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Dan Gwak of Point72 Ventures on why defense tech is becoming the next big thing for investors on August 5, 2023 at 4:48 am
Dan Gwak has had a more varied life than many investors. He grew up in Jakarta, the son of Korean parents who ran a shipping business. After high school, he headed to Cornell in the U.S., and became an associate at The Carlyle Group.
Everything was moving up and to the right, so to speak. Then, like a gut punch, the financial recession hit in 2008.
Gwak was among many who suddenly found themselves on uneven footing and evaluating their next steps. Unlike most of his young investing banking peers, Gwak quickly decided to join the U.S. Marine Corps as a machine gunner. It seemed like a natural decision, given that in Korea, where military service is compulsory for men between ages 18 and 35, both Gwak’s father and brother had served. It was also Gwak’s way of “becoming American,” he says.
While he wasn’t expecting his service to end four years later in Afghanistan – he was wounded and sent home – Gwak again didn’t waste much time deliberating about his next moves. He applied and was accepted to Harvard Business School, and nearly since that time, he has been investing at the intersection of national security and technology. Out of school, he joined In-Q-Tel, which is the venture arm of the CIA. In 2017, when the billionaire hedge fund manager “Stevie” Cohen decided to build out a venture practice — Point72 Ventures — he poached Gwak, and Gwak has remained active since, including leading a 50-person team that has invested more than $1 billion into roughly 130 companies on Cohen’s behalf.
The deals range across four key areas: deep tech, fintech, enterprise and defense tech. But in a lengthy conversation with Gwak earlier today, he talked the longest about defense tech as he’s passionate about it and because the way he sees it, Washington is focused more than ever on the global balance of power — and looking for any edge it can find. Below are excerpts from that part of our chat, edited lightly for length and clarity. You can listen to the entire conversation here.
TechCrunch: You have these four areas on which you’re focused, but fintech has cooled off after several frothy years, defense tech now seems top of mind for investors. Is that true inside Point72?
Dan Gwak: Absolutely. If you rewind the clock, fintech was an area that was very hot and we were very active in deploying a lot of capital. Today, the area that’s really come up is defense tech. It’s not just that the market in general has corrected, but rather, I think defense tech, specifically as an opportunity, has really [gained traction] among other venture investors, as well as founders [along with a growing] awareness of the importance of defense tech to the government.
Given your experience over the years, working for and selling to the government, does the sales process move any more quickly than historically? The longstanding knock, of course, is that it’s too bureaucratic and there’s too much red tape to get past.
Even five years ago, I would have told you that defense tech investing the way that we think about it – which is investing in companies whose primary customer is going to be the Department of Defense – is a bad idea for exactly the reason that you describe. But that has changed for a couple of big reasons. First of all, the government is generally inefficient at buying things until something comes along that has the potential to shift the global superpower balance, and that’s what you’re seeing today. If you look at the last time that happened, that was probably pursuing the atom bomb and the Manhattan Project. When you look at things like AI and all the ways it applies – whether that’s autonomy or computer vision or natural language processing – these are all things that absolutely can shift the global superpower balance, and the government sees that now. And when the government sees that, then it becomes much, much better at buying things.
It seems like a portfolio company of yours, Shield AI, falls into this category. [Editor’s note: Shield AI develops AI-powered fighter pilots and drones that it sells to the U.S. Air Force and U.S Army.]
Autonomous drone swarms do have the ability to shift the global superpower balance, whoever gets that right and can release a drone swarm of thousands. That is an approach [against which there are] just not good defenses against today, even if you own the largest aircraft carrier fleet in the universe. [And because a company like Shield AI can help in] the future preparedness of America, it can, as a result, get a lot of the funding that comes out of the government. It used to be because of the slower sales cycles and so forth, you had to kind of count on the prize being larger but taking longer to get to. [Today] we’re finally entering a time where, as long as you align with something that really, really matters to the government and you can connect the dots effectively, you can grow that business as quickly as as any commercial business,
What has Ukraine meant for its business?
