The Future of Space and Startups: Where Smart Investors Are Betting Next | Ep 319 with Jake Chapman Managing Director of Marque Ventures

Yeah, a great question. I mean, I think anyone who gets any founder who's building a company in defense stack or for national security is probably a geopolitics nerd because, you know, why are they in that space, they're in this space for a reason, I think care about it.

“I think is the same thing with our team, like we all think a lot about what's going on in the world.”

From a personal perspective, it's just interesting. But from a business perspective, it's also quite important, right? So if you think about the old weighing brezky quote, like if this gate to where the puck is is going, not where it is, you have to think about that. And we're investing in national security, get to think about how the world is changing and like where your tools that you're investing in or your company's you're investing in might fit into the future, right? So like, if you think about Ukraine, I think is a good example and what's being used in Ukraine, the technology is being used there, it's a high leverage, it's small drones, it's fiber optic connection, it's electronic warfare.

But then you think about what the US is actually preparing for, which is to deter a war with China in the Indo-Pacific, probably over Taiwan, maybe over some other islands, the tools are very different. So if you were only investing in the things that are being used today in a particular conflict, then you would be missing a lot of the stuff that's important for the future, right? Ventures all about trying to predict the future with as much clarity as you can, and then investing behind that future vision.

Do you have a system or a way that you can evaluate things, because you bring up a great point, you're trying to predict the future, and as we know, things move like a million times a second right now, so I could see the challenge but trying to predict, but I imagine that you have some way in order to do that.

“Yeah, I mean, we certainly try, right? We don't know about crystal ball. I actually think national security is a little bit easier to predict the future needs than it is in any other sector I've invested in in the past.”

I mean, I started my career, I invested in consumer package goes right to stuff you find the grocery store and all sorts of stuff. I think consumer behavior is the hardest thing to predict. In national security, especially in the US, we actually run an acquisition system that is fairly communist. I mean, we have essentially five year plans, and those plans to some degree are classified, like you can get access to some information to all information, and you can see where Congress's priorities are in their budget, and that, again, unfolds over multiple years, and so you actually can, if you know where to look, pretty good visibility into where the spending is going to go.

And then we can then take a step back and say, all right, well, this is where the spending's going to go for the next five years, where should we be investing today to meet them, where they're at. And so it's, it's a more predictable space actually than anything else I've ever invested in. Geopolitics aside. No, that is fascinating. I didn't even think, I mean, yeah, consumers, you love something one day, and you hated the next day, something happens and it changes. We've had a lot of people on who've also talked about this.

When you look at the funding space, so you came from the government, and now you're starting your own thing, and you have your own venture capital fund, what were the differences in the two.

So, so taking a step back, I, I was running another fund, and I was investing more and more in what was called Deep Tech or Frontier Tech. So, thank energy, autonomy, aerospace, stuff like that, and moving my career more and more towards national security over time. All the companies were building in aerospace, have a national security application.

And so, ended up falling in love with the mission. I loved working with active duty folks, and thought it was a really important place to be investing.

“There's, well, you know, lucrative, but also I think important for the mission. And so I left the firm I co-founded to go start a new firm. I was going to go start a private firm focused on national security.”

And then, when I did that, a friend of mine asked, if instead, I would consider going and trying to fix what was called the Army Mentor Capital Corporation. So, in 1999, Congress CIA created Inquiltel, which was the venture arm of the intelligence community.

So, CIA, but then also sort of more broadly. And the reason they did that is they realized that the best technology was being developed in the private sector, not in government labs anymore.

Then, in 2002, Congress realized that the Department of Defense at the time, now Department of War, had it similar set of challenges. And so, they created the Army Mentor Capital initiative, what we became under us, the corporation, to help the department find the best technology and get it to the Warfighter as quickly as possible. So, it ran for about 10 years from 2002 to 2012, under other leadership, and then it kind of sat follow for 10 years. A lot of mistakes were made along the way. I would say that the government is not a great venture capitalist.

But then, they asked if we'd come in and fix it. And so, we spent two years working with Congress and the services, so Army Navy Air Force Marines, space force. Trying to figure out how you'd run a venture arm hand in hand with the department. And at the end of that process, one of the realizations was you would run it as a private form, because the sort of congressional budgeting cycles and just the bureaucracy of being a quasi governmental organization, made it almost impossible to run a successful firm.

So, we took the plan, we put together, and the team we had built inside that organization, and then left and started Mark Ventures. So, that's kind of the origin story for our firm.

So, if you're talking to a founder who's like, you know what? I see some problems. I never thought about getting into this industry or industry's impacted, but now I want to.

