The Rise of American Dynamism with a16z
Katherine Boyle
Katherine Boyle and Erin Price-Wright are General Partners at Andreessen Horowitz (a16z), leading the firm's American Dynamism practice. This episode explores how their team invests in companies tackling national imperatives—ranging from defense and manufacturing to energy and critical infrastructure. Katherine shares how American Dynamism emerged from portfolio patterns at a16z, while Erin describes how her background at Palantir informs her investment lens.
Erin Price-Wright
Together, they unpack why the U.S. must reindustrialize, how software is now eating the physical world, and what they look for in high-capex startups. This conversation also highlights the evolving U.S.-China industrial competition, the role of government in innovation, and why talent is moving from Big Tech into “hard tech.”
Episode recorded on May 21, 2025 (Published on June 30, 2025)
In this episode, we cover:
[02:30] An overview of a16z
[04:59] Its thesis shift from defense to energy and industry
[07:49] How AI is transforming heavy industries
[8:24] Tech stack for US vs. China
[12:23] Role of government versus private capital
[16:14] Why software is still the core of industrial innovation
[16:55] Base Power as a software-led grid infrastructure play
[20:42] When vertical AI-native startups beat incumbents
[21:48] How a16z helps startups navigate Washington
[27:51] Why energy problems require system-level solutions
[31:57] Moats in energy and manufacturing
[37:51] a16z’s American Dynamism 50 list
[40:16] Battery supply chains and the China dependency
[46:44] Why capital stack strategy matters for hard tech founders
[48:52] Looking 10 years ahead
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Cody Simms (00:00):
Today on Inevitable, our guests are Katherine Boyle and Erin Price-Wright, general partners at Andreessen Horowitz who are driving the firm's American Dynamism practice. Andreessen Horowitz or a16z needs little introduction to anyone listening with a startup or venture capital background. It's a behemoth venture capital firm with around $45 billion under management. The firm's American Dynamism practice is relatively new, though. Katherine created it with her partner David Ulevitch just a few years ago, and Erin joined in 2024 to focus on the energy side of the practice.
(00:41):
American Dynamism's core investment focus is on companies solving critical national interests, aerospace, defense, safety and manufacturing among them. The firm has increasingly leaned in on energy and industrials, and I was interested to hear from Katherine and Erin about what they look for and why they believe an innovation renaissance is happening in these sectors. From MCJ, I'm Cody Sims, and this is Inevitable. Climate change is inevitable. It's already here, but so are the solutions shaping our future. Join us every week to learn from experts and entrepreneurs about the transition of energy and industry. Katherine Erin, welcome to the show.
Katherine Boyle (01:36):
So good to be here. Thanks for having us.
Erin Price-Wright (01:37):
Thanks for having us.
Cody Simms (01:39):
I've been looking forward to this conversation, because you guys have created this brand around your thesis. The American Dynamism thesis has turned into this word. It's almost movement-defining to some extent, and I am really curious to hear the origins of how you created this thesis. And then how it's flowing into the work that we do and that our listeners care a lot about, which is our energy ecosystems and the future of how we are building the industrial future that we need, and building the compute infrastructure that we need, all of which comes together around the nexus of energy. So that's the context here. Maybe start with just for a level setting for folks who obviously probably heard of Andreessen Horowitz, but don't quite know exactly how the firm is set up. Just a bit of an overview on a16z and then we'll dive into American Dynamism.
Katherine Boyle (02:30):
Sure. So Andreessen Horowitz, gosh, we're now in our 16th year. So still young, but we've grown tremendously over the last 16 years.
Erin Price-Wright (02:39):
Teenagers.
Katherine Boyle (02:40):
Yes, exactly. That's a good way to put it. Still very much iterating. But we started out as what I would say as reaction to the venture capital experience that Marc and Ben had. Our co-founders said they wanted to build something that was different than their experience of just having a board member sit on their board, give five pieces of advice, and then never really do anything for them again. They wanted to build out the best operating teams in the world to make sure that founders who were building a company for the first time could leverage the network of, say, someone in their network had built over 25, 30 years.
(03:10):
And I'd say what's incredible about Andreessen Horowitz ... Right now I've now been here three and a half years, is that it is constantly evolving. I always say it is a culture of yes, it feels like a startup. You have a great idea, Marc and Ben and the team very much feel like, "Yes. Try it. And if it doesn't work well as Mark says bury it outside behind the shed. But if it works, we'll celebrate it." And I think people are always surprised when I say that American Dynamism wasn't us sitting in a back room really thinking, "Oh, how are we going to build this movement?"
(03:37):
It was really just a culture of iterating inside of a16z, where I think there was a realization that there were so many companies in our portfolio that didn't look like typical enterprise or consumer companies. They didn't fall into any of the other categories. But when you lumped them together, there were very deep similarities between companies like Shield AI and Anduril and SpaceX, companies that have to sell to the federal government or are highly regulated by rules and regulations of who they can work with. And there really isn't a practice that is tailor-made for those types of founders.
(04:08):
So in 2021, I knew David Ulevitch very well from working with him on the Anduril board. We always used to joke that we were always competing for the exact same companies. Why not we join forces and build a practice together that's really tailored for these founders at the early stage, so we came together in 2021. And American Dynamism as a term, which is something I always was saying, people always ask me where does it come from? It comes from somewhere in Washington. I'm sure I've heard many politicians and many people refer to the Dynamism of America and American Dynamism.
(04:34):
And I was saying it to refer to this amorphous category. When we founded the practice, we're like, "Well, I guess we just call it American Dynamism." I wish I could say we were far more intentional or far more thoughtful about how we were going to build it, but it was really this iterative startup process of, "Okay. If we're building something from first principles that's never been built before for founders, what does it look like?" In less than three-and-a-half years, it's pretty incredible what this movement and ecosystem has become.
