Investing in American Resurgence with Venrock’s Morgan Hitzig

Morgan Hitzig is an investor at Venrock, where she invests in deep tech companies focused on national security, reindustrialization, and the technologies that support thriving cities.

Can you walk us through your unconventional path to venture capital?

I actually started my career in finance but never thought I would go back to it. My dream job, from when I was 15 or 16 years old, was to work for NYPD’s Counterterrorism Bureau. I was born and raised in New York and was here on 9/11 so the counterterrorism mission always felt personal. But the police department didn’t make it easy. After applying about six times, I finally got a call back and became the newest analyst in the NYPD’s Counterterrorism Bureau.

I spent about three years in counterterrorism, which was incredibly rewarding as a native New Yorker because you get to see the underbelly of the city you know and love. But I realized there’s something different about being in uniform. I was a civilian in that organization, and I wanted to serve in a different way. So I joined the Navy as a reservist through their direct commission officer program, which I recommend to everybody. It’s an amazing way to continue serving if you’re in technology and interested in geopolitics.

I was playing the home game at NYPD and the away game for the Navy as an intelligence officer. At a Navy exercise, I met Mike Diorio, who became my boss at Dataminr. He convinced me that I had the right disposition for leading teams in a startup environment. It took him a while to convince me since I had the best job in New York City, but I went over to Dataminr for about five years, leading their operations team and growing the company overseas. I got totally bit by the startup bug.

After a few deployments with Special Operations Command, I came home and joined Peregrine Technologies, focused on public safety, as their Head of Growth. A few years into my time at Peregrine, Nick Beim at Venrock called and said I’d be very good at venture capital. Since joining Venrock, I’ve never looked back because it’s such a privilege to support founders building to solve America’s most pressing challenges: Investing in how goods and people move around the globe, bringing advanced technologies to local, state, and federal government agencies, and applied AI that actually improves how people live and work.

What is Venrock’s investment thesis in the American resurgence space?

My domain on American resurgence thesis is seeking an answer to the question: What’s the blueprint for national defense and reindustrialization? At Venrock, we broadly define the answer as investing in the public interest. That’s potent for me given my public safety background. A big part of that thesis is also how we create the technology that supports thriving cities. More broadly, we believe that some of the biggest problems to solve for American resurgence live in the physical economy. After a decade where software’s center of gravity lived on screens, AI is now moving decisively into the physical world. Hardware breakthroughs unlock new capabilities in software. Software breakthroughs unlock new possibilities with hardware. 

We’re everything from incubation to Series A. About 60% of our unicorns were incubations at Venrock. We love finding entrepreneurs who have a glimmer of an idea and want to co-create it with us. We have offices in New York and Palo Alto where we spar alongside entreprenuers to find the best ideas. We like to earn the right to be the capital partner for somebody. Iif we’re not the right partner for you, even in a scenario working with an EIR, there’s no expectation that you only work with us, which I think is very unique. We tend to focus on leading or co-leading investments, with the expectation that we want to be the first phone call, good, bad or ugly, for the founders we’re supporting.

From your experience both in service and as an investor, what’s the right way to build in defense tech?

Historically, the best technology hasn’t won in government procurement because that wasn’t what they were optimizing for. They were optimizing for either safety, expediency, or a contract vehicle. The acquisition side was broken. The government would test and evaluate a particular piece of technology without understanding the context in which it lives.

On the venture side, we due diligence people, the idea, the market, and how quickly a company can scale among a myriad of other factors. We understand if the team has what it takes to deliver on a big contract. But the way the government invites companies to present belies a lot of what’s going on underneath the surface. Often you just see what this company looks like against this particular problem.

That’s starting to change because founders now have to execute on the product. We’re getting into the part of the cycle where there’s so much promise, and now we have to see these companies really start to deliver. So, defense is more complex than most markets in the sense that startups need to deliver highly resilient technology at speed and scale while navigating the unique complexities of the Pentagon acquisition process. This is a customer base that’s unlike any other. There’s a deep responsibility. This isn’t accounting software going down on a Friday afternoon. This is technology that’s going to be at the point of friction in the scariest moment in somebody’s life, and it’s got to work.

Is venture capital the right model for defense tech investing?

This is exactly the right question to be asking. We’re a storied venture capital firm with very specific return requirements, many of which would be very hard for a lot of the companies in defense to support. I personally think we’re missing a piece of the capital stack. The Office of Strategic Capital and other DoW entities are trying to fill this gap.

A lot of the companies we get pitched are amazing. They’re building technology America needs. They’re building technology that I want to take with me if and when I go back into the fight. But it’s not a 10x venture capital return business that’s going to go public with 30% year-over-year growth. It’s just too hard.

The market today is pricing in a war thesis. In order for some of these companies to hit the valuations we’re seeing, we have to go to war. I don’t want to go to war. We’ve run those simulations. It’s not a pretty picture. I think it’s a dangerous game to be pricing in warfare. You see it most acutely in unmanned systems with all the companies that continue to get funded.

What is encouraging is that we truly have coopetition in a way that doesn’t exist in any other part of the venture domain. Rising tides truly lift all boats here. It’s heartening to see VCs from across the spectrum seek out and put money behind companies who are working to make our warfighters, our country, and our allies safer. 

How do defense tech and the industrial base fit together in your investment thesis?

The phraseology that stuck with me is “production as deterrence.” I don’t think the Chinese are worried that we will outproduce them anytime soon. But it’s a necessary component to being able to deter at scale. Whether we like it or not, mass really matters in conflict. In order to get to mass, our critical old-line industries, which are under-innovated and ripe for disruption, need better technology.

This is coupled with the supply chain challenge everybody’s talking about. The bottleneck for advanced manufacturing is increasingly focused on the supply chain. In order to have a very strong defense, you’ve got to have a very strong industrial base. If we’re going to prevent war rather than price it in, we’ve got to be stronger first in industrials, in the supply chain, and in energy and manufacturing.

We’re seeing a lot more roll-ups. I’m getting pitched roll-ups almost every week of companies that are in the supply chain for defense. Time will tell whether those are good venture bets versus just early exposure to what is ultimately a private equity strategy. But you can’t have one without the other.

What patterns do you see for founders who successfully build in this sector?

Great defense tech companies today have a few key elements. They’ve got the mission orientation: they understand who they’re building for. They’ve got exceptional product expertise either because they came from the sector directly or somewhere adjacent and can port it over. And they have institutional fluency. I hate to say it, but this space still requires knowing what a PEO and a PM are, understanding the difference between NDAA and Reconciliation, knowing who to call to make sure capital lands in the right places to support the build against a critical problem.

The winning teams in this space understand what operators need and then they design for a battlefield that’s ever changing and pretty messy. I like founders who have gone expeditionary, either here in the US or overseas to Ukraine or other operating environments, just to understand what’s expected of their technology before they start building it. I also think it’s valuable to have a veteran on the early team. It brings credibility and an instilled understanding of the stakes of the mission. This is a different customer base. Sometimes it takes walking in those shoes.

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