The Investor Who Called Defense Tech’s Big Moment
Military tech was once unwelcome in startup land, but Founders Fund's Trae Stephens saw around the corner
Last November, on a brisk night in Albuquerque, New Mexico top investors in the now red-hot defense technology sector gathered to celebrate the 40th birthday of Trae Stephens, the Founders Fund partner who’s done as much as anyone to bring military technology into the venture capital mainstream.
Guests including Founders Fund’s Peter Thiel and General Catalyst’s Paul Kwan mingled with defense tech founders, Stephens’ family, and high school friends of his from back in Ohio. Stephens shared cigars with 8VC’s Joe Lonsdale, Anduril’s Matt Grimm hosted a roast of the guest of honor, and everyone rocked out to a Goldfinger set outside the sprawling desert compound. The next morning, Thiel led the group through a homily.
The party reflected Stephens’ ambition to be a bridge builder between Silicon Valley, middle America, and dealmakers at the Pentagon. A veteran of an unnamed three-letter intelligence agency who says he’s always been motivated by public service, he left the government first to join Palantir, and then Founders Fund, and has since had a hand in many of the venture world’s most important defense tech deals.
“If you want to choose one investor, you want to choose Trae, if you want to be a defense tech company," said Gecko Robotics founder Jake Loosararian, who told me Stephens played a big role in helping his company compete for department of defense contracts.
Stephens has climbed to what is effectively the number two spot at Founders Fund, one of Silicon Valley’s most elite venture capital firms, by doing exactly what Founders Fund partners dream of doing — bucking the conventional wisdom and defying political pieties. Stephens co-founded the iconic defense tech company — Anduril — with Palmer Luckey, a pariah co-founder back when rank-and-file Google employees terrified their bosses by resisting working on America’s own defense.
Stephens really did see the rise of defense tech before most everyone else in Silicon Valley — of course he had the benefit of learning from his now boss Thiel, who co-founded Palantir, the progenitor of modern day Silicon Valley defense tech.
Andreessen Horowitz is the marketing juggernaut that can make their name synonymous with American Dynamism, but Founders Fund laid the groundwork for the defense tech back before it was cool. (True to form, all the defense tech hype is giving Stephens reservations. More on that in a bit.)
Now the question for Founders Fund is where it goes from here. The firm saw Keith Rabois, PayPal mafia member and prolific investor, return to Khosla Ventures. Once a rising star for the firm, Ryan Petersen had to go back to fix up Flexport, the key Founders Fund portfolio company that he co-founded, although he’s stayed on part-time. Some of the firms’ promising junior investors decamped to Kleiner Perkins. A lot hangs on this former member of the deep state with a nice guy reputation, to bring the anti-conventional wisdom firm to its next chapter.