Moreover, VC-backed groups in the defense space are giving established defense contractors like Lockheed Martin and RTX (formerly Raytheon) a run for their money. As Jamie Martin noted on BookForum four years ago, Founders Fund-backed Palantir had beaten out RTX to secure an $800 million army contract, and Elon Musk’s VC-powered SpaceX had been gobbling up satellite sector funds, forcing Boeing and Lockheed Martin to develop their own venture capital operations, Horizon X and Lockheed Martin Ventures respectively, to compete.
Fast forward to 2023 and VC’s domination of the defense space has crystallized in a conflict-mired era. Newcomer machine-parts startup Hadrian was founded only in 2020, but has already soared to the defense industry’s forefront, raising almost $100 million in funding as of late 2023,
Likewise, venture capital has buoyed defense newcomer Rebellion Defense’s rapid rise to prominence, with Rebellion raising $63 million in 2019 through the likes of former Google CEO Eric Schmidt’s new venture capital firm Innovation Endeavors, Founders Fund, and angel investor James Murdoch, son of FOX News Founder Rupert Murdoch. Schmidt, Murdoch, and In-Q-Tel (the CIA’s venture capital firm) Trustee Ted Schlein sit on Rebellion’s Board.
“It doesn’t seem to be that working for the Pentagon is a dirty word anymore,” explains William Hartung, a Senior Research Fellow at the Quincy Institute for Responsible Statecraft. “It seems like a lot of these startups are very much seeking that, and then the VC companies are facilitating it.”
Success in venture capital, therefore, depends on heavy-handed risk-taking in the hopes of big returns from a few investments. In the defense sector, however, high returns comparable to other VC-frequented industries, like tech, are uncommon, rendering VC investing choices complex.
Ultimately, these coveted, yet elusive returns become more plausible in periods of tension and conflict, when governments — which VC-backed defense groups “depend” on for business-sustaining contracts — have a greater appetite for weaponry and adjacent tech.
In this respect, billionaire VCs like Peter Thiel and Eric Schmidt are conspicuous for involvement in both sides of government-defense sector relations. While Thiel says he won’t fund candidates in the 2024 race, he’s previously supported a slew of successful Republican congressional campaigns. And after stints as Chief Financial Officer for Thiel’s now-defunct Clarium Capital Management and Chief of Staff at Thiel Capital, Michael Kratsios took White House and Defense Department positions in the Trump administration, giving Thiel closer proximity to power.
Furthermore Rebellion investor Schmidt is a member of the Defense Innovation Board, which advises lawmakers and the Pentagon on tech policies and, as the American Prospect former managing editor Jonathan Guyer writes, is “allocating resources toward the exact technology Rebellion [is] selling.”
Rebellion Defense obtained U.S. Air Force contracts worth up to $950 million in 2020.
According to Guyer, the arrangement suggests “no firewall between Schmidt’s work for the government and the private sector.” Two Rebellion Defense employees also served on the Biden Administration’s Presidential transition team.
Indeed, VCs’ lack of transparency and visibility in the public eye shields their activities in the defense space from critical scrutiny.
“If the head of the Joint Chiefs goes on the board of Lockheed Martin, everybody knows about it,” says Hartung. “If a general goes on the board of some small tech company or as an advisor, that's not as visible. But their activities may actually be more dangerous because they're helping launch a whole new generation of technologies where we don't really know what the consequences will be as they apply to military issues.”
Meanwhile, talk from defense-focused VCs and their beneficiaries’ suggests an urge to stir global tensions, or otherwise convince the Pentagon to prepare for the worst. For starters, VC-powered defense organizations are making their allegiance with Israel clear as it continues to pummel Gaza, with Palantir and Anduril making public pro-Israel statements and Israel employing VC-backed Shield AI’s Nova 2 drone in besieged Gaza.
Moreover, VC groups are poking the stick at China, now a nemesis in what Palantir senior policy adviser Jacob Helberg deems a brewing “tech war.” (Helberg is also a member of the U.S.-China Economic Security and Review Commission, putting him in a prime position to focus lawmakers’ national security-related policy concerns).
Meanwhile, Lux Capital’s website plainly states that China is “a serious threat to U.S. global hegemony.” And a16z Cofounder Marc Andreesen has observed he has more success in policy conversations with lawmakers when he mentions China:“[A]ll of a sudden it’s like, ‘Oh well we need American A.I. to succeed, and we need American technology companies to succeed, and we need to beat the Chinese.’”
