Defense Tech Meets Commercial Markets with Marlinspike’s Neil Keegan

Neil Keegan is the founder and managing partner of Marlinspike, an early-stage fund investing in dual-use technologies across defense and commercial markets.

Tell us about your background and why you founded Marlinspike?

I’m a D.C.-area native who always wanted to serve my country. I went to the Naval Academy and spent six years on active duty in surface warfare. I studied economics and finance to understand how the big system works. After coming out of the Navy, I went to Johns Hopkins SAIS for graduate school and then landed at Goldman Sachs in New York working with hedge fund clients. Then I moved to Los Angeles to work with private clients. 

The LA role gave me time in the alternative investment landscape. I even underwrote an investment in SpaceX at about a $10 billion valuation that jumped to $12 billion by the time we got in. Now they’re doing a tender at $405 billion. That opened my eyes to high-growth, disruptive companies and founders upending business models.

Ultimately,  I wanted to run my own firm. So, in 2019, I moved back to D.C. and started making co-investments in companies like Palantir before they went public and Shield AI’s Series D. After some success and with a better understanding of the opportunity set, I put together a great team to launch Marlinspike and our first fund.

What is Marlinspike’s investment thesis?

We focus on dual-use investing. That means we look for asymmetric opportunities with downside protection but uncapped upside. We look for companies solving problems for national security through high-growth technologies like AI, autonomous systems, cyber, aerospace, and space. 

Historically, we’ve seen that if a company solves a hard problem for the Department of Defense (DoD) or the intelligence community, the technology is often commercially scalable.

We don’t require companies to be defense-first or commercial-first. But we do look for unique technologies gaining traction in at least one lane. Often our value-add comes from helping commercial companies think about use cases in the intelligence community or DoD. 

Right now, our primary focus is the convergence between autonomous systems, AI, and advanced manufacturing. Because the lines are blurring. You can’t really say “that’s an AI company” or “that’s advanced manufacturing” anymore. There’s a real convergence happening.

Why is dual-use important to your investment approach? 

First and foremost, we’re fiduciaries committed to delivering returns to our investors. We’re not afraid of defense-only companies if we get in early enough. Say they have a $15 million to $40 million valuation, getting to 10x just being defense-only is reasonable if they become a mergers and acquisitions candidate selling for under $500 million.

But we prefer companies that can broaden their platform to include commercial applications. The total addressable market difference is typically 1-to-10. If the defense market is $100 billion, the commercial market could be $1 trillion. Take Kodiak Robotics, one of our investments in autonomous trucking software. They’re doing well in the DoD market, but it would be crazy not to apply that software to industrial trucking. The commercial side provides a buffer while earlier-stage companies work through the DoD acquisition process.

How do you approach portfolio construction and check sizes?

We’re primarily an early-stage fund, deploying around 80% of our capital from pre-seed through Series B rounds. Our pre-seeds and seeds establish footholds of $100,000 to $1 million. We’ll be opportunistic for later-stage companies that align with our thesis, but our typical fund size of $75 million to $100 million supports around 25 portfolio positions.

When we encounter exceptional opportunities, we’re prepared to make significant investments. We’ve allocated up to 15% to 20% of the fund to a single investment if we see a spectacular team, or technology that solves a genuine problem. Often it’s a sufficiently large total addressable market that offers outsized returns. That kind of concentrated investment can be crucial to achieving our target of 10x returns. For example, we held a maximum 15% position in Armada’s Series A with a check exceeding $5 million, and we did similar in Anduril’s Series E in 2022.

What makes founders successful in the defense tech space?

It’s not necessarily about having military experience. There are many great founders without military experience who see problems and have such deep technical expertise that they figure it out. The really good ones move fast and are humble enough to bring in people who understand where to get capital and how to solve the most urgent needs for the warfighter. 

We look for founders who have been around the block and have had successes and failures. They need to know when to pivot while being humble enough to ask for help. You might only have a year or two to prove you deserve more funding. If you’re six or seven months in and not hitting milestones, you better figure something out. These traits only become clear by getting to know founders and seeing how they operate in challenging environments.

How has the defense tech investment landscape changed since you started Marlinspike?

When we launched, we knew there was a problem. As a country, we needed to do more with less and solve issues with technology. Our adversaries had been studying us for 25 years and gearing their militaries to defeat our capital assets. 

The Ukraine war highlighted how the rules of warfare were changing. There has been  increased drone use and satellite imagery in this conflict. We have also started seeing more creative battlefield tactics combined with traditional needs like artillery rounds and missile defense systems. Additionally, you’re seeing China outspend us on defense tech, to the point where some of their equipment is simply better than ours. This constant exposure, coupled with wobbly financial markets, have forced people to look for new possibilities.

There’s now a sense of operational urgency, and private markets are recognizing there’s a big opportunity where you can make money. All these trend lines are drawing capital from those who feel comfortable in the space.

Where do you see the biggest opportunities in national security over the next five years?

AI is ubiquitous but extremely important. Using it well is about getting enough proper data to ingest it and make sense of it. We’re at the early stages. It’s like the internet in the early ’90s where we knew it would help but weren’t sure of its full impact.

Advanced manufacturing will also be critical in rebuilding our industrial base. This means onshoring, where we can do things faster, better, cheaper, stronger, and in a distributed way. That won’t happen without specific AI-enabling technologies. We came together in this way during World War II when President Roosevelt asked entrepreneurs and corporate leaders to figure out the way forward. It didn’t happen overnight, but they planned, and it became a war where we could outproduce our enemy.

What advice would you give to founders building in this space?

Make sure your company is a portfolio fit. Ask yourself, where do you fit in the convergence of AI, autonomous systems, and advanced manufacturing? Understand where you are in the company lifecycle, because that determines capital allocation and expected returns. Be ready to pivot if needed and bring in expertise where you lack it. Focus on solving urgent problems with technology that can scale.

The rules have changed. Companies like Palantir, Anduril, and SpaceX have proven that new primes can deliver. The risk of choosing these companies over traditional primes has gone way down because they’ve performed and executed. This opens up more room for earlier-stage companies to excel and expand market share. The ecosystem is moving in the right direction.

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