Cody Simms (04:59):
And you started it really with this, I think, national security or national defense orientation, but it seems like that has been opened up to realize how big that impact might be across multiple industries and sectors.
Katherine Boyle (05:11):
Yeah. And I'll actually let Erin share more about why she joined. But I think when we started, there were so many companies that were focused on selling to the Department of Defense. And I think maybe a year, year and a half ago, we really started realizing, "Wow, there's a lot of people who are leaving SpaceX, Anduril, these already skilled companies, and they're saying, 'I want to build an energy. I want to build in minerals mining. I want to build in these categories,'" where we certainly didn't have domain knowledge or really have companies even in the portfolio that were doing that sort of thing.
(05:38):
And so the aperture has really broadened. We've had to learn a lot. I let Erin share her story, but I think it's really cool that American Dynamism in many ways ... Everyone knows what it means, but in terms of the specific companies in the broad umbrella, it can change with the needs of the country. It can change with the demands of what's important. And the AI wave certainly gave rise to a need for new energy resources, and that has been a huge focus of where we've been investing. I'll let Erin share more.
Erin Price-Wright (06:03):
Yeah, I was at another firm before this and I remember reaching out to Catherine when the original American Dynamism essay was published, because I spent most of my career before investing at Palantir, and I wasn't on the defense side of the business. Almost the whole time I was there, I was on the commercial, industrial side of the company. I joke that I started my career in tech and oil and gas, because when I landed out Palantir, I was flying off to Azerbaijan and Trinidad to go visit oil wells for big Palantir customers who were pulling hydrocarbons out of the ground. And so a lot of my exposure in tech had been to these large industrial customers. Palantir, who are critically important for the western economies to be able to, whether it's build weapons and weapon systems, whether it's to be able to provide the economic engine for these entire societies to be able to function, these are industries that we've forgotten about that have been largely left untouched for many decades.
(06:57):
We see this, '50s through the '80s as being large infrastructure investments in things like water treatment and chemicals and mining and industrials and manufacturing. And then, basically, since the eighties, very little investment has been made in any of these sectors at all. And we're getting to the point where that feels like it's starting to break and cracks are starting to show. And at the same time, we have AI being this massive driver of value. Over the last two or three years, I think things that we once dreamed were possible when people in 2010 were talking about ML algorithms being able to transform legacy industries, we're starting to see that really be a thing with dynamic control systems and autonomy. All of this software is really poised to transform these large legacy industries that are really the backbone of our western society in a way that I think is really exciting.
(07:49):
So I couldn't think of anything more important to work on than to come try to figure out how these two problems come together, where hardware meets software in these gritty industries that are really important for how we live, and also provide the backbone for how we build out a defense industrial base. When you deconstruct a drone, you can't do that if you don't have manufacturing capability. You can't do that if you're not pulling metal out of the ground, processing it. You can't do that if you don't have energy to be able to build the autonomy algorithms that it's going to run off of. So we fundamentally see these problems as quite closely interlinked.
Cody Simms (08:24):
I'm curious how much either of you think about particularly the US and China. If I take a step back and I think of macro level, what is the tech stack for the US? And what is the tech stack for China? The US tech stack historically I would say is oil and gas. Its defense and it's AI chips, or chips in general, microprocessors, high-capacity compute. That's what makes the US potentially the greatest economic engine in the world. And China, I think, has a different tech stack. China is one of the world's leaders in solar. They're one of the world's leaders in lithium-ion batteries in storage, and they're clearly emerging as one of the world leaders in EVs. And I'm interested to hear, as you think about American dynamism, how much of the goal is maintaining what's great about the American tech stack today, and how much of it is trying to win some of these markets that China already has a pretty clear lead in?
Katherine Boyle (09:19):
I love that framing. I haven't actually thought of it that way, and I actually think I take a little bit of a different view of where I think China is excelling and where America has been lagging for the last several decades, and what we really do have to beef up ourselves. I was just on the border of Ukraine and one of the things that was very interesting to me ... I was with operators on the ground with USG, was learning that China's the main supplier of both sides of that conflict. Yes, we've given lots of money and weapons to Ukraine, but when they're building things in the trenches, they're ordering things from China in the same way to build themselves as the Russians are dependent heavily on Chinese manufacturing for that conflict as well.
(09:55):
And so when you look at that conflict in terms of production, you can look at it as the Ukrainians have had to really build up their production capacity. The Russians have clearly built up their production capacity, which they didn't have before the conflict began, and China has beefed it up dramatically for both sides of that conflict. And when you look at the US, our production is lagging, and it has been left not only in defense manufacturing but in manufacturing across the board.
(10:18):
And I think the thing that is now very apparent is that you can't have a broad-based manufacturing system without having broad-based defense manufacturing system. Those things are very much linked. And that when you look at any sort of conflict of the future, what is going to be the huge difference between China and the US? It's that China can produce at rapid pace and the US just can't. And that is something that even going back to Chris Brose's book, The Kill Chain, which came out in, I think, 2019. Looking back at 2016, 2017, every war game between the US and China, the US lost, and the reason was was because of the lack of production.
(10:49):
And so when I think of where is our tech stack, actually, very much lagging, and where do we have to beef it up? It's manufacturing, it's production. It's being able to vertically integrate to produce quickly. It's innovating on manufacturing processes that we haven't innovated on in the last 70 years. And I think that's where a lot of our companies are focused are, is how do you produce masse for a lot of different categories? Again, not just for defense, but for things like energy, for things like housing. How do you produce quickly en masse to create a broad-based manufacturing economy, which we do not have?
