Bloomberg Technology is live from Southern California, live from Long Beach. And the focus is on defense in space technology, of which there is a high concentration in SoCal. And there are specific names in that industry. One of them is Katherine Boyle of Andreessen Horowitz, who is backing American dynamism, is backing startups at the cutting edge of defense and space technology. And Katherine joins us now. And that's where we start. You know, I know Southern California so well, and I know that increasingly we are covering defense tech on this program. And we've been covering space technology for a little period of time now. Why Southern California? Why is there a concentration of activity there, Katherine? Well, I think there's a couple of great historical reasons for why Southern California has really become a defense and aerospace hub. One is that it's always been that way when you think of sort of the traditional primes. They have historically been based in

Southern California. But then, of course, a little company came along a couple or maybe a couple of decades ago called Space X and decided to build in Southern California versus Silicon Valley. And when you think about just the long story of Space X really training up, I always say that, you know, the one of the major gifts that Elon Musk has given the country is that he's James is that he's trained two generations of manufacturing talent and of engineering talent at Space X, and that talent is based in Southern California. And so when you look at sort of the companies that are, you know, coming out of this defense tech movement, a lot of them have been trained at places like Space X where they got their start there, and then they're building new startups and deciding to build where there's a concentration of talent, which is in Southern California. So in many ways, that is, you know, a huge part of the story of that

region. And people, because they live there and because the density has only grown with new and new startups, you're seeing sort of the benefits of that talent density. Katherine. I wrote to Elon Musk and I write to Space X and I invited them to participate in the program and we didn't hear from them. But something interesting that developed during the planning of the show is Elon Musk's announcement that he'd move Space X's kind of technical headquarters from Hawthorne to Texas. The question I have for you is like, does that create a bit of a vacuum or an opportunity for other companies who can attract talent that wants to stay there? Well, I think there's there's a lot of talent that wants to stay in Southern California. But I think it also brings up a great point that there are emerging tech hubs. There are new places where talent is going. Texas is certainly a place that's been very good at attracting talent in the

last few years for a number of reasons. I think you are seeing sort of this great dispersion of talent, which is a good thing. You know, when we think about sort of where venture capitalists and particularly have historically invested, it's always been sort of this meme of we invest in Silicon Valley, and now we're talking about places like Southern California. You know, Angel, I think, did something that was considered very contrarian when they founded Android in 2017, which was they said, We're going to build in Orange County, California. We're not going to build in San Francisco. We're not going to build in Silicon Valley. And you know that that turned out to be a smart and wise decision in terms of being able to build very, very fast and to take advantage of that Southern California talent. And I think you're seeing this sort of next generation of defense, tech, and aerospace companies choosing different

locations. And Texas has certainly been attractive for a lot of those founders. The Austin ecosystem is a very vibrant, hard tech ecosystem as well. Of course, it takes time to build these ecosystems. One of the questions that I always get is, oh, well, you know, are any of these alternative tech hubs actually competing with San Francisco? And remember, it's, you know, say San Francisco and Silicon Valley have an extraordinary had started a lot of these new movements. But you are seeing capital move to these areas. You're seeing talent move to these areas and wanting to build a new hubs where there is space. And I think that that over the next decade, we're going to see emerging emerging tech hubs focused on on hard tech emerge outside of the traditional Silicon Valley ecosystem. American dynamism. What are the environmental factors, industry factors in SoCal that make it a good place for American dynamism play out?

Well, so I think it's a Southern California story, but it's also a broader American story. So I am often asked the question, where did American dynamism come from? It feels like there's been an extraordinary change in the industry. And why is that happening? And I always go back to, you know, Marc Andreessen, the founder of our firm, wrote, I think, a very poignant essay during Covid called It's Time to Build. And it kind of kicked off this question of, and he actually points to the moment where it hit him that we need to build more in the physical world. And it was very early in COVID when New York City hospitals and the best country in the world were asking citizens to deliver ponchos to the hospitals because we did not manufacture enough PPE for this historic moment, which was Covid. And I think it sort of opened up the question of how is it that America is

not building? How is it that we're not manufacturing? Why is it that our defense industrial base has lost, you know, its innovation? You know, there were all these questions. I think that that kind of came out of that essay. And then, of course, you know, only two years later, Russia invaded Ukraine and sort of opened up the minds, I think, of a lot of early in career engineers and founders who had never seen, you know, a live war in Europe. For many of these founders that, you know, are in our portfolio or are engineers that are founding engineers of extraordinary American dynamism companies, they do not remember September 11th. They, you know, were too young in many cases. And so, I think you have this extraordinary movement coming together, which is there are now enough companies that have scaled and have become either public companies or large enough startups, large enough private companies.

