What’s Driving the $100B Surge in Defense Tech?

Laura: Hi, I'm Laura Lariu. I'm a partner in Orrick's Tech Companies Group and I'm here live from Tectonic with Mo Islam and Brian D'Erario, who are two of the founders of Tectonic. Tell us a little bit about what Tectonic is.

Brian: So, Tectonic is a media publication for the defense tech industry. We send out a twice weekly newsletter, hold events like this one at South By and create custom content with our partners. And Mo can tell you a little bit about the backstory of how we got started.

Mo: Tectonic is part of our broader media holding group that focuses on building media for critical technology industries that are linked to national security. We started with a brand called Payload that focuses on the space industry. Then we launched a nuclear energy brand called Ignition. And then about two months ago, we launched Tectonic, which is focused on defense innovation, so non-traditional defense companies. This was really because over the last few years, we've seen north of $100 billion of private capital go into defense innovation. But the media side of defense has been very outdated, similar to what we've seen in the previous brands that we've created. So, we felt like the industry needed a new age, modern digital media business that also focused on events and community building.

Laura: And why is it important to create community around these critical tech industries?

Brian: I think for a long time, and I've worked for several other media companies, and I think the problem with media is that it's a lot of talking to the industry. Events are built up and over-monetized, and media is focused on not really connecting with the industry, but just reporting on it. And I think one thing we've built primarily in all the industries we cover is building community, whether it's through our happy hours, whether it's through our larger summits, and making sure that, we're not building products that we think the industry needs, but we're building products that the industries are telling us they need.

Mo: It’s a really critical time to be bringing people together within the U.S. defense ecosystem. We have adversaries that – we have some of the most powerful adversaries the country's ever seen – and there's a lot of disjointedness between sort of New Age defense companies, the military, government, and also the traditional primes. So, it's more important than ever to actually bring these people together in a room and hash out some of the inefficiencies, some of the issues, and also kind of figure out the solutions and how do we bring everyone together and build a more amazing defense ecosystem here in the U.S.

Laura: And we've had an amazing lineup of content, so we talked a bit at the summit about crossing the valley of death and these companies sort of getting from prototype to full scale production, getting the right customer and/or government contracts in place and raising enough capital to get through all of the above and more. What are some of your takeaways from the conference so far, knowing that we're just starting day two?

Mo: Yeah, I would say that two of the big themes that came out of yesterday was the country overseas that comes up quite often: China. So, a lot of conversation about the industrial base that China has and how quickly they've grown and how quickly their military budgets have grown. And how do we think about that as the U.S. We've had a very robust industrial base for a long time, but the nature of warfare is changing. So how do we build a more innovative industrial base going over the next 10, 20 years?

And I think the other really important piece was around capital formation. There's a lot of companies getting funded right now. So, making sure that the investor base doesn't feel too overzealous, that valuations don't get too ahead of us, because that ultimately could be detrimental to the industry. So just making sure that we think through these things practically and that we have a bit of a muted lens when it comes to funding these businesses.

Brian: And I think something else with Silicon Valley and the speed at which people grow and build products is a lot different in software and defense. I think there needs to be aspects of that that we bring to the defense industry, but also, there's lines you have to work within, to work with the government and work with government contractors. So, it’s consistently new learnings and new ideas that those folks are bringing, but also figuring out how we can blend them with the traditional systems and rails that we've been operating in for the last hundred or so years.

Laura: It's exciting to be at this event and part of this greater ecosystem. Thank you so much for chatting with us today.

Mo & Brian: Thanks for having us.