Erin Price-Wright (11:18):
And I think that there's a misunderstanding by a lot of folks in the United States that Chinese manufacturing capacity, whether it's in energy or defense or what have you, or consumer goods, is just a whole bunch of cheap labor. It's like sweat shops. We think of the '90s scandals with Nike and you have child labor locked in a room. But if you actually go visit a factory in China, let's say, it's a brand new factory. Day one, there might be 500 people on the factory floor. If you go back 50 or 100 days later, there might be five people on the floor.
(11:51):
It might be a lights-out factory operating 20 hours a day, with very minimum human labor and relying really heavily on automation. And I think that's something China's done really well, is to lean into manufacturing automation across the broader industrial base. And I think that that's something that we really should learn from and understand that we're not actually competing. We're not talking about how do we bring cheap labor industries back to the United States. We're talking about how do we use technology to innovate how we do everything, from producing energy capacity to producing drones.
Cody Simms (12:23):
That is such a good point. And for anyone who has not visited Shenzhen, go. Go.
Erin Price-Wright (12:28):
Don't bring your cell phone.
Cody Simms (12:29):
It's incredible. Yeah. Get a VPN, but go visit. I'm interested to hear what you both think of as the role of government in all this. In China, clearly government just moves mountains and makes things happen. In the US, a lot of original Silicon Valley and a lot of that manufacturing base that you talked about was really post-World War II government projects, big government money, DOD grants and spending. But today it feels like the innovation that's happening is all in the private market in the US. It's being driven heavily by ... You mentioned SpaceX, companies that are redefining manufacturing. I would guess you have a thesis on this given what your role is in our global economy today, but curious to hear your thoughts there.
Erin Price-Wright (13:11):
In fact, it's something we debate a lot, so it's a good question. The United States is never going to be able to implement industrial policy in the same way that China does. We have elections every four years, we have a two-party system, we have a democracy. If one government implements something, there's a pretty high risk that the next administration is going to somehow unwind it, so we have to do things a little bit differently. That said, I think the thesis of our fund is that there is a role for government in this and in technological innovation full stop, and we put a lot of resources and thought behind that. I'll let Katherine maybe share more.
Katherine Boyle (13:46):
I also think it's almost impossible to compete with the private sector of the United States of America. Silicon Valley is the most dynamic place in the world if you are an ambitious person, you are motivated by a system that involves equity, that involves taking high risk, that involves working on the latest cutting-edge projects and a capital base that is willing to fund that. No other country has that where there's this much risk capital and appetite for high-risk projects. Look at all of the AI research labs that can now get capital from the private sector and move even faster than they could if they were at a big company, or if they were at a university. That was not the case by the way in the '70s and the '80s, where if you were really interested in computers, you had to be at a major lab, or you had to be at one of the four universities that had the capacity to actually have a computer.
(14:30):
So much has changed I think in the last 45 years that we haven't even realized, okay, what we did in the 1940s out necessity, there was no competition and there was state capacity to do big things. We've transferred that to the private sector and it's happened slowly, but it's also been an extraordinary benefit for innovation in this country that we've reaped the rewards of uniquely. Now, I love looking at that chart that shows in 2000, if you looked at the largest companies in the world, I think six of 10 were in the US, but they were pharmaceutical companies or they were energy companies, oil and gas companies. Now if you look at that chart, 25 years later, it's eight of 10, and they are all tech companies. And the only other one in the US is Berkshire Hathaway, and how big is their position in Apple? Technology is the story of the 21st century, and that has all been created by this incredible, dynamic capitalist ecosystem, mostly based in California and in Silicon Valley, and we have to use that for state good.
Erin Price-Wright (15:24):
And the role of the government I think here is to make sure that that system of private capital and innovation can flourish. So it's how do they get out of the way versus heavy-handedly to try to control the direction that it moves?
Cody Simms (15:37):
I'm so glad you brought up the rise of software tech and its incredible role in transforming the global economy, because I do think one thing that gets lost in this American dynamism conversation, which is all about how do we restore manufacturing promise to America? One of the things that gets lost is, but over the last 20 years, the US did a lot of really incredible innovation. Google, Apple, Facebook, Amazon, you name it. These companies are incredible and have completely transformed the world. They just have done it mostly in software, not in hard, heavy industry manufacturing.
Katherine Boyle (16:14):
What's interesting, we invest in a lot of hardware companies, but software's at their core. Marc famously said, "Software is eating the world," and it's now eating the physical world in a way that intersects with government. But the companies that do best in that sector, and you can include Anduril and SpaceX in this category, they are software companies. Yes, they are building hardware. Yes, they are transforming the physical world, but there is a software core that is essential to their success. And I think that's something that perhaps isn't talked about enough. In manufacturing again, as Erin said, automation and bringing automation to different types of manufacturing is the key to how you have proliferated manufacturing systems, and I think that's something that we're going to see over the next 10 to 20 years as well.
Erin Price-Wright (16:55):
I was going to say something similar, which is, let's take a portfolio company that we have in common, which is Base Power. This is decentralized, grid-scale battery storage, starting by selling to residential properties who want home battery backup and cheaper power. On the surface, yes, this is a hardware company, this is hardware and execution. We underwrote this as a software investment. The reason we got so excited about Base is because it looks and feels like a software company. This is a decentralized network. This is a way to get a high scale of signal deployed onto the grid, the operations around building these batteries, getting them out into the field. How do you manage this operation at scale? That is a software problem, a software and execution problem. And so when we think about the characteristics of what excites us about companies in this American dynamism sectors that might have heavy hardware and CapEx components. There are businesses and companies that look and run like software businesses, where the core value add is very similar to the core value add of the tech companies of the last 15 or 20 years.