where the talent is leaving those companies and encouraged to found new companies in the ecosystem. You also have these is Southern California is it's a talent hub, but you also have this really interesting moment, which is, you know, these historic events back to back that opened people's eyes and said, okay, the 2020s are very different than the previous tech generation. And we're not just going to be building software. We're going to build hardware and software that supports the national interest. And when people ask me, what is American dynamism, the clearest definition is there are companies that support the national interest and the interests of our allies, and that can be building in the physical world. It's often defense, aerospace, energy, these very hard physical things that need to be built that the government and that America cares deeply about. I think our experience of downed Bloomberg Technology of American dynamism, but also sort of the awareness stemming from the war in Ukraine, as the

example has been, and Israel. They've been vocal about it. But what's the next? And Israel, I mean, you must be looking for new innovation. Where are you seeing that, and what kinds of startups are you looking at? I mean, and the railways, an unusually hardware-focused name that also has competence in software. So Android is a perfect example of a company where, you know, I think Android always points to how long it took SpaceX and how long it took Palantir to get those first contracts from the US government. It took them a very long time. And of course, Android did this at a historic pace, you know, founded in 2017. By 2020, they had their first program of record. And I think if we take a step back, it actually shows us that the government has woken up to the need to work with startups, which was not the case in the,

you know, the early 20 tens. It was not the case was sort of the defense 1.0 generation was really building. So Android has shown that you can move much faster. And the thing that I think is really interesting is the success of Android has been getting success for startups that were founded in the last few years. You know, the program that we always love to point to is Replicator, which was, you know, a program focused on working with startups and work and focusing on production that the Defense Department needs. That has become a core initiative out of the DOD under this administration. Previous administrations really focused on the Defense Innovation Unit, where it was building, you know, building ties to Silicon Valley, understanding that the best engineers in the world are in Silicon Valley and that the DOD has to work with them. So I think that, you know, the we always look at the private industry side, which

is that there's now a talent density, there's momentum, there's capital that has really met this movement so that we can build startups. But that would mean nothing if there wasn't an eager buyer. And the DOD has become an extraordinarily eager buyer, supportive of working with startups, understanding that, you know, they need to be a lot more thoughtful about procurement. They need to make it possible for earlier stage companies to be able to sell into the Department of Defense. And that also these large legacy primes, which have had no competition for, you know, in many cases 50 to 100 years, now have to start working with startups, and they have to integrate the technologies that these startups built if they want to be the chosen supplier to the DOD. So we have seen this extraordinary change in how the DOD views startups as a possible supplier for the requirements that they have.

In your world. You just listed all of the factors that you consider when something crosses your desk. Availability of capital, the innovation to founder themselves. And that makes me want to discuss Miami, frankly. You know Andresen was excited about Miami and pulled back a little bit. Was it just some of those factors one is pronounced as you thought they were going to be after two years there? Well, so I think, you know, when you're building a new innovation hub and the migration we saw in two states like Texas and Florida over the last few years, it really is a 30-year project, not a three-year project. And of course, you know, when we're talking about tech companies, we like to think in quarters. We don't like to think in decades. But the migration and I think the kind of the movement to these states is really an exceptional story of what's happening in America. And I don't think that we can bet

against it. I think that, you know, when you've seen the amount of talent that's decided to either stay in these states or is leaving places like New York and California and move into these states to build companies and to build, frankly, new movements. Like, I actually think that this is, you know, I am not any less bullish on the state of Florida as a Florida resident. I'm super excited to be here. And I think that, you know, building up these ecosystems to a talent density often takes time. And what Texas, frankly, has and what Florida has that they didn't have five, seven years ago is they do have people who've built companies before. They have capital. A lot of the capital, as you know, has moved to Miami, both on the public market side and the private side. So there is sort of, I'd say, the sea change that has happened in the last few years and that will only continue.

Catherine, we started this conversation talking about how SpaceX opened the door. They were first, and then it had a ripple effect over a number of years in Southern California. But, of course, in Florida, Kennedy Space Center in particular, SpaceX has a presence. Do they have the same impact on the tech ecosystem in that state as well? Again, I think these are long journeys. And, you know, SpaceX is a company where, you know, I believe we've only started seeing the impact that they've had on the U.S. and, frankly, on the entire ecosystem. So, you know, again, it's a 20-year-old company, but it's a company with a story that I think is much longer than that. And so, the impact that it's having, you know, on Florida or Texas, I think, will only be able to look back in years and decades and be

able to look at those effects kind of in hindsight. But ultimately, it's I think the story of SpaceX is an American story. And if you have followed that the trajectory versus the if you're looking at it as sort of the company that's not only affected all of deep tech and all of aerospace, but really has affected how the Department of Defense operates, it's a story that I think we are only starting to see how extraordinary that company has been for America.

A16Z's Boyle on Defense Tech, American Dynamism

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