What advice do you give to them, maybe because they want to do a startup, or maybe they just started something, and they want to grow it to the point where they could look for funding.

“Yeah, so I mean, I'll give advice to the national security, because that's what we do. I think it's a very unique space to break into.”

So, one, I think if you're interested in this space, maybe you've been watching the news, and you see that the world is sort of a more dangerous place today that it was ten years ago or twenty years ago, you want to do something about it. That's great. Like, would love to have you building in this space. Find someone on your team that if you weren't active duty that was that serves and has like first-hand experience, dealing with the bureaucracy at the Department of War, like how they acquire things, what they need, understand that process, have that person on your team.

If they're not a co-founder, they need to be like a first-hire, because otherwise you might build something that's awesome and never find that customer.

It's a really hard space to break into. If you don't have some connectivity and some understanding of how it works. So, it's super important. That's number one.

“I think number two is talk to the customer. I mean, this is true in every space, but like know who your end user is and get like really early feedback on the thing you're building.”

There are so many founders who build really cool widgets, but if they're, you know, solutions in search of a problem, or there's like something about it that they wouldn't think about that the end user would, that makes it unusable. It's like an example in like the national security spaces. You know, if you're building something for the individual soldier, you know, it might be like a one-pound thing.

Like, relatively light, you would never think about the weight in your day-to-day life, but they're already carrying, you know, 80 pounds in a sack, rucksack.

They've got 100 things attached to their bodies. It's all wired up. Maybe you have a wire now, and so there's like a new wire, they have to have attached their body that's going to tangled up things. And they'll just never use it. So what happens is you build it, it gets shipped to them overseas, and then it sits in a pelican face in a box, back at the base, never gets used, and then doesn't get bought again. And you would never know those things unless you talk to the end user who's like, oh, yeah, you know, I'd never carry that.

It's got to be half the weight, or if I'm going to carry it, it's not going to be attached to my rifle. It's got to be like on my hip, or whatever it is, like you need that feedback. Yeah, I could see you need the first hand experience in order to really solve the problems. Like myself, I wasn't in the military.

“So the problem, I think that they would have, how would I even know where they would know the exact problem?”

What do you see is the biggest mistake when founders are pitching you? Because I think I don't see a lot of VC's talking specifically about like, this is what I want to see. But I would imagine though that there are a lot of mistakes or bad pitches or things like that that you would see on an ongoing basis. So what, what do you see that you're like, this totally is the wrong thing to do when you're pitching a VC? I mean, there's a bunch of things that can go wrong.

So first of all, when VC's say no to founders, it's like every founders should know this. Like 99% of the time it has nothing to do with the company that's in front of them. It's like they just did a deal last week, instead of their partner, because of internal, from politics, it's probably going to be the one that gets to do the next deal. Or they've invested in a company like yours, or they don't want to invest in the competitive business, or they just don't like your spail. Whatever it is, there's like 99% of the time it has nothing to do with the company, it's like an exogenous thing.

Like if I'm going to look at a thousand deals this year, 1500 deals or whatever the number is, then I'm going to do four. I'm basically looking for reasons to say no, because I need to be able to move on and then look at the next company, talk to the next founder. So one, we all have bad days or days where we're low energy, but like if we're on a call or I'm meeting you and you are not like using excitement for the finger building. Like how am I going to be excited about it, right?

“Like you have to be very passionate about it.”

Part of the reason I want you to be passionate about it is if you're a great founder, you can go get a job at meta and make, you know, 600,000 dollars a year or whatever with like very low downside risk. And you're going to face as a founder, especially in defense that's so hard. An existential risk, like every six months or every year in your business. And you're going to be confronted with the decision A or B, A, keep building this building that like is giving me an ulcer and it's really hard.

And like maybe we'll never mount anything or be go take the job at meta for 600,000 dollars or name your, you know, major magnificent seven startup or tech company.

And I need you to keep picking the company, right? So you have to really love the thing you're building on the problem yourself. So that's never like passion on the call in the meeting, super important. And the other one is, um, and the thing I would say like really impresses our team the most is if we ask you a question and you have an extremely thoughtful answer. So it's clear that you've thought about it. Uh, and whether we agree with your answer or not, it's sort of a real event.

Like what we care most about is the fact that you have thought about the challenge and like thought deeply about it and can respond. Um, if you don't have an answer and you say, let me think about that and get back to you and then you send me a follow-up email with a well-fi out written answer. Oh, incredible. Um, like that's what we want. We want founders who have answers for all the tough questions whether we agree with your answers or not, it's sort of irrelevant.