Cody Simms (17:58):
Yeah. I totally agree with you there and on base in particular. It's a hard problem. You got to build this distributed network of batteries, meaning you have to have great hardware and you have to be good at sales, and you have to be good at deployment.
Erin Price-Wright (18:08):
And guess what? That's all a moat that makes it very hard for the next software company to come in, because you've made those hard CapEx investments, but your value long-term is defined by how good your software is.
Cody Simms (18:20):
Yeah. And what I was going to say is then ultimately what they have to be good at is similar things that large cloud providers have to be good at, network routing, pattern optimization, understanding how electrons are flowing across their system based on pricing, based on demand, based on external factors.
Erin Price-Wright (18:36):
At very high scale, in real time. Those aren't problems that traditional utility company knows how to deal with. Those are problems that tech native software people know how to deal with.
Cody Simms (18:47):
It strikes me in the 20 teens, we had this whole movement, maybe even mid/late 2000s, this whole movement of mobile first. And it was all consumer app-focused and then moved into maybe SAS and it was this. You'd take what was an internet company and you make a mobile version of it. And it's a different company, it opens up markets in different ways. Uber is the classic example of this, and I think we're entering a new phase right now of what I would almost call AI-first companies, which may be building real-world things, but they come at the problem with AI in their guts and in their core, and knowing how to leverage the latest technologies in a way that incumbents just cannot do. How much does that drive the kinds of things you're going after?
Erin Price-Wright (19:29):
Well, it's something that we talk and think a lot about internally. And one of the debates we have is, is this a problem where you should be selling software, AI-based software to the incumbents who are working on this, because they already have the footprint in the distribution? Or is this the type of problem that you really need to rethink from the ground up, with AI at every single individual piece of the puzzle? And is this something that you really have to build as a vertical solution from scratch? And there are a lot of industries we see where on the surface you squint and you look at them and you're like, "Is this really a VC industry?" So mining for example. Is this really an industry where a VC should be playing?
(20:08):
But if you start stacking up all of the challenges of building a mining company and you think about adding margin at every single piece of the value chain, such that maybe a year ago it wasn't a project that was economically viable to do in the United States, but you insert AI in 50 different points of that process and suddenly you make a business that's efficient enough to run in the United States, that it makes sense. That's a place where we think really building that kind of a verticalized business from the ground up makes more sense than maybe selling AI software into an existing incumbent.
Cody Simms (20:42):
Andreessen Horowitz broadly will certainly invest in enterprise SaaS software companies. Does the American Dynamism thesis do that? If you go after a space and you think, "Oh, actually this space is going to be better for a pure-play software company to go sell as an enterprise business," is that out of your American Dynamism thesis?
Erin Price-Wright (21:00):
No. Absolutely. We love software businesses.
(21:03):
When we find a pure software business that we think will work, it's good news for the fund.
Katherine Boyle (21:07):
I'll say though that one of the questions we always get is we know Andreessen Horowitz does so many things. How do we delineate what is an American Dynamism company, versus what is an AI apps company or an AI infrastructure? And we work very closely across our teams, but we actually delineate it by the go-to-market function. If a company says, "My primary customer base is going to be consumers or the Fortune 100," that is going to be much better served by our AI apps teams, because that's how they built out their go-to-market engine. That's what they're building for. But if a company comes to us and says, "Hey, we have all these characteristics of, yes, we could be an AI apps company, but we're going to be selling to industrials and we are going to be selling to the US government," that's where we've built out our go-to-market practice.
(21:48):
And I'd say we have a very robust operation in Washington, both on the government affairs side and on the business development side, where we try to bring our companies in as early as possible to meet with people at the DoD, to meet with the appropriate regulatory agency to make sure that they're not only compliant, but also part of the conversation around what's happening in things like nuclear, or what's happening broadly in energy or mining. And then we also understand how Washington works. You have to know who your congressperson is. You have to get in touch with the right committees to make sure that your messaging is top of mind for them. And that's a very hard triangle to manage in Washington while also managing a company. So that's where our operating teams are really focused or helping that three, four, five-person team manage and navigate that aspect of building the business very early, while also focusing on running the company.
Erin Price-Wright (22:37):
Our companies also get the benefit of the fact that we have these large portfolios outside of American Dynamism. So we are invested in the best AI companies in the market. So our founders who are building a business, whether it's in energy or defense or autonomy or mining or chemicals, get the benefit of access to the founders that are literally on the cutting edge of building these models. So they're not out there trying to do fundamental research on their own, while at the same time trying to build a business in the hardest categories to build a business ever.
Cody Simms (23:06):
Katherine, you mentioned companies focused on selling to government or selling to industry. I assume sometimes you're also trying to find companies that are going to take out existing industry, that are going to build a new category and own that industry in the future. How do you think about a complete disruption, versus a partner-to-win model when you're looking at businesses?
Katherine Boyle (23:27):
It's a great question. And what's interesting is I would actually use defense as a good example of this. The early defense companies in our portfolio, things like Shield AI and Anduril, they had no options to really partner with primes. It was almost like the big guys didn't even care that they were building. It was like, "No. No. You guys are in startup land and that doesn't matter."
Cody Simms (23:45):
You guys are cute.
Katherine Boyle (23:47):
[inaudible 00:23:48] There was a, "how do we even partner, we don't know how to do that." And so those companies really focused on how do I prime on the contract? And in many ways, they were in direct competition with a lot of the existing primes that have been around for, candidly, 100 years, which is crazy. That's a whole other backstory. But then what we've seen in what we're calling Defense 2.0 is that a lot of companies are partnering directly with primes. The primes have in some ways woken up and said, "Wow, some of the best suppliers that we can find are actually these startups. And they're cutting edge, they're great to work with. They have top-tier engineers." And so they work directly as tier one suppliers to the main primes, and they don't see themselves as necessarily completely disrupting the industry. But they see themselves as augmenting it to a place where every other major prime is dependent on some of these suppliers.