Teaming up earlier this year, further, a group of 13 prominent tech companies and adjacent VC groups signed an open letterrequesting defense procurement reforms to better open the U.S. defense budget to start-ups. The letter warns that if no changes are made, U.S. “competitors will continue to gain ground on the technological battlefield” leaving American warfighters at a disadvantage on the physical one.
Anduril’s Palmer Luckey even characterized VCs as “hawkish” for the sake of protecting existing investments in a recent interview, observing that“[e]veryone who cares about Ukraine is also watching Taiwan, because…Taiwan going south is an actual existential threat to many of their investments [based there]. And so I think you’re seeing a lot of hawkishness on the part of venture capitalists” as a result.
More bluntly, VC America's Frontier Fund (AFF) representative gloated that "if there is a kinetic event in the Pacific,” referencing Taiwan,“some of our investments will [go up] 10x, like overnight.”
Meanwhile, cash flows suggest VCs’ efforts are paying off: Anduril has earned an estimated $342 million in revenue in 2023, telling investors it’s slated to score $625 million in new government contracts this year. Rebellion Defense’s contracts doubled in 2023 alone. And, despite years of unprofitability, Palantir’s stocks jumped 20% after impressive third-quarter results, in which the company made $72 million in net income. As Palantir’s Alex Karp previously put it, “[b]ad times are very good for Palantir.”
Ultimately, VCs’ success in this sector relies on conflict. In other words, they’re looking for a fight.
Stavroula Pabst is a writer, comedian, and media PhD student at the National and Kapodistrian University of Athens in Athens, Greece. Her writing has appeared in publications including the Grayzone, Reductress, and the Harvard Business Review.
Marc Andreessen, of a16z, speaks during 2016 TechCrunch Disrupt in San Francisco, California, U.S. September 13, 2016. REUTERS/Beck Diefenbach
Ukraine would consider inviting Russian officials to a peace summit to discuss Kyiv’s proposal for a negotiated end to the war, according to Andriy Yermak, the Ukrainian president’s chief of staff.
“There can be a situation in which we together invite representatives of the Russian Federation, where they will be presented with the plan in case whoever is representing the aggressor country at that time will want to genuinely end this war and return to a just peace,” Yermak said over the weekend, noting that one more round of talks without Russia will first be held in Switzerland.
The comment represents a subtle shift in Ukrainian messaging about talks. Kyiv has long argued that it would never negotiate with Russian President Vladimir Putin, yet there is no reason to believe Putin will leave power any time soon. That realization — along with Ukraine’s increasingly perilous position on the battlefield — may have helped force Kyiv to reconsider its hard line on talking with the widely reviled Russian leader.
Zelensky hinted at a potential mediator for talks following a visit this week to Saudi Arabia. The leader “noted in particular Saudi Arabia’s strivings to help in restoring a just peace in Ukraine,” according to a statement from Ukrainian officials. “Saudi Arabia’s leadership can help find a just solution.”
Russia, for its part, has signaled that it is open to peace talks of some sort, though both Kyiv and Moscow insist that any negotiations would have to be conducted on their terms. The gaps between the negotiating positions of the two countries remain substantial, with each laying claim to roughly 18% of the territory that made up pre-2014 Ukraine.
Ukraine’s shift is a sign of just how dire the situation is becoming for its armed forces, which recently made a hasty retreat from Avdiivka, a small but strategically important town near Donetsk. After months of wrangling, the U.S. Congress has still not approved new military aid for Ukraine, and Kyiv now says its troops are having to ration ammunition as their stockpiles dwindle.
Zelensky said Sunday that he expects Russia to mount a new offensive as soon as late May. It’s unclear whether Ukrainian troops are prepared to stop such a move.
Even the Black Sea corridor — a narrow strip of the waterway through which Ukraine exports much of its grain — could be under threat. “I think the route will be closed...because to defend it, it's also about some ammunition, some air defense, and some other systems” that are now in short supply, said Zelensky.
As storm clouds gather, it’s time to push for peace talks before Russia regains the upper hand, argue Anatol Lieven and George Beebe of the Quincy Institute, which publishes Responsible Statecraft.
“Complete victory for Ukraine is now an obvious impossibility,” Lieven and Beebe wrote this week. “Any end to the fighting will therefore end in some form of compromise, and the longer we wait, the worse the terms of that compromise will be for Ukraine, and the greater the dangers will be for our countries and the world.”