It's like I want to know that you've thought about it.

“If you probably know the space better than I do, right?”

So like your answer is probably right, even if I don't think it's the right one. I think those are like the two, the two biggest things. So number three, if I ask you who your competitors are and you say I don't have competitors or you like quickly dismiss the other people that I know are building in the space. Like I have probably taught to those people. There, there's a reason they're building what they're building.

Um, like you shouldn't be so dismissive of your competitors. Like understand what it is that they're building and how you're different.

So don't just say we don't have competitors or like those guys will never eat it off the ground.

Like tell me what, to be thoughtful. Imagine blockbuster and Netflix, like blockbuster probably said in meetings like Netflix is not our competitor. They'll never get it off the ground. I heard a story from Netflix under that I guess blockbuster had a streaming, but a new CEO came in and squashed and said like they want to focus on the in store and the DVDs. And because I guess the Netflix founders were really afraid that if this if they went in that they were going to be destroyed because they're there.

There's was much smaller than blockbusters at the time. And then that's it and now we know what happened, which is fascinating how something can be so far ahead. Yet someone else like you said smaller can totally disrupt everything and then just propel past. Yeah, I love the blockbuster Netflix example. I use it all the time.

We're talking about modern portfolio theory with folks, which is that you know you can venture is inherently risky. But you can do risk an investment portfolio when you invest in venture and the reason is because venture has low correlation to the rest of your portfolio. So even though it's risky as a standalone, it's a counterbalance to everything else. It's sort of like investing in national security actually. Like in in good times for the world, national security very slowly goes up.

And when times are bad, national security investments go up quite a lot, but everything else kind of comes down.

So it's like it's a hedge on a portfolio. And the example I always used for like how to hedge a portfolio is the blockbuster Netflix example, which was there was a blockbuster on every street corner.

Netflix seemed absolutely crazy. What was the smart investment? Well, the smart investment turns out was to have invested in both really. And you would have done great. So what are you thinking about space? And when it comes to national security, I've been doing a lot of this deep dive into space technology, just because I thought it was fake.

So one was like, oh no, we're building like a hotel in space and we're going to need like everyone who's doing things on earth. We're going to need in space and I thought that I really thought this was a joke. And as I did in my research on like, oh my gosh, like people are really building things in space and and they're like building things on the moon.

“And I can't even believe that we're even living in a time where this is real. How are you looking at that?”

Or is that even a thing yet when it comes to national security? Yeah, no, I mean spaces is hugely important in our sector or industry.

So we have an organization in the Department of War dedicated to space dominance.

“It's important for a whole bunch of reasons. So it's important economically, right?”

And like if you think about what the Navy does, the Navy's main job actually is to ensure like free trade or like the free flow good. It's like to support the U.S. economy through commerce. Like that's actually what the Navy was originally designed to do. And it's still largely what it does today.

Space has the same sort of characteristics now as the oceans, right? Like Starlink is like vitally important in a lot of different businesses now.

And it's only a few years old, right? So imagine whatever will be like 10 years from now. And Starlink is only one piece of space infrastructure that really supports commerce and national security.

“And it's going to be terrestrial. It's a defending that is super important. But yeah, a ton of businesses are going to get built in space. Most of them, I think, with customers, terrestrial customers are not like a real true in space economy yet.”

But it does seem like that's coming at some point. I know that like the asteroid belt has something like you know, $106 trillion worth of like mineral wealth in that, you know, in asteroid. Some insane number and like single asteroids have like, you know, more gold than all the gold that's ever been lined on the earth.

Right? Like not that you want to mine all that gold because then gold doesn't have any value.

But like the resources themselves are valuable for things we need to build or do, right? So all that's coming. And if that's coming, then like some day there might be space pirates. And so you need the ability to that defender assets and space.

“So yes, like I think it's real. There's like tons of economic value being created today, mostly for terrestrial businesses.”

But then eventually there will be like true in space in space economy stuff. And we'll see if the aliens come or maybe they're already there or bigger big debate, right? Like they're they're going to release the files of alien if aliens or I don't know what do you think about aliens? Well, okay. So I think statistically, they're almost certainly intelligent life somewhere else in the universe. There's a clip of dangerous school. Secretary of Justice now, he's sexually army from maybe he's six months ago, where he's he's talking to someone about talking like a news anchor.

