The Startup Defense
The Startup Defense explores the intersection of commercial technology and defense innovation. Callye Keen (Kform) talks with expert guests about the latest needs and trends in the defense industry and how startup companies are driving innovation and change. From concept to field, The Startup Defense covers artificial intelligence, cybersecurity, mission computing, autonomous systems, and the manufacturing necessary to make technology real.
The Startup Defense
Venture Capital, User Stories, and Decoding the Defense Industry with Meg Vorland (Dcode)
Imagine if the complexities of government tech adoption, the disruption caused by AI and ML, and the power of compelling user stories were all decoded for you in one enlightening conversation. That's exactly what you're signing up for as Meg Vorland of DCode and DCode Capital graces our podcast. Meg offers us an insider's perspective on how DCode helps startups surf the opportunities surfacing at the intersection of government and technology.
Technology has its tentacles wrapped around modern governance and its challenges. Commercial tech companies are taking the plunge into the government market, while innovation shops and programs like SOFWorks and Defenseworks are reshaping government's tech approach. But as AI and ML disrupt the market, we must confront significant hurdles. Meg Vorland, with her rich experience, provides us a roadmap to navigate this evolving landscape. She talks about DCode's role in guiding startups and aiding the government in identifying use cases and potential impact areas.
We then pivot our discussion to an often overlooked aspect - understanding the user. Meg and I emphasize the power of 'listen mode', the art of asking the right questions to get the backstory. We also touch upon the role of a good connector in the ecosystem who offers insight and understanding. Wrapping up this insightful discussion, we value having a VC for market sentiment and intelligence and echo the importance of a mentor to maintain focus. Dive headfirst into this riveting conversation as we demystify the convergence of government and technology.
Great, it's AI Cool. We will tout that. But what problem are you actually solving with this? Where in the government are having those problems?
Speaker 2:Welcome to the Startup Defense. Today I have Meg Vorlin from Decode and Decode Capital and many other interesting things. Meg, for our audience, can you tell us who you are, what you do and what are you passionate about right now?
Speaker 1:Yeah, excellent. Meg Vorlin, as you said, and I'm the Chief Strategy Officer, co-founder at Decode and General Partner at Decode Capital, we're working at the intersection of technology and emerging technology and the government missions. We try to help the government solve some of their toughest challenges through access to both emerging technology as well as process improvements and ensuring that they're able to meet some of their challenges. Something that I am passionate about right now is getting the defense authorization built past at some point Always on an interesting technology, and probably answer that would be quoted the most often right now would be how is AI going to be used in the government space? I think it's going to be an interesting path forward.
Speaker 2:I definitely would like to get in that with you, because you're in the right place. The whole premise of this show is there's these amazing people working in the commercial innovation space and there's these amazing people that hold the most important missions in the market in the world. There is an intersection where technology and the mission can meet and really great things can happen. I know that Decode has been doing this for much longer than this podcast has been out. My background is in physical products. Decode works with a lot of software tech companies. We're coming at this same conversation from different ends of the same intersection. I find that interesting as well. Can you talk a little bit about what spurred this on? What spurred your desire to launch Decode and what has that done for the market, as you've seen the past few years?
Speaker 1:We launched in 2016, which is a really interesting time in the tech innovation world for governments. You saw the beginnings of DIUX around the same time. We launched at a great time where we've been able to really ride this wave. I don't think in the past it had been. Anyone didn't want the access to the great technology, but I do think that there were just a couple of headwinds that we were really able to double down on and make sure that, as a lot of these innovation shops came about, we were right there, helping design some of that strategy and going in the direction towards commercial products. You said you work a lot more on the hardware side. We're much, much more on the software side, but we really saw a huge shift on the government side. But we saw a huge shift with commercial technology where, when we started, we were talking to tech companies and they were saying no, thank you, no, thank you.