(24:31):
And so we've made a lot of investments in companies that want to work with the new defense primes, the ones who are selling directly to government, but that also want to work with the legacy ones, because the legacy have woken up and said, "Okay. Wow, we really need to change our business. We really need to change how we do business with the startup community. And now it's robust enough where we can." But I think that's been good for the entire ecosystem, because it's helped the legacy players really find ways to improve their own products. And it's been terrific for our companies who see them as great customers that they can potentially work with, and while serving USG.
Yin (25:03):
Hey everyone, I'm Yin a partner at MCJ, here to take a quick minute to tell you about the MCJ collective membership. Globally, startups are rewriting industries to be cleaner, more profitable and more secure. And at MCJ, we recognize that a rapidly changing business landscape requires a workforce that can adapt. MCJ Collective is a vetted member network for tech and industry leaders who are building, working for, or advising on solutions that can address the transition of energy and industry. MCJ Collective connects members with one another, with MCJ's portfolio and our broader network. We do this through a powerful member hub, timely introductions, curated events and a unique talent matchmaking system and opportunities to learn from peers and podcast guests. We started in 2019 and have grown to thousands of members globally. If you want to learn more, head over to mcj.vc and click the membership tab at the top. Thanks and enjoy the rest of the show.
Cody Simms (26:05):
And I would assume it creates market for the pure software companies in the broader Andreessen Horowitz portfolio, because the primes realize they got to catch up, and so they're going to start partnering with companies that can provide them with AI capabilities to help catch up as well?
Erin Price-Wright (26:17):
Yeah. And that same pattern we see pretty consistently across different industries, whether it's manufacturing and supply chain energy, et cetera, that you need some initial disruptors to really own the end-to-end value chain, to really show what's possible when you inject technology into different parts of the lifecycle of the product and then a larger market opportunity opens up.
Cody Simms (26:38):
Do you find that it's a different kind of founder who pursues a full take-down business versus a partner to win business? Does that make sense?
Katherine Boyle (26:47):
Yeah, It's hard to generalize because I do see some founders saying, "Okay. We're going to take over." Of course, any founder that's going to take over an entire market has a particular dominating spirit that we love to see. But I think it's not so simple to work with everyone in the ecosystem as well. It's more product dependent. If you have a vision for a type of product that you are building, there's very good reasons to not prime with the Department of Defense. And so I think it's more of a strategic decision for a lot of founders and both can be very valuable businesses, in our opinion.
Cody Simms (27:16):
Erin, in energy, what are the areas you think right now are solved problems and what are the areas where there is room for large-scale change? I'll give you a little bit of my thesis. Solar has won, it just isn't fully deployed yet. And storage is already coming down the curve where it is going to win as well. And so the question is, how much do you need new technology in those areas versus deployment innovation? And then, where do you need totally new technologies that can still leapfrog existing performance or solve big problems?
Erin Price-Wright (27:51):
I would say that nothing is solved. The grid is probably the most complicated machine ever built. And saying solar itself as a sliver of that is largely a solved problem, I think, underestimates the challenge of how do you hook all of this up together? So maybe the problems are less or the challenges are less net new scientific and technological innovation and breakthroughs. Yes, I think solar will continue to get better. And much more, how do all these pieces fit together as part of a larger system? For example, the big challenge for a new solar project today isn't necessarily, what is the underlying technology of the solar panels? I will say the fact that the solar panels are made in China is a challenge. That's a problem, so that's a separate topic of conversation is should we and how should we consider manufacturing solar at scale in the United States or in the West?
(28:42):
But aside, it's hard to get a new solar project connected to the grid today, because the grid interconnect waits are so long. You could be waiting theoretically 20 years to get a new solar project commissioned and up and running, and part of that is regulatory. It's what are all the different hoops to go through on the permitting and land use and commissioning and EPA side of the house. Part of that is we just don't make enough transformers, so that is a technical problem. We're several years backlogged in the order wait list for new transformers to get new projects interconnected with the grid. There are folks who are working on net new technologies to make new types of transformers that we could build faster in the US that have more capacity, that are easier to manage than the existing transformer architecture we have today.
(29:29):
The other thing that we're seeing is many more projects bypassing the grid altogether. So with the backlog of data centers needing to get power, you're starting to see many more creative solutions, where power and the data center are co-mingled together on site, and you don't even have to worry about grid interconnect. So you have generation storage and use all together and you bypass the grid completely. And then you have things like Base Power, which we talked about, which are much more a grid-level distributed storage. So I think it's less about the individual technologies and more just how do all these things fit together at scale? How do we move faster to get more power onto the grid, given that the individual sources of power, nuclear, solar, et cetera, for how we're going to get this energy abundance to power the next generation of growth ... How do you get all of this online?
Cody Simms (30:23):
How do you avoid investing in technologies, whether they be new-generation technologies, new storage technologies ... How do you avoid investing in things that will ultimately become commodity? It strikes me that 10 years ago in the Clean Tech 1.0 boom, one of the challenges was a lot of things got invested in that ultimately commoditized and lost the ability to hit. Venture scale project developers made a ton of money deploying them all over the country, but the actual companies themselves, the technologies didn't become unique to the businesses.
Erin Price-Wright (30:57):
That's a really important question, and where we think about what makes sense for a venture investment in the energy space, there really does have to be a business model attached to it beyond just we are generating energy more efficiently than before. There has to be a broader network effect.
