than three times more economic growth over the past three decades than any other citizenry in the world and have proven to be quite capable of the type of dramatic change conducive to technological progress.
Not all hope is lost though. America is still the most innovative country in the world, with technological progress highly valued by both the private and public sector. By many metrics and surveys, America is also still by far the most desirable country for immigrants. And, by many readings, America still has our closest rival, China, beat in terms of technical innovation and supply chain prowess. We control five of the world’s ten fastest supercomputers to China’s two; our military is technically superior in nearly every dimension compared to China’s; and for the first time in decades, America is now a net energy exporter. Still, none of this ought to be taken for granted. Decades of American prosperity have made it difficult for many American politicians to genuinely imagine a world in which America is no longer the most technologically and economically powerful country in the world. If we are to truly maintain our competitive edge, we must double down on investment in American technoindustry and technoindustrial builders.
Countdown’s Mission
The ideas in this memo lead us to our investment thesis: we invest in pre-seed hard tech companies rebuilding our industrial base, with a focus on founders who value evolutionary thinking and aspire to create industrial flywheels. Our mission is to discover and fund American companies capable of accelerating progress precisely when others might stagnate. In rapidly growing hard tech industries (e.g., aerospace), we pay close attention to founding teams drawing inspiration from industrial flywheel concepts that have stood the test of time. In other industries (e.g., construction), we are drawn to hard tech founders who are bold enough to forge a new path in their field and establish tech-enabled industrial flywheels where little exist today.
However, for American startups to create industrial flywheels that ensure our continued technological superiority, they will need to leverage two crucial resources in the long term: the right people and the right principles.
While capital is increasingly a commodity, talent is certainly not. The right engineer can have an asymmetric effect on a company’s trajectory. The industrial flywheel principle of radical engineering ownership is powerful, but it clearly requires the engineers in question to be extremely talented and competent if they are to be unilaterally entrusted with projects. It is therefore impossible to build a highly successful hard tech business without possessing the ability to recruit the best engineers, and this is no easy task.
Nevertheless, we want to make a dent in this problem. We’ve spent the past year building up a directory of hundreds of talented hard tech engineers to connect with our portfolio companies. It’s also why we’re currently building out an even more robust talent platform, establishing meaningful relationships with hundreds of engineers through “career conversations”: one-on-one chats with engineers that help us cut through the noise for founders who are hiring. Early-stage engineers often graduate from school with a nebulous idea of the range of career options available to them. Our goal is to understand these engineers’ career aspirations and talents and match them to our founders based on a culture and skill fit, which we’ll be uniquely positioned to evaluate thanks to this initiative. Through this, we’ve already helped place engineers at many of our portfolio companies, including a senior principal engineer from SpaceX—and we’re just getting started.
A successful hard tech company must also operate with the right set of first principles. Specifically, we believe it’s critical for founders to reason from foundational truths and values rather than from analogies or hearsay. Our goal is to help founders discover what those foundational truths are for their respective industries and companies through intensive conversations with our advisory network of operators, decision-makers, and engineers across various hard tech industries. These peers will help our founders engage with the right stakeholders to serve American interests while considering company-defining questions, such as what countries and organizations to do business with, take equity from, and sell to.
Finally, we believe holding strong first principles hinges on a delicate balance between skepticism about the present and optimism for the future. On one hand, we believe it’s important for founders to be acutely critical about the way their respective industries operate today to understand the ways it can improve as well as challenges that may lie ahead. As a result, industry outsiders (as opposed to deeply entrenched domain experts) may develop the most valuable perspectives when attempting to disrupt an antiquated market.
However, skepticism alone is never enough. A founder’s job isn’t just to tear down existing practices; he or she must also build something far more compelling in its place. We do not invest in technological nihilism. The most successful founders, in every sense of the word, relentlessly paint a vision of a brighter future and build with that vision in mind. This is not just an idealistic mission, but it also practically helps galvanize the type of talent needed for hard tech companies to create their industrial flywheels. It goes without saying that engineers do not want to build products that are destructive or pointless. Engineers will work more fervently and passionately for a future they believe is meaningful.
Closing Thoughts
To say that building generational hard tech companies is hard is a trite understatement. Not only do founders need to leverage the type of evolutionary thinking that underpins all successful startups, but they also must build industrial flywheels to ensure a strong command of the physical world. This requires both a foundation of rock-solid principles and the ability to recruit and retain a talented engineering team. Countdown’s mandate is to find, invest in, and support this cycle.
With a small team and a mighty vision, we hope to play a meaningful part in realizing an American hard tech renaissance, accelerating the pace of real technological progress for generations. Although challenges undoubtedly await, our ultimate goal is to help founders revitalize American industry—paving the way for exceptional financial returns for our limited partners and decades of continued prosperity for our great nation.