Speaker 1:Governments. We know that that is a hard market. We know that our investors are telling us pass. If you need to open up a new channel, if you need growth, don't go there. You're not going to get it quickly, whereas I think now we have many, many more companies who are interested in the market, not just because some of the doors have been opened in a new way, but also because I think, with companies IPOing less often is staying private longer or VC funded, they need to find that next commercial channel. I think the government channel is proving to be a really good next step as companies find that big growth curve.
Speaker 2:Certainly relying on the stability of that mission prevailing or the replication of those problems. If you get in with one group and are able to demonstrate success, you can replicate laterally which in the commercial market. That's the dream, but doesn't really work like that. The best hope is that you have a commercial product that's functional Hopefully it's coded and designed and made in the US Great. It works and it's supported. It has some kind of commercial traction. But then we can move it over and you have 2016's great, because that means that you saw the rise of softworks and defenseworks and all the subsequent innovation shops. Then we can take it to a place which now they have CSO authority, they have OTAs. They have different ways of getting funding in place. We work a lot with innovation challenges. So non-dilutive funding that might be smaller $50,000, $100,000, $500,000 funding but it gives you a chance to get in with that customer and they actually pay you to demo. The market's very different now than it was 10 years ago.
Speaker 1:Oh my gosh, it's different now than it was seven years ago, five years ago, and it's changing so quickly. I had about five years at the US Small Business Administration. Most of us are close to my heart. The commercial sector didn't see the way that F-Works really affectionately masterdised the silver process in a way that's wonderful for commercial sector technology. They did that in very, very innovative, really, really pushed boundaries on that, on that program, that were stagnant.
Speaker 1:We in 2015 wouldn't have told companies that's the path into the government and it's proving to be a better and better path than we thought it would have been.
Speaker 1:There's countless other examples of places where there just are better paths in now than there had been, and a lot of the companies that we work with end up being companies that are a little bit further along in their growth cycle. So don't think two guys in a crash per se. It's usually they've done their series, a round of funding maybe, but they're like, serious about getting into the market. We tend to see those companies as really interesting for the government because one the venture community has done a lot of the R&D, so they've put money into the R&D of these companies where it used to be less and less R&D funding is coming directly from the government and more and more coming from the private sector, and so we're looking at signals on the capital side as how mature is the company, how are they thinking about security and those things on the front end, so they really will be able to have a robust sense of see a general government business.
Speaker 2:Yeah, you make a good point. Significantly less R&D relative to total budgetary spend is going in, certainly on the small end of things. So for us mere mortals trying to just work in our small businesses, it's still proportionally a lot of money relative to what you'd think. So billions of dollars. But I've seen this total shift from one I don't want to invest in hardware, and two I don't want to invest in defense. A lot of that is because defense has a long sales cycle.
Speaker 2:So does B2B sales, though, to be honest, and you say, okay, somebody's going to be at their post for two years. How long does it take to develop a hardware product? 18 months for a complex thing. Is the person even going to be there to buy it when it's done? A lot of that has changed programmatically, which is interesting, but stepping in the private market. So VC is up to private equity to come in and capitalize on opportunity so we can move faster. Sbir process is far too slow if you're talking about innovative hardware and getting to market when you have a champion who's ready to buy it and say, yeah, we're going to get funded over the course of this entire year, and it's not even enough money to make the thing. So we'll have to really figure this out To see that change and the money going into the market has been a nine day difference.
Speaker 1:The hardware is the place where I think we still have a really long ways to go. We made one hardware investment in our pre-fund. Because we made one hardware investment, we get a lot of companies coming to us with other hardware deals Because there's so few people playing in the space right.
Speaker 1:Exactly, exactly. There's so few people playing in the space as opposed to there are a lot of investors that are playing in the software space, and the dual use software space in particular. I wouldn't call it a crowded space. We're all friends, we're all sharing deals on these things, but the hardware space is still a really, really tough space for the venture funding especially.
Speaker 2:And in this area we're not exactly a powerhouse of manufacturing talent. There's a lot of very smart engineers and very educated people, but de-risking out a hardware or even doing due diligence on a hardware investment it's a unique skill. It requires a lot more effort than in a normal kind of tech advisory. Let me see what you're building on and how you've built this thing on a software level, Because the hardware probably also includes software and that's the other problem.