In other diplomatic news related to the war in Ukraine:
— Hungary finally signed off on Sweden’s bid to join NATO after the Swedish prime minister met with Hungarian Prime Minister Viktor Orban in Budapest, according to Deutsche Welle. What did Orban get for all the foot dragging? Apparently just four Swedish fighter jets of the same model that it has been purchasing for years. The prime minister blamed his party for the slow-rolling, saying in a radio interview prior to the parliamentary vote that he had persuaded his partisans to drop their opposition to Sweden’s accession.
— French President Emmanuel Macron sent allies scrambling Tuesday when he floated the idea of sending NATO troops to Ukraine, according to the BBC. Leaders from Germany, the United Kingdom, Italy, Poland, and other NATO states quickly swatted down the idea that the alliance (or any individual members thereof) would consider joining the war directly. Russia said direct conflict with NATO would be an “inevitability” if the bloc sent troops into Ukraine.
— On Wednesday, Zelensky attended a summit in Albania aimed at bolstering Balkan support for Ukraine’s fight against Russia, according to AP News. The Ukrainian leader said all states in the region are “worthy” of becoming members of NATO and the European Union, which “have provided Europe with the longest and most reliable era of security and economic development.”
— Western officials were in talks with the Kremlin for a prisoner swap involving Russian dissident Alexei Navalny prior to his death in a Russian prison camp in February, though no formal offer had yet been made, according to Politico. This account contrasts with the one given by Navalny’s allies, who claimed that Putin had killed the opposition leader in order to sabotage discussions that were nearing a deal. Navalny’s sudden death has led to speculation about whether Russian officials may have assassinated him, though no proof has yet surfaced to back up this claim. There is, however, little doubt that the broader deterioration of the dissident’s health was related to the harsh conditions he was held under.
U.S. State Department news:
In a Tuesday press conference, State Department spokesperson Matthew Miller said the situation on the frontlines in Ukraine is “extremely serious.” “We have seen Ukrainian frontline troops who don’t have the ammo they need to repel Russian aggression. They’re still fighting bravely. They’re still fighting courageously,” Miller said. “They still have armor and weapons and ammunition they can use, but they’re having to ration it now because the United States Congress has failed to act.”
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Janet Yellen, United States Secretary of the Treasury. (Reuters)
On Tuesday, U.S. Treasury Secretary Janet Yellen strongly endorsed efforts to tap frozen Russian central bank assets in order to continue to fund Ukraine.
“There is a strong international law, economic and moral case for moving forward,” with giving the assets, which were frozen by international sanctions following Russia’s 2022 invasion of Ukraine, to Kyiv, she said to reporters before a G7 meeting in San Paulo.
Furthermore on Wednesday, White House national security communications adviser John Kirby urged the use of these assets to assist the Ukrainian military.
This adds momentum to increasing efforts on Capitol Hill to monetize the frozen assets to assist the beleaguered country, including through the “REPO Act,” a U.S. Senate bill which was criticized by Senator Rand Paul (R-Ky.) in a recent article here in Responsible Statecraft. As Paul pointed out, spending these assets would violate international law and norms by the outright seizure of sovereign Russian assets.
In the long term, this will do even more to undermine global faith in the U.S.-led and Western-centric international financial system. Doubts about the system and pressures to find an alternative are already heightened due to the freezing of Russian overseas financial holdings in the first place, as well as the frequent use of unilateral sanctions by the U.S. to impose its will and values on other countries.
The amount of money involved here is considerable. Over $300 billion in Russian assets was frozen, mostly held in European banks. For comparison, that’s about the same amount as the entirety of Western aid committed from all sources to Ukraine since the beginning of the war in 2022 — around $310 billion, including the recent $54 billion in 4-year assistance just approved by the EU.
Thus, converting all of the Russian assets to assistance for Ukraine could in theory fully finance a continuing war in Ukraine for years to come. As political support for open-ended Ukraine aid wanes in both the U.S. and Europe, large-scale use of this financing method also holds the promise of an administrative end-run around the political system.
But there are also considerable potential downsides, particularly in Europe. European financial institutions hold the overwhelming majority of frozen Russian assets, and any form of confiscation could be a major blow to confidence in these entities. In addition, European corporations have significant assets stranded in Russia which Moscow could seize in retaliation for the confiscation of its foreign assets.