Cody Simms (31:16):
More than a widget sales business as well.
Erin Price-Wright (31:18):
Yeah. More than a widget sale business because you have to assume that the cost of energy goes to zero. So generally, when we are making assumptions about what our company's business models look like in the future, we assume that the general cost of power is nothing, because that's the goal. And it's more like how do you serve a grid at scale? How do you serve a system at scale? How do you serve power in places that that's hard to serve power today. Our company Radiant, which is a small nuclear reactor, the idea for that is to get power into places that can't connect to the grid for whatever reason, whether it's for operating bases or they can't get interconnect.
Cody Simms (31:51):
Doug was on the show a couple months ago. For listeners who want to go hear all about Radiant, go listen to that episode.
Erin Price-Wright (31:55):
Oh, fantastic.
Cody Simms (31:55):
It's great.
Erin Price-Wright (31:57):
Yeah. So it's much more about what is new about the business model, which often relates to distribution.
Katherine Boyle (32:04):
One thing I'll add too is Elon has popularized this phrase that I think is really important for American Dynamism companies that we always say, "the factory is the product." And so a lot of the actual products that are being built may be commoditized or look like commodities, but the factory itself and how quickly they can pump them out, how quickly they can iterate for the customer. To Erin's point on energy where they can operate, can they operate in remote environments? It may look like a commodity business, but if the factory is unique and impossible to replicate, that is an [inaudible 00:32:36] company that we want to be involved with. And we really do try to on what is the actual machine that is being built?
(32:41):
To use our industry. I mean, you could say that venture capital is a commodity industry. No one actually wants to say that, but we're all selling the same commodity. But the machines are very different. Every machine is very different. And so I think we have to understand whether a business is actually a good business. We really have to dive into what is the machine? What is the thing that cannot be replicated? And for every industry it's different. For some it's connections, for some it's brand, for some it's location. And maybe there is actually a commodity deposit that will be important for some of the companies that we ultimately invest in. But I think there's something about understanding what the actual factory is. Using that term loosely, that gives us conviction in a given company.
Cody Simms (33:15):
It comes back to my question that I was asking about AI first. It may not be AI from a software perspective, but may be automation. It may be whatever it is, but they're able to do something more efficiently than the way things have historically been done, is what I'm hearing you say.
Katherine Boyle (33:28):
Yeah. And there might be deeper modes because of that too. That's the thing where I think there's a lot of debates now around, what are the types of moats that are going to be driven by AI? And we're only starting to see those emerge in American Dynamism companies. And so I think that will be an interesting thing to explore over the next couple of years.
Cody Simms (33:43):
Erin, what's your hunting list in energy right now?
Erin Price-Wright (33:46):
Oh man. I think if someone knows how to solve the interconnection problem, definitely come talk to us.
Cody Simms (33:53):
One thing that we've observed is the rise of a few really key tech ecosystems that seem like they live and breathe this American Dynamism or new industrialism thesis, whatever you want to call it. To me, obviously you have the Bay Area and I think San Francisco and Palo Alto, San Jose have almost bifurcated into two different communities to some extent. But I would very much put both of them on that map. I would put El Segundo here in LA, where I live, very much on that map. I would put Austin, Texas, very much on that map right now because of everything going on in energy. I'm curious if you agree with those four spots, and if there are other climate startup communities in your space that you're extremely excited about right now. Miami might be another one to some extent too.
Katherine Boyle (34:37):
Yeah. I think Miami's a different ecosystem and we can talk a little bit about XOwat and what I thought the interesting secret about a company like that is. But I think you've nailed it in terms of the ecosystems that we really see emerging. And I think there's a reason for that, which is you can learn software on your own. It has never been easier. I don't want to say easier, but there is such a thing as a self-taught engineer programmer. And that is changing too, where I think we'll see that even more with AI, where it's like they don't even need to go to college. But still you can go to any top-tier engineering university in America and learn coding, and that's something where you see incredible talent from all over. That is not true of building a manufacturing company. The best startups, they went to the University of Elon Musk, they worked at Tesla, they worked at SpaceX. They worked at a place that has reached scale, and they have learned how to iterate and manufacture from the best.
(35:26):
And there's maybe a handful of other one-offs that we could point to, as people who've learned it. But there is something striking about the people who have really learned production come from those companies and they've learned how to iterate, and they've learned how to build from that kind of heritage. You can't learn it at a university. You can't learn it at a startup, it doesn't work, and that will change. I think as there's more and more winners in the category, there will be a much broader exodus. But I think there's a reason why Austin has become important, because you have Tesla there. And then there's a reason why El Segundo is important, which is because SpaceX has been there in Hawthorne. They really are this exodus from these companies that have scaled and seen excellence, where you can't get that if you're a kid who's coming out of a college dorm room and has never actually had the true capacity to build. Yes, I think we'll see some succeed without that heritage, but a lot of the early mistakes that people will make, they've learned what not to do from those companies.
Cody Simms (36:16):
To build at scale, I think is the important designation there. And we saw it in the early two thousands for people who had built some of the original internet companies. There's a reason why most of the internet companies that emerged in the 2000s decades were in Silicon Valley, because they had been part of that Web 1.0 wave. Silicon Valley's in Seattle, I should add. And then there's a reason the auto industry is in Detroit, because in the 1920s and thirties, that's how you learned how to build cars at scale. You lived in Detroit.
Erin Price-Wright (36:41):
What is exciting, though, is seeing the talent start to emerge from non-historically AD-related categories. And people pick up their head and think, "Wow, I really want to build something hard."
Cody Simms (36:55):
'AD' meaning American Dynamism?
Erin Price-Wright (36:56):
Yes. American Dynamism, sorry. Although it couldn't [inaudible 00:37:00] ... to defend.