Speaker 1:So we were just doing diligence on an investment and they had bought some hardware assets and we were like, oh my gosh, now what? Are you a hardware company? Are you a software company? Very clearly a software company still, but it makes the math different and there are people who are specialized in those areas. And there are people who are specialized in those areas as it relates to dual use in the department and making sure that those get developed.
Speaker 2:Well, let's talk AI, because this is a perfect example of this specific problem, because with AI, people think, hey, it's software, right, it's AI. And they dig a little deeper and say, okay, well, ai is many, many things. So specifically I'm talking about LLMs. They're like, okay, that's still not that specific, let's dig a little bit deeper into the tech. What do you actually mean? And at the end of the day, at the end of the steps one through 10, I'm at the end of 10 where it's me standing with a box and say, hey, did you realize that a lot of these companies are acquiring these AI businesses? Because they want the hardware. They've figured out some way of actually utilizing and getting a hold of processing power at scale. And so a lot of these software companies, they're secretly software hardware companies.
Speaker 1:Yeah, so we're seeing that across the board and that's like the underlying infrastructure that you know, especially in the Gov space, you want to make sure that they've had the right investors going forward, make sure that the company is stayed clean on a lot of those things component parts it's a more regulated marketplace, but what we end up seeing from our government customers who they've seen the AI in the news too is really trying to figure out how they're going to use it. How are they going to implement and what are those use cases that are best fit for it. Where is the data clean? It's been quite a challenge which you've seen in different parts of the department. You know having win here, struggle here back and forth in a lot of places.
Speaker 2:The market's moving very quickly too. We're seeing massive acquisition movement with these companies. It's kind of curious from your perspective Because again you're bringing a whole new world of software experience to this conversation. For me and some of the larger software companies are our customers because we will build something for them. But from this fast moving software perspective, are you seeing an uptick in acquisition or AccuIr kind of hey, I want to team with you, hey, I want to acquire you, kind of movement in the market?
Speaker 1:Yeah, I think we're gonna see more. We seen about what we've expected, I would say, to date. The other thing is that the diligence is. There's a lot of diligence around. How is this going to be, no matter what you're building? How is this going to be disrupted by AI? What are the places where what you have built you don't have the technical mode you thought you had because of different pieces and and different companies are going to be able to come in and take some of your market share? We've seen that a lot. The major disruption I think has been Towards companies that have built with some intelligence on the back end now, I think, are looking at what they're like two steps ahead might look like so that they can still retain a technical mode as they're growing, and then then they will be a good acquisition target.
Speaker 2:I mean, is getting disrupted by right now. So it's moving that Pass. I've worked with starters for a really long time and it's funny to see this because, as a technical person, we go really, really deep and because of chat, now everybody knows what AI is. They think it is chat, gpt, but it's like hey, do you know that? You probably already own lots of products that have AI and ML baked into them? If you drive a car and you have a backup camera Could make an argument that that's a very simple iteration of it, but certainly your iPhone has several hundred different examples of it that baked into it. It's nice to see people excited about tech. I think if we move into a recession, they'll be more.
Speaker 1:Acquisition is generally and how the defense market works and I think we are in front to is that work constantly talking with companies and founders and technologists who are very excited about their AI. But getting it to translate into what the government use cases and where their best opportunities are is always the biggest challenge, and making sure that they're targeting the right places to really make that impact. Great, it's AI, cool. We will like tout that, but what problem are you actually solving with this? Where in the government are having those problems? And then then we can go you know, similar to what you said earlier. Then we can go horizontally and say, okay, this looks like this, looks like this. We can solve some of the same problems across the whole US.
Speaker 2:Is that something that decode can help startups kind of navigate? Is your finding? I call them 10x problems because generally in do d or I see space, the whole market experiences the same problems as anything else. Like a pencil is a pencil and a tool is a tool. It's just the problem that solves might be a life or death thing or existential crisis to the United States versus like a hey, that's kind of nice to have it, but it is fairly opaque to commercial founders.