Another major issue is that using assets to finance an ongoing conflict will forfeit their use as leverage in any peace settlement, and the rebuilding of Ukraine. The World Bank now estimates post-war rebuilding costs for Ukraine of nearly $500 billion. If the West can offer a compromise to Russia in which frozen assets are used to pay part of these costs, rather than demanding new Russian financing for massive reparations, this could be an important incentive for negotiations.
In contrast, monetizing the assets outside of a peace process could signal that the West intends to continue the conflict indefinitely.
In combination with aggressive new U.S. sanctions announced last week on Russia and on third party countries that continue to deal with Russia, the new push for confiscation of Russian assets is more evidence that the U.S. and EU intend to intensify the conflict with Moscow using administrative mechanisms that won’t rely on support from the political system or the people within them.
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Activist Layla Elabed speaks during an uncommitted vote election night gathering as Democrats and Republicans hold their Michigan presidential primary election, in Dearborn, Michigan, U.S. February 27, 2024. REUTERS/Rebecca Cook
A protest vote in Michigan against President Joe Biden’s handling of the war in Gaza dramatically exceeded expectations Tuesday, highlighting the possibility that his stance on the conflict could cost him the presidency in November.
More than 100,000 Michiganders voted “uncommitted” in yesterday’s presidential primary, earning 13.3% of the tally with most votes counted and blasting past organizers’ goal of 10,000 protest votes. Biden won the primary handily with 81% of the total tally.
The results suggest that Biden could lose Michigan in this year’s election if he continues to back Israel’s campaign to the hilt. In 2020, he won the state by 150,000 votes while polls predicted he would win by a much larger margin. This year, early polls show a slight lead for Trump in the battleground state, which he won in 2016 by fewer than 11,000 votes.
“The war on Gaza is a deep moral issue and the lack of attention and empathy for this perspective from the administration is breaking apart the fragile coalition we built to elect Joe Biden in 2020,” said Rep. Pramila Jayapal (D-Wash.), a progressive leader who has called for a ceasefire in Gaza, as votes came in last night.
Biden still has “a little bit of time to change this dynamic,” Jayapal told CNN, but “it has to be a dramatic policy and rhetorical shift from the president on this issue and a new strategy to rebuild a real partnership with progressives in multiple communities who are absolutely key to winning the election.”
Rep. Ro Khanna, a prominent Biden ally, told Semafor the vote is a “wake-up call” for the White House on Gaza.
The “uncommitted” option won outright in Dearborn, a Detroit suburb with a famously large Arab American population. The protest vote also gained notable traction in college towns, signaling Biden’s weakness among young voters across the country. “Uncommitted” received at least 8% of votes in every county in Michigan with more than 95% of votes tallied.
The uncommitted campaign drew backing from prominent Democrats in Michigan, including Rep. Rashida Tlaib (D-Mich.) and state Rep. Abraham Aiyash, who is the majority leader in the Michigan House. Former Reps. Andy Levin and Beto O’Rourke, who served as a representative from Texas, also lent their support to the effort.
“Our movement emerged victorious tonight and massively surpassed our expectations,” said Listen to Michigan, the organization behind the campaign, in a statement last night. “Tens of thousands of Michigan Democrats, many of whom [...] voted for Biden in 2020, are uncommitted to his re-election due to the war in Gaza.”
Biden did not make reference to the uncommitted movement in his victory speech, but reports indicate that his campaign is spooked by the effort. Prior to Tuesday’s vote, White House officials met with Arab and Muslim leaders in Michigan to try to assuage their concerns about the war, which has left about 30,000 Palestinians dead and many more injured. (More than 1,100 Israelis died during Hamas’s Oct. 7 attacks last year.)
The president argues that his support for Israel has made it possible for him to guide the direction of the war to the extent possible, though his critics note that, despite some symbolic and rhetorical moves, he has stopped far short of holding back U.S. weapons or supporting multilateral efforts to demand a ceasefire.
Campaigners now hope the “uncommitted” effort will spread to other states. Minnesota, which will hold its primaries next week, is an early target.
“If you think this will stop with Michigan you are either the president or paid to flatter him,” said Alex Sammon, a politics writer at Slate.
Meanwhile in the Republican primary, former President Donald Trump fended off a challenge from former South Carolina governor Nikki Haley. With 94% of votes in, Trump came away with 68% of the vote, while Haley scored around 27%.