Artificial Intelligence is upending the world, and Silicon Valley’s venture capitalists are raking in money hand over fist. But how are these venture capitalists transforming one of the United States’ mainstays across decades, the military industrial complex?
Venture capital (VC) has only recently staked its role as an influential player in the military industry, according to a new paper by Elke Schwarz in the Finance and Society journal. Still, Schwarz pointed out that “the VC sector exerts a significant influence not only on military procurement processes but also on the direction of military operations and practices.”
What does that mean for the “communities and stakeholders” whom military operations impact most, those who are in “the crosshairs of VC-backed AI technologies”?
First, a little bit of history. In Schwarz’s telling, Silicon Valley, VC, and modern military innovation “all share original DNA.” In other words, venture capital and Silicon Valley have played a role in military technology since as far back as the 1940s. After all, the internet was first born as a military project.
Until the 1990s, Lockheed Missiles and Space (now Lockheed Martin) was the largest employer in Silicon Valley. That decade and in the early 2000s, however, Silicon Valley shifted its focus to churning profit off civilians.
In recent years, VC has refocused on military industries, Schwarz explained, VC funding for military technology startups more than doubled between 2019 and 2022. And some of the names behind this surge in cash might sound familiar: PayPal’s Peter Thiel, Google’s Eric Schmidt, and Netscape’s Marc Andreeson, to name a few.
Why does it all matter? Well, the way Schwarz put it, military technology is, if nothing else, “a matter of life and death.”
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Because VC relies on a market to remain profitable, and through “lobbying, legislative tools, and mythmaking,” it also recasts the defense sector into a shape that accommodates its own needs. VC-backed startups only survive if they can achieve rapid growth, and a company’s valuation, in fact, takes precedence over its profit.
For its part, the defense industry stands out as “an attractive market” because it is “well-funded and robust,” according to the paper. For VC-backed outfits, getting a leg in the military industry requires what Schwarz described as mythmaking. In other words, they must convince the military that it needs VC startups.
The main narrative theme Schwarz identified is an increasingly common one: that the funeral pace of government bureaucracy and the current processes is the main issue plaguing the military’s ability to successfully conduct war.
Another myth — Anduril Industries, which Palmer Luckey and others founded in 2017, has promoted this one — posits that the traditional military industry companies make outdated products and that “digital innovation” will win “the wars of the future.”
In short, Schwarz argued that observers need to pay more critical attention to the VC defense technology landscape while keeping in mind how “these new actors” can influence “defense and security cultures” as well as the “global security landscape.”
One could argue that the traditional military defense industry needs a good shakeup, Schwarz admitted. “But it stands to question whether all these things can be achieved by bringing AI-based startup products into the fold with more speed and at greater scale,” the author wrote, “or by hitching one’s wagon to an Uber-like platform, the smooth functioning of which will be crucial for a long time to come.”