Speaker 1:That's something that you help People navigate when we're working with commercial founders, we're generally doing one of two things. One is I'm talking to them about what the market. Actually it's very different to try and do a tam or total address market for the US government when you have to do an education play and you're not really sure who is having these types of problems. We're talking with them a lot about what the opportunities could be in a very realistic way and then what we do is so we run actually a boot camp program. That's a eight week program that hits our highlights of all the places that people fall down. I talked a little bit about use cases and Making sure that you have the right use cases for your type of technology and you're targeting the right folks within the government. That's part of our program.
Speaker 1:We also talk about how to talk like the government and making sure that you understand the agency department P E, o that you're going into and you know their acronyms and you know really what their greatest challenges are. So we do try to help companies focus in the right places so that they can have a tremendous amount of impact, because what we see is companies don't want to come in and solve tiny Challenges here there. Would they like the revenue? Yes, they would, but really there in it to solve the big problems and make sure the warfighter has access to it and make sure the mission gets accomplished.
Speaker 1:And then, actually, on the government side, we do a really similar thing where we're working with different agencies and departments on okay, here's your biggest challenges. How do we break those down into like what are the process problems? What are the policy problems? What are the technology problems that you're facing? How do you reduce a lot of those within your organization, especially on the things that make. A huge impact is our amazing public servants are trying day in and day out and we talked about the wave of innovation that that we've been a part of, and I think about it every day how hard it is on the inside and how hard it is to actually get these things over the line, and so we help provides some focus and direction on how to get things done when you're in the building or when you're, when you're actually sitting at the desk trying to get that mission accomplished.
Speaker 2:I love that because, if you're coming from a traditional corporate process improvement perspective, there's a lot of reasons why things don't work Cyber security, actual information security, human intelligence reasons, just segregation of how organizations are designed and they're purposely designed. So you say, anyway, you just automate this and route this form around here like that and it's like well, no, See, that's so easy.
Speaker 1:You can put it up on a whiteboard and you can draw, and then the bureaucracy happens. And how do you both plow through and make sure that you're doing the right thing while staying within the correct bounds? So we do a lot. One of our first pilot programs was through the Defense Innovation Board and we had I don't know it was like 15 or 20 general officers, flag officers, from across the DOD in this program and I like to think of it as kind of design thinking.
Speaker 1:It was kind of agile methodology, it was kind of all these things, but it was really my like get things done program. How do you actually get it done? Use all these tools. Here's how you can pull them in. When it comes down to it, if you haven't talked to your contracting officer, if you haven't pulled legal in, if you haven't done all of the social capital stuff to get it over the line, it's not different than any other big organization. The person who can affectionately give you the finger will pull them in early. And so we like to talk about it, as all of these methodologies are wonderful and great, but they don't actually like get the things done in the way that, when bureaucracy hits, I'm more methodology agnostic because I feel like those tools especially.
Speaker 2:You can see some lean books up on there and, yeah, like there's theory of constraints, right. The goal there's all the lean books. I've got all great right, got the design thinking books done, the courses it's all great. But in a bureaucratic organization, if you install tools without changing culture, all you do is annoy somebody as the tool master and it just gets worse, right. So bringing everybody in and having a user story and a conversation is essentially where innovation actually happens. Yeah, it was to looking at Toyota and say, hey, toyota did it like this 60 years ago. It worked then, so it can work for us today.
Speaker 1:And so much of the time, what we see, too, is that someone wants to push hard and there's like, say, I need to get to the cloud, and you're like, why? So you're like five Ys, yeah, great, five Ys. And it comes down to like a process problem or a because I need to know this and this. And you're like, okay, so those two data sets to each other? Oh, but we can't do that, okay, great. So, really, getting down to what is the problem you're trying to solve? Not just I'm obviously a proponent of like getting the technology in to solve the problems, but way, way, way to the left of that, you have to really understand the problem, and it's lots and lots of times a culture problem, a process problem, a policy problem From a venture perspective.