Cody Simms (37:01):
There we go.
Erin Price-Wright (37:05):
Interchangeable. People who have built software, like fantastic software companies like Stripe, some of those people are going to places like OpenAI, but increasingly we see young, hungry, ambitious talent moving towards American dynamism categories and companies, which I see as someone who used to go walk to the Palantir office every day with protesters around me asking, why I could work for this evil corporation that sold to the government. It's really heartening to see. So it's really heartening every time I get on the phone with a Stripe engineer or a Google engineer who wants to find a job working with hardware, trying to figure out how the physical world meets the digital world. I'm like, "Yes, we can do this. We can figure this out." That's been a pretty exciting talent exodus to watch.
Cody Simms (37:51):
On the idea of creating community around this American dynamism theme that you've created, you all have taken this interesting marketing tactic of publishing the American Dynamism 50 each year, which is this list of 50 companies that you believe represent the spirit of American dynamism. And I don't think they're all Andreessen Horowitz portfolio companies as far as I know. Is that correct?
Katherine Boyle (38:13):
Yes.
Cody Simms (38:13):
Tell me about the project and how that came about.
Katherine Boyle (38:16):
Yeah. Honestly, I'll say it here. We should probably be more methodical about it. People love being on that list. People take the list seriously. So we're trying to be more methodical about it, but every year we have a theme. And so it's not necessarily the best companies in American dynamism that year by valuation or by headcount or anything like that. Every year we have a theme of, what is the big thing that is top of mind, mainly for people in Washington? So the second year, it was the intersection of the physical world and AI. This year it was the fight of the future, so it was really focused on defense. It wasn't focused as much on [inaudible 00:38:49]
Cody Simms (38:48):
The thesis where people haven't read it for this year, it was really dark. It was like, "It's 2027, China has invaded Taiwan, semiconductor manufacturing shuts down. What happens?"
Katherine Boyle (38:58):
It's the scenario that the DOD is playing every day, which is how do we prepare for a war of mass in 2027, if that is indeed the year it would happen? So that was, here are the companies that are supporting it. But I think we try to capture the zeitgeist and we try to get it as close to the zeitgeist as possible and try to include the breadth too, because I think one of the things that ... We build this list for our founders and for founders in the ecosystem, but we're also building it for people in Washington.
(39:23):
So it really is meant to be this, here's what Silicon Valley and what this American dynamism ecosystem are building this year. And here's just a flavor of the companies that you're going to see coming through your office telling you how they can support the DOD or the DOE, or support the initiatives of people in Washington. So it really has become this thing that I think a lot of lawmakers look forward to as well, because it gives them, here's the bleeding edge of what's happening, and it actually gives them a lot of hope. It's funny you said it's dark. I actually think they took this year as, "Wow, I didn't know there were 50 companies [inaudible 00:39:53] deep [inaudible 00:39:54] about-
Cody Simms (39:55):
You're right, the scenario's dark, but they're already thinking about it all day. So yours is more the optimistic side of it, which is, "We can do this, we can navigate it." And I love that you said capturing the zeitgeist, because I'm proud to say four of the seven energy companies on this year's list have been on the pod. And three of the seven energy companies are MCJ portfolio companies. So
Katherine Boyle (40:13):
That's great.
Erin Price-Wright (40:13):
Love it.
Cody Simms (40:16):
I'll take it. So riffing a little bit on this scenario where China invades Taiwan, et cetera, strikes me how important it is if we're talking about American dynamism for the US to navigate the supply chain of lithium-ion batteries. We talk about the data center boom and this huge energy demand. And ultimately the way it's solved is by reusing the electrons that we already generate, which is through batteries. We talked about base power being a mutual portfolio company. How are you thinking about resilience of that supply chain that can navigate a trade war, or navigate tariffs, or navigate a world where China decides to cut off the US in some way, shape or form?
Erin Price-Wright (41:03):
It's a huge challenge, because it affects both the broader American public living their life day-to-day and whether they have access to power and whether that power is cheap. It also affects if you were to take a drone and deconstruct it into its constituent parts, a battery is a huge component of that. And today, you really can't get batteries anywhere outside of Chinese companies.
Cody Simms (41:28):
Or a cell phone. It's everywhere. Laptop.
Erin Price-Wright (41:30):
It's everywhere. It's everywhere. And if you trace that down to its roots, the vast majority of batteries in the world, I'd say over 99%, are manufactured by Chinese companies. Some of them are manufactured outside China, so Vietnam manufactures some batteries all owned by Chinese companies. And then if you look at the component parts, the minerals and rare earth metals, which are inside those batteries, 99% of those come from China. So even if the actual elements themselves were dug up from the United States or for somewhere in Africa, China does 99% of that rare-earth processing, which affects our ability to build batteries, build motors, build component parts for essentially every weapon system we have in the United States, if China were to cut off our access to that supply.
(42:17):
This is a critical problem. I know the US government is very focused on it and figuring out how to shore up those US-based supply chains, but it's going to be a really hard problem, because we haven't done that level of processing or mining in the United States for many, many decades. So this is a net new skill that we're going to have to relearn essentially as a society, in order to be independent in the case of a 2027 war with China.
Cody Simms (42:43):
And Erin, just to add on that, we talk about China owns it, but it doesn't all happen in China. A lot of the processing happens in China, but the mines are all over the world. A lot of the processing happens all over the world. It's just that China has invested in it and actually controls those supply chains. And so it's an economic lever as much as it is a technological one, which might even be harder to crack.