Ukraine’s impact on defense tech has been a very catalyzing one. Everyone understood even before Ukraine that drone swarms and the effective use of attritable technologies and things like that could have a very big impact. Ukraine just serves to highlight that In real life. When you look at what’s going on there, that effective use of drones has had a massive impact in that battlefield.
So-called slaughterbots are autonomous drones that are programmed to kill people without any human intervention. How does a company like Shield AI deal with potential customers that might misuse its technology?
I don’t want to speak on the company’s behalf on that topic because it is a conversation that the company should have with its customers, and I’m not necessarily in those conversations. However, I think the overall topic — the danger posed by autonomy when it comes to taking human beings out of that decision to attack — is a very interesting one. To my mind, it’s all about system design. Any weapon in the world that has a kinetic effect can be very, very dangerous — to the enemy, to ourselves, and to noncombatants who just happen to be in the wrong place at the wrong time.That’s why when you look at all these kinetic systems, there’s always good system design around the decision to take an action, and a human being is usually in the loop. When it comes to this new wave of technology, it’s not like we’re throwing that concept of safety out the window. Good, sound, system design, as informed by the risks that we are willing to subject ourselves to, is always going to be an important part of the equation.
The U.S. government is a big customer that can demand that things are tailored for its purposes. Does it preclude these companies from selling to other governments? How does that work? Do they have to get buy in from Washington?
It depends on what other country we’re talking about [laughs]. To contextualize with numbers, though, the overall spending of the United States and all of its allies on defense is $1.6 trillion. That is a gigantic market. It is an order of magnitude larger than the commercial SaaS market. Of that 1.6 trillion, fully 50% of it is just the U.S. So when you see defense tech companies so focused on the U.S. defense market, there’s a good sound reason for that. That [also] means that if that largest part of the market is asking you not to interact with nations that might be adversarial to the United States, you’re going to respect that.
Are the investors interested in these deals changing at all? I know who some of the players are — you, In-Q-Tel, Lux. . . .
Lux is certainly one that’s been investing where deep tech meets defense tech for a while. [There]’s also Founders Fund, 8VC, a16z as part of their American dynamism effort. There is a core group of half a dozen or so that have been focused on defense tech for for a while. Now I’m seeing additional investors, tier one venture investors, who were not necessarily historically interested in defense tech, start to be a lot more interested. That that’s a good thing. The opportunity is just so large. If you think about it, the DoD has an $800 billion budget and only 1% of that today goes to startups.
That’s an incredible stat. I guess I have the headline to this story now. Who gets the rest? Lockheed Martin?
It’s largely the defense primes today, which serve an important purpose. But the truly transformational technologies that the DoD needs to be able to harness in the next 10 years, those are going to come from startups.
Dan Gwak has had a more varied life than many investors. He grew up in Jakarta, the son of Korean parents who ran a shipping business. After high school, he headed to Cornell in the U.S., and became an associate at The Carlyle Group. Everything was moving up and to the right, so to speak.
Business
The Cities Bracing for Trump’s Immigration Crackdown
In the wake of Donald Trump’s recent election victory and his promise of “the largest deportation operation in American history,” several major U.S. cities are bracing for potentially seismic shifts in their economic and social landscapes. As the nation grapples with the implications of this proposed policy, urban centers that have long been havens for immigrant communities find themselves at the epicenter of a looming storm.
Los Angeles, often dubbed the “City of Angels,” stands to lose more than its celestial nickname suggests. As a primary gateway for immigrants, the city’s vibrant tapestry of cultures and its economic engine could face significant disruption. From the bustling streets of Koreatown to the sun-drenched orchards of the Central Valley, the absence of undocumented workers could leave gaping holes in the city’s workforce and cultural identity.
Across the country, New York City, with its iconic skyline and melting pot reputation, faces its own reckoning. The Big Apple’s 5.9 million immigrants, many of whom are undocumented, form the backbone of industries ranging from construction to healthcare. The potential exodus could transform neighborhoods like Jackson Heights and Flushing, altering the very essence of what makes New York a global city.In the Sunshine State, Miami’s tropical allure belies the turbulent times ahead. Home to 2.5 million immigrants, the city’s economy relies heavily on sectors like tourism and hospitality – industries where undocumented workers often fill crucial roles. The potential deportation of these workers could send shockwaves through Miami’s economic ecosystem, from South Beach’s glitzy hotels to the agricultural heartlands of South Florida.