Speaker 2:can you tell us about some of your favorite wins?
Speaker 1:We have a really interesting model in that our venture capital arm, decode capital, is built on top of our advisory firm, so we get to diligence a lot of companies through our advisory firm. We get to see, you know, how are their teams, what do we like about their products. We essentially get to ride shotgun in some of their sales calls, so we get a lot more information, I think, than the normal venture capital firm, and so it's been really, really fun to see really cohesive teams and you know not just what are they doing in the government market, but how they're doing it in the private sector. We had one that we had worked with that we recently made an investment in. We had worked with them in one of the first companies we brought in in 2016 and had a really, really good relationship with them. We had one of my co-founders, rebecca, on the decode capital. She had come out of the intelligence community and she had actually worked with them hands on in that capacity. She was like, oh, I know exactly where this company should go next because same use case, so she points them in the right direction.
Speaker 1:The company would just not know that otherwise, because it's really like you said, it's an opaque market of. You can say this agency or department, but what are they actually doing day to day? What are their technology needs? What problems are they really trying to solve? It's actually it is a lot harder to find for companies. Our investment in heavy AI is a really good example of a place where we've known them for years and we've been part of their growth for years and continue to be in really close contact with them on their growth in the federal market and they're also doing really cool things in telecom. They're doing really cool things across the board.
Speaker 2:That's fantastic. I hear this recurrent theme knowing the problem. So you mentioned this when you're talking about organizations. You talked about it when knowing about the investments and you talked about it advisory. So I ask a flavor of this of every guest because really my assumption is that people are listening to this and they want to get involved in the market. They're like, okay, I'm a founder or hey, I work at XYZ Prime right now and I'd really like to become an entrepreneur, utilize my 20 to 30 years of tech experience and launch my own thing.
Speaker 2:But getting access to those stories Stories move the world right. They help you sell, they help you build your products or requirement document. It helps you understand your go-to-market strategy, who your customer is going to be. It seems like the challenge across this whether it's hey, I'm in the IC and I'm trying to figure out how to move a little bit more quickly on this need, or I am a Silicon Valley startup and I just want to explore dual use, getting the story is the biggest challenge. I'll ask you this question. Everybody has a different answer to why I like this. It's like how do we get those stories, how do we go out and what, what are the different mechanisms or what are the different tactics or strategies that you found to go and get those user stories?
Speaker 1:I Would be very, very interested in what everybody else has to say about this. My point of view would be you have to get into listen mode and you have to ask Some people the right questions. So the way we structure our programs and things like that, we bring in a ton of mentors, because Meg and the awesome team at decode would never be able to know all the stories from all the places, but we bring in really amazing mentors. So we had one the other day I think it was DHS focused and it was someone who had left DHS recently who was talking about. Here were the priorities, here are the challenges, and Companies just got to ask questions and I may think that that's so valuable for founders, for Go-to-market people, for BD people, for sales people to get into listen mode first and Really be able to ask the right questions.
Speaker 1:You obviously have to get access to the right people, but asking those questions in lieu of just saying here I have the solution for this thing, I'm really getting into like listen mode and being able to Suss out the story behind this story, like this might be old information, this might be someone who worked at the VA five years ago, but where can I find value in the knowledge that you have, and how can I use that To make sure that I better understand your organization, I better understand how, how you're functioning?
Speaker 1:We have a lot of folks who go to industry things, where you generally have the higher-ups telling stories, which is a nice way to to hear them, but I do think it's really valuable to be able to ask those questions and and get down to what problems are they actually Having. And then my other piece of advice is always to ask the referral type questions. So the Okay, who else is having this problem, or have you ever seen it this way, and who would be the right person to talk to on that, even if it's someone who's not is it was just in the ecosystem and isn't actually in the government today. You can get a lot of information just by asking those little questions of like who else should I be talking to about this? What other department were you working jointly with? Who else has your job? Are all good questions to get to the right people, who will then be able to relate to, hopefully, the story that you've crafted listening mode.