Erin Price-Wright (43:05):
Yeah. If you look at the landscape in the African continent, for example, they're producing tons of these rare earths, but the United States has very strategically decided to stay out of it, because it's politically unpopular to be involved in mineral extraction in the world. So the United States has turned a blind eye. China has swooped in, invested billions of dollars in infrastructure projects, and as a result gets all of that off-take and does all of that processing in China.
(43:31):
I debate my hardcore-environmentalist mother sometimes, I think she's come around, about why we should invest in mining and processing in the United States. And it's easy for us to turn a blind eye and say, "Oh, we're not going to do it here. We have the strongest environmental protections in the world, and that precludes us ever investing in this type of processing and manufacturing in the United States." But I would rather have the United States environmental record producing rare-earth minerals than China's. If you think about it on a global impact level, I think we can no longer afford turn a blind eye to where the elements and products that we use every single day and that our society runs off of, come from.
Cody Simms (44:10):
I hear the same argument from people in the oil and gas industry, who will say, "Hey, would you rather have the US producing oil and gas or Russia?" And it's a similar argument I hear people make. I'm curious-
Erin Price-Wright (44:20):
Taiwan buys the majority of their ... They just shut down their last nuclear plant, which is probably a mistake. But they buy all of their oil and gas from Russia and they're desperate to buy it from us, and we just don't sell it to them. Controversially, the first check I wrote at Andreessen Horowitz was into an oil and gas company. So-
Cody Simms (44:36):
What's the name of it?
Erin Price-Wright (44:37):
It's still rather stealthy, so I won't share on the pod.
Cody Simms (44:41):
I'm curious how much you think requires new native extraction, better discovery mechanisms, better drilling, digging, extraction mechanisms? How much of it is on the processing side, how much of it's on the recycling side of taking things that we may import initially from China, but we have a lot of it in the US today. And how do we do a better job of managing it as it hits end of life, recycling or reusing in some cases?
Erin Price-Wright (45:07):
To be honest, I think it's a "yes and" problem. I think every single piece of the supply chain is going to need innovation and is going to need investment. I think the real trick and challenge will be figuring out how to verticalize sufficiently, such that a single entity can have enough control over the end-to-end process to actually tell a good gross margin story using technology. We talked a little bit about this before, but if you take off any single sliver of the end-to-end value chain of producing rare-earth minerals in the United States, it's really hard to make an economic case for investing a ton of CapEx. And mines go bust all the time, it's a very tumultuous industry. It's highly driven by commodity prices, and you run the risk of China just coming in, flooding the market with a commodity and crashing your prices, because they want to put you out of business.
(45:58):
So you really have to own the end-to-end supply chain, including the customer off-take agreements, likely with United States government involved in setting those contracts and those prices, if you're going to build a reasonable business here, versus picking off piecemeal some small piece of that value chain. Because I just don't think you can make the numbers work if you're going up against China. But that's a very hard problem for venture capital to solve alone. That involves a lot of different capital structures and regulators in the United States together agreeing this is an important problem to solve.
Cody Simms (46:30):
And when you make an investment, do you look for companies that can scale purely on VC dollars? Or are you okay underwriting companies that you know are going to need to take on significant amounts of project finance or significant amounts of other forms of capital?
Erin Price-Wright (46:44):
The most expensive capital a company has is its cap table. So maybe you have to build factory one, plant one, whatever it is, with VC dollars. But we actually explicitly look for companies that, if companies have a lot of CapEx, we explicitly look for companies who we believe can be thoughtful and strategic about how to structure their cap tables and their financing waterfall, such that they're not financing the lifetime of the company with venture capital, because that is just totally not sustainable.
(47:12):
And I think the best founders and teams who are building CapEx heavy companies in American Dynamism really understand that. And we, in fact, at Andreessen Horowitz have a team internally to help our portfolio companies really think through this strategically. Like, what are different forms of project financing? What are different forms of debt? How to think about non-dilutive capital from the government to invest in some of these projects, where they're doing heavy R&D or jobs-related. It's really important, and it's also one of the reasons why American Dynamism companies tend to hire CFOs earlier in their lifetime than general enterprise SaaS companies.
Katherine Boyle (47:47):
A good CFO is worth its weight in gold.
Cody Simms (47:50):
For sure it is. Well, listen, I know we're coming up against our time here. The last question I'll ask is, what do you think the world looks like in 10 years?
Erin Price-Wright (47:58):
Well, we have the best job ever, which is we spend all day long talking to people who are so optimistic about the promise of technology that they're dedicating their lives to essentially the preservation of Western democracy. And I can't wake up every morning and feel gloom and doom when that's the case. So I feel very lucky to be in that position, because we're surrounded by probably the most optimistic people in the world.
Katherine Boyle (48:26):
Yeah. And I think it's so hard to say what 10 years will look like. When we were starting this practice I thought it'll probably take 10 years for this to be a true category of innovation that other limited partners and other investors are investing in, and that happened in less than three. So I do feel like time is accelerating so much that 10 years from now, it's really, really hard to think of how much change will have happened in 10 years.
Erin Price-Wright (48:48):
In 10 years we're going to have AGI. So the world will look very different.
Cody Simms (48:52):
It will. It will indeed. Katherine, Erin, thank you so much for joining, and kudos on coining this phrase and creating the movement around the category that you have named. And it's been exciting to see the investments you're doing. And I can't wait to see what else comes of it.
Katherine Boyle (49:08):
Wonderful. Thanks so much for having us, Cody.
Erin Price-Wright (49:10):
Thank you so much.
Cody Simms (49:12):
Inevitable is an MCJ podcast. At MCJ, we back founders driving the transition of energy and industry and solving the inevitable impacts of climate change. If you'd like to learn more about MCJ, visit us at mcj.vc and subscribe to our weekly newsletter at newsletter.mcj.vc. Thanks and see you next episode.