Chicago, the “City of Big Shoulders,” may find those shoulders significantly weakened. With 1.7 million immigrants in its metropolitan area, the Windy City’s diverse neighborhoods and industries face an uncertain future. From the meatpacking plants to the tech startups, Chicago’s economic resilience could be tested like never before.
In the Lone Star State, Houston and Dallas stand as twin testaments to the complexities of immigration policy. These Texas titans, each home to large immigrant populations, could see their booming economies stumble. The construction sites that dot their ever-expanding skylines and the service industries that keep these cities humming could face unprecedented labor shortages.
Out West, the San Francisco Bay Area’s reputation as a bastion of innovation and progress could be challenged. The region’s tech industry, often reliant on immigrant talent, might find itself grappling with a new reality. From Silicon Valley’s coding campuses to the agricultural expanses of the Central Valley, California’s economic powerhouse could face a reckoning. Phoenix, rising from the Sonoran Desert, could see its growth trajectory altered. As Arizona’s urban center, it stands at the forefront of the immigration debate, potentially facing not just economic impacts but social and political upheaval as well.
These cities, along with others like San Diego and Las Vegas, are not just facing potential economic disruptions. They are staring down the barrel of profound social change. Family separations, community fragmentation, and the erosion of cultural enclaves built over generations are all possible consequences of mass deportations. Moreover, the fiscal implications are staggering. Undocumented immigrants contribute billions in taxes annually, often without receiving the full benefits of their contributions. Their sudden absence could leave gaping holes in city budgets, potentially affecting public services and infrastructure projects.
As these urban centers brace for impact, the debate rages on. Supporters of stricter immigration policies argue for the need to enforce laws and protect American jobs. Critics warn of economic devastation and the unraveling of America’s urban fabric. What’s clear is that America’s cities stand at a crossroads. The coming months and years will likely reshape urban landscapes in ways both visible and invisible. From the foods we eat to the services we rely on, from the neighborhoods we call home to the very character of our cities, the impacts of this proposed immigration crackdown could be far-reaching and long-lasting. As the nation watches and waits, these cities – vibrant, diverse, and economically vital – find themselves on the front lines of a policy that could redefine what it means to be an American city in the 21st century.
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Business
How Trump’s Deportation Plans Could Reshape Major Cities
In the wake of Donald Trump’s recent election victory, his ambitious plans for mass deportations have thrust America’s urban centers into the spotlight. As the nation grapples with the potential implications of what Trump calls “the largest deportation operation in American history,” cities across the country are bracing for significant changes that could reshape their economic, social, and cultural landscapes.
The stakes are particularly high for metropolitan areas like New York, Los Angeles, Houston, Dallas, and Miami, which host the largest populations of unauthorized immigrants. These cities, along with other major urban hubs such as Chicago, Washington D.C., and San Francisco, stand at the forefront of a looming transformation that could reverberate throughout the nation.
Economic Tremors
Economists warn that the proposed deportations could send shockwaves through urban economies. Mark Zandi, chief economist at Moody’s, cautions that businesses would face “significant challenges” if a substantial number of immigrants were removed. Industries such as construction, hospitality, and healthcare—pillars of urban economies—could face severe labor shortages.
Joe Brusuelas, chief economist at RSM, emphasizes the potential ripple effects: “The native-born workforce cannot meet current labor demands.” This labor gap could lead to increased wages, potentially rekindling inflation—a concern that looms large over city planners and policymakers alike.
Community Fabric Under Strain
Beyond economic considerations, the social fabric of cities hangs in the balance. Elena, a Nicaraguan immigrant in Houston, voices a fear echoed in immigrant communities across the nation: “I’m scared… This is my home.” The threat of family separations, particularly in mixed-status households, casts a long shadow over urban neighborhoods.
Immigrant advocacy groups like FIEL are mobilizing, advising clients to prepare for “anything that can happen.” This atmosphere of uncertainty could lead to decreased community engagement and cooperation with local authorities, potentially impacting public safety and community cohesion.