Speaker 2:That would presume going and participating in events or communities where we have the ability to listen and this is the best market for trade shows that you could possibly ever get so we that is a very easy ask is to find a small show and then look at who's speaking and have a conversation With them later, or just listen to what they have to say find your mentors in the space of you know, a really good connector.
Speaker 1:One really good connector will be able to. You can't just go it, you're not just gonna like, hey, I'm here by me. It's a really hard market. So finding those connectors of people and those, the ecosystem partners that will be able to Provide some color. Sometimes that's you know, sometimes that's folks like that are at think tanks, sometimes that those are s eyes who you know have have the contract and no one understand the problem intimately. It couldn't look a lot of different ways in the ecosystem, but there's a lot of information out there to be had if you're in listen mode.
Speaker 2:I find that VCs are great. They're a great source of information, just because they hear so many pitches. I run accelerators so I get pitched about a thousand times a year and so if somebody is saying, what do you think about this idea, I can kind of go through a mental catalog of how many times have I been pitched a variation of this idea in the last Three or six months. You can kind of see what's the market sentiment or movement on XYZ. But on the reverse side of this is like when I get a chance to take a startup to a VC, they're like hey, did you look on crunch base and see what's being funded? Do you see that I already invest in this space? You know, and if we're talking the right person, they have so much intelligence built from Experience or working with other investments. It's ridiculous. This is a commonly overlooked thing is like how much Information that a good venture team is getting just because of the effort is being put into the market.
Speaker 1:Yeah, absolutely, and we see it too in things like oh okay, you were looking at data in this agency or department. Well, when we worked with Data Robot, I think that, like here was some of the places where it was like the rub You're not a competitor, but like here's where we saw like the real challenge have you overcome that challenge? And just having that like trusted advisor and being able to that really understands the space. Well, I think is always, especially in this market, it's a harder market than a lot of new channels.
Speaker 2:Yeah, I can't overstate the importance of finding a mentor or an advisor that can not just shortcut what you're doing but be a sounding board of sanity, kind of keep you focused.
Speaker 1:My one plug here is that a federal board member is not a sales team. While that federal board member might be able to be that good mentor that keeps you focused, like that person is not your sales team.
Speaker 2:That just hit me so hard because that's the thing that everybody wants. They want general XYZ I won't name any names, but that's what they want. They want somebody important to be on their advisory board or to be an early investor and tell them look, this person is retired. They're also probably speaking as much as they're capable of. They're extremely successful.
Speaker 1:If they had any touch on the procurement system. They're under restrictions on what they can and can't do.
Speaker 2:Yeah, and so it is unrealistic to expect that type of relationship from that person. You're getting a huge bump in credibility by being associated with that person and you're able to have access to a lot of experience and intelligence from that. Let's just leave it at that, but it's not going to be the unlock to your billion-dollar venture because you have XYZ on your board.
Speaker 1:Yes, and we have this conversational intent Be eyes wide open, know what it is and what it isn't. You're still going to need to understand your cuto market. You're still going to need to understand the problem, such as the use cases in agencies and departments, and that's not going to be that person I really appreciate you spending the time with us today?
Speaker 2:Can you give us a parting thought, word of wisdom, or the people that are listening?
Speaker 1:I think we've only just seen the beginning of this wave. I think that we know that we have to stay competitive. We understand where a lot of the challenges are on the government side, and I would urge all of the amazing commercial sector technology to look at the space, because it is the place where you are going to be part of the solution and solve real challenges for the US. We've been really, really lucky to be a part of it and we will continue to fight for making sure that the US government gets access to the best technology, fantastic.
Speaker 2:I'm going to make sure that all of your contact information so they can engage Decode is in the notes and in the description. Please reach out to them. If you have a startup, if you're looking at this and saying I love the name Decode because it's software, it's defense, but it's also to demystify this. If that sounds appealing, please reach out to Meg. Let me know if you have any questions. Meg, thank you again for spending the time with us.
Speaker 1:Thank you so much for having me Really really appreciated. It was a really fun conversation.
Speaker 2:Thank you, this has been the Startup Defense.