And he's like, yeah, I was just like talking to some of our astronauts like in space. And he said that he was talking to a soldier on the moon. And then like there was no follow-up question and like nothing nothing came of that. And I was like he just as a soldier on the moon. And like I think maybe he was he was like a he didn't mean to say that like he meant to say something else. And then that just like sort of slipped out like I don't think we actually have soldiers on the moon, but he said it and you can find the you can find the video clip. So I don't know why would we have soldiers on the moon if not to fight aliens.

No, but like to your question. Do any aliens exist? I think there's a decent chance. So if you look at UFOs from like the 1940s to today, if you believe it like we've witnessed certain things like we've witnessed things that like accelerate faster than any known object possibly accelerate or make turns faster than anything could turn and still survive. So like there's like alien tech out there. There's like lots of explanations for that. But I think actually the most compelling is that it's alien because if it were an adversary right so if it's like Russia or China building this stuff or even it was the US.

The thing that you're seeing from 1940 would not look like the thing that you're seeing in 2025 right like we would expect to have seen a tech curve some advancement in that technology wouldn't just be like wow we had this amazing thing and now it's frozen in time it's always going to be the same thing. And the other thing is if it had been Chinese tech or Russian tech like we would be speaking Mandarin or Russian probably a not English right now. So you know there's like other explanations right swamp gas weather balloons like it's you know sensor problems.

But like the stuff that's come out in the last couple years is like it's like there's some of it is verified by multiple sensor types right so you have like a pilot in an F 35 who sees it. The radar picks it up the shipborn radar down below picks it up and like the IAR sensors see it it's like I can imagine a scenario where like one sensor doesn't see it but when you have all this like overlapping corroborating sensor information the chance it it's a totally made up sort of figment of their imagination is like infinitesimally small.

I don't know man maybe aliens I mean like you said we might even I might I'm been thinking about this I think we might even have become like we might be from aliens like.

And I saw something going in like a diagonal really cross like fast across the sky like dag like zooming like this and I told my wife like do you see that and she saw it and I was like what the heck is that. And interestingly enough I found out to that Joshua tree is right next to like one of the largest military bases in the US in 99 palms and I was like this is I don't know what I don't know if they're related but I was fascinated and I was like I'm not going to tell anyone about that.

“I guess people are going to think I'm crazy I don't know what it was but is the first time I've ever publicly said it but I thought it was very strange.”

They do a lot of like experimental aircraft testing out there so it could have been that but.

It's also treated there are there are more UFO sightings around military sites and nuclear sites which may or may not be related to the military doing testing of thing that could also be if those sites just attract the attention of whatever the. The UFOs are I used to live in New Mexico and say you know go to Roswell it's it's it's an interesting town like it.

“I tell people go there one time in your life for like 10 minutes but don't stay longer than 10 minutes but it's an interesting place to live by the way.”

But this has been great Jake I'm very interested about what's going to be coming in the future and the fact that founders have different industries that they can go into.

And you know military people can when they get out of the military they can become entrepreneurs I feel like I've known a lot of people that did that transition and they became amazing entrepreneurs and they can partner with other people to it's I think it's such a great way for them to be able to. And they can advance themselves and to go into a totally new industry but leveraging all the knowledge and experience they had so if people want to get in touch with you and they want to maybe they want to pitch you or maybe they want to find out more information how can they do so.

Yeah, not what you email me my email is is Jake at mark mhr q u e dot VC or you can find me on Twitter at VC.

Pretty pretty easy Twitter handle to find how did you get that yeah I wish he was a cooler story but I had a maybe I don't know eight years ago now.

“I had an early Twitter employee reach out who had like a bunch of two and three liter Twitter handles he was like hey man I love this stuff that you tweet I think you're super interesting would you like the at VC Twitter handle.”

And I was like you know I'm not rich like I'm like I can't give you like a million dollars for this Twitter handle but like dried love and he was like I don't worry about it like we'll just make sure you can have it. That's amazing like that's like getting one of those like URLs like two two letter URL and and that's that's incredible but at VC I mean totally you can't forget that one but Jake this has been great what a conversation and we've been led into aliens like. I don't know if I've had this conversation that anyone before so I'm glad that I was able to talk to you today and that all you do you know to help entrepreneurs like you said you could go get a job at meta I make a bunch of money but instead.

The old saying I work 80 hours a week so I can not work 40 hours a week at the at a job but we know if we didn't have those entrepreneurs how many things but we not having the world there be so less advancements for those people you know they they make those sacrifices to to build and to create and thank you so much for all that you do. Yeah absolutely man you're right like veterans make phenomenal entrepreneurs we love working with veterans. If you liked the show please take a moment to rate review and subscribe it really does help the show to grow.

Thank you for listening.