Cities at a Crossroads
As the debate intensifies, cities find themselves at a crossroads. Some, like New York and Los Angeles, have historically positioned themselves as “sanctuary cities,” often at odds with federal immigration enforcement. The impending clash between federal policy and local governance promises to be a defining feature of this new political landscape.
Meanwhile, the logistical challenges of implementing such a massive deportation operation remain daunting. Questions abound regarding detention facilities, transportation networks, and the sheer manpower required to carry out Trump’s vision.
Looking Ahead
As America’s urban centers brace for potential change, the full impact of Trump’s deportation plans remains to be seen. Legal challenges are all but certain, and the resilience of America’s cities will be put to the test.
What is clear is that the coming months and years will be pivotal for urban America. As Jason Miller, a senior Trump adviser, puts it, the plan is to “immediately reinstate” immigration policies from Trump’s first term. For America’s cities, this could mean a period of unprecedented change, challenge, and, potentially, transformation.
As the nation watches and waits, the story of America’s cities in the face of this ambitious deportation plan is just beginning to unfold. The outcome will undoubtedly shape the future of urban life in America for years to come.
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Business
Donald Trump Wins 2024 USA Election
Based on the election results, Donald Trump has indeed won the 2024 U.S. presidential election, defeating Vice President Kamala Harris. Here’s an analysis of the key statistics and implications:
Electoral College Victory
Donald Trump has secured the presidency by winning crucial battleground states and flipping some key states that were previously held by Democrats. The final Electoral College tally is still being determined, but Trump has surpassed the 270 electoral votes needed to win.
Battleground State Performance
Trump’s victory was largely secured by winning several critical swing states:
- Wisconsin: Trump’s win here was pivotal in securing his path to victory.
- Pennsylvania: This state flipped back to Republican control.
- Georgia: Another key state that Trump managed to win back.
- Michigan: Trump successfully flipped this traditionally Democratic stronghold.
Popular Vote and Voter Priorities
While the final popular vote tally is still being calculated, exit polls provide insight into voter priorities:
- Economy and democracy were top concerns for voters.
- Abortion and immigration also played significant roles in voter decision-making.
Congressional Control
The election results extend beyond the presidency:
- Republicans are set to take back the Senate majority, securing at least 51 seats.
- Control of the House of Representatives remains undetermined.
Media Implications
The outcome of this election could be seen as a challenge to mainstream media narratives for several reasons:
- Polling Discrepancies: Many pre-election polls suggested a tight race or even a slight Harris advantage in key states. Trump’s victory, particularly in battleground states, may indicate that polls underestimated his support.
- Narrative Shifts: Throughout the campaign, much of the mainstream media focused on Trump’s legal challenges and controversies. His victory suggests that these issues may not have resonated with voters as much as economic and policy concerns.
- Voter Priorities: The emphasis on issues like the economy and immigration in voter decision-making may indicate a disconnect between media focus and voter concerns.
- Electoral Predictions: Many mainstream outlets were cautious about predicting a Trump victory, even as results began to favor him. This hesitancy could be seen as a reflection of broader media skepticism about Trump’s chances.
- Underestimation of Trump’s Base: The results suggest that Trump’s core support remained strong and potentially grew, despite negative coverage in much of the mainstream media.
It’s important to note that while the election outcome may challenge some media narratives, it doesn’t necessarily invalidate all mainstream reporting. The complex factors influencing voter behavior and the challenges of accurate political forecasting remain subjects of ongoing analysis and debate.
As the dust settles on this historic election, both the media and political analysts will likely engage in extensive reflection on the factors that led to Trump’s victory and the implications for future political coverage and analysis.
Bolanle Media is excited to announce our partnership with The Newbie Film Academy to offer comprehensive courses designed specifically for aspiring screenwriters. Whether you’re just starting out or looking to enhance your skills, our resources will provide you with the tools and knowledge needed to succeed in the competitive world of screenwriting. Join us today to unlock your creative potential and take your first steps toward crafting compelling stories that resonate with audiences. Let’s turn your ideas into impactful scripts together!
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