Kelly Perdew is co-founder and managing general partner of Moonshots Capital, an early-stage VC firm investing in extraordinary leadership.
How did you start Moonshots Capital?
I graduated from the U.S. Military Academy at West Point in 1989. As an Airborne Ranger-qualified military intelligence officer, I spent three years on active duty and two years in individual ready reserve. I wanted to do law and business school when I got out of the military, and applied to the University of California, Los Angeles. About halfway through the first year, I raised $500,000 for the first startup and the entrepreneurial bug bit me hard.
I started building companies in Los Angeles while I was in the program. During those first few years working in the entrepreneurial ecosystem, there were a lot of founders that I could tell were going to be successful entrepreneurs. I had no money, so it was very small checks early on. My mentor was Luis Villalobos, founder of the Tech Coast Angels. His Monte Carlo simulations on early-stage tech investments showed that investors needed 20 to 25 investments over a two- to four-year period to adequately diversify their portfolio and minimize risk. I applied this principle as I met entrepreneurs and founded companies, recognizing that diversification across the asset class was essential for successful investing. I started angel investing in LA and became one of the OG angel investors back in the day.
After winning The Apprentice Season 2 with Donald Trump in 2004, the West Point dean invited me to speak to cadets and the faculty because there was a small spike in applications after the airing of the show. My future co-founder at Moonshots Capital, Craig Cummings, drew the short straw to be my handler for the day and that’s how we first met. Craig was in the military for 17 years and decided to get out. He did a Ph.D. at Columbia and started teaching. He started investing in Washington, D.C. while I was investing in Los Angeles and we would share deals as angels. We liked the way we each looked at deals. I invested in his second startup and we sold that to Daimler Mercedes. In 2014 we decided to start running syndicates and we hung out the shingle “Moonshots Capital.”
A weekly dispatch featuring exclusive interviews with deep tech founders & a roundup of the most important deep tech news.
What is Moonshot Capital’s core investment thesis?
In 2017, we looked back at the 73 companies we had invested in as angels and through syndicates and determined that the factor we could control at the time of investment was the quality of the leadership. We had leadership training from our military backgrounds. It was not only leadership training, but how to train leadership and active duty military application of that leadership.
Extraordinary leadership wins at the end of the day and that has been our thesis. We’ve kept focus on the fund side by looking at late seed investments. Our check sizes are $1 million to $3 million on $2 million to $6 million rounds pre-Series A, when businesses are just starting to scale and have approached $1 million in annual recurring revenue.
How do you evaluate leadership in the founders you invest in?
I had been out of the military for 10 years when I got cast to be on The Apprentice. After I won, everyone was asking if my military background helped me on the show. I couldn’t believe that people didn’t realize how much leadership training there is in the military, and how applicable it is to everything in life.
This is especially true when you start thinking about the stress, the pressure, and the minimalist resources common for a startup. The chaos of launching a business is directly attributable to what you’ve learned in your experiences in the military. About a third of our assets under management (AUM) have gone into teams that have military vets on the founding team. And about a third of our AUM has gone into technology that has both commercial and military applications.
A lot of the executives on the commercial side of businesses are starting to understand how powerful military leadership training can be for a company. If you can get somebody who has had military training, you are going to get all those leadership capabilities in somebody who’s way beyond their years. We trust our sons and daughters with officers or senior enlisted people in the military. That trust is sacred. Amazingly, the military veteran founders we invest in think the same thing about other people’s money. They know they are getting money that could be from someone’s kids’ college funds. The mentality translates from the military to the business sector. That DNA is important to us.
How do you analyze dual-use technology companies as investment opportunities?
We were investing in dual-use technologies before it became cool in the past three years. But trying to sell to the government is not for the faint of heart. The term dual-use is almost anathema for a venture capitalist. There are almost no examples of a product roadmap that is perfect for say the Air Force and is also perfect for the civilian aircraft industry. It’s literally bifurcating your effort.
For software applications like ID.me, a company that I’ve been on the board of for 14 years, we wrote some of the first angel checks. Craig and I invested in every round and we’re very bullish on it. But even ID.me had seven to eight years of crawling through broken glass to get to where it is now. If you look at the giant dual-use success stories over the past 20 years there’s only one, Palantir. Anduril is still on its way and obviously there’s Elon Musk’s SpaceX and the other space companies.
Necessity is the mother of invention and that is true for the new threats and risks that exist in the world. Look at what we’re seeing on the battlefield in Ukraine and what they’re capable of doing with drones. A relatively small, poor, and undermanned country has put a third to a half of Russia’s fleet on the bottom of the ocean and just took out some percentage of their long-range bombers remotely, with no humans.
This is a massive change in the battlefield and we absolutely need to be investing in tech. From our standpoint as a micro fund, there has to be a real commercial application in addition to defense. With a lot of these startups, especially in hardware, you have to fund multiple rounds and they are capital intensive over the long haul. There’s going to be some large distressed-buying private equity funds sitting at the last hundred yards of the valley of death. But there will be a few that thread all the way through and become the next Palantirs and Andurils. I’m a little worried about the amount of capital pouring into the defense space at the moment. There is only so much the market can support as exits and it takes an experienced and domain-savvy investor to find the next Palantir.
Your portfolio includes hard tech, robotics, and aerospace. What drives Moonshot Capital’s investments in these areas?
With Apptronik and Figure, two companies making humanoid robots, we believe in the size of that market capability. There’ll be way more humanoid robots than the number of cars that exist in a rapid period of time.
For the U.S. market, there will be more than one winner. It’s just such a massive space. I think we’re covering our bases and excited to be engaged with them. But certainly, Jeff Cardenas at Apptronik and Brett Adcock at Figure are amazing. Jeff’s a robot guy from the beginning, and Brett, in terms of engagement and interaction, has the closest thought process to Elon Musk of any other founder that I’ve seen. They both have fundraising capability, but we were able to get in early when people would have said we were crazy for investing in that valuation. But in terms of the size of the market, the opportunity that exists, they are just so massive that we wanted to participate.
Of the space founders that we invested in, Jason Dunn at Outpost is a serial space founder and there aren’t many of those. He previously built and sold Made in Space (now Redwire Space) where he helped NASA with 3D printing spare parts on the International Space Station. Now, he is building the world’s first returnable and re-usable satellite that will be able to deploy precision-land cargo from anywhere on Earth, to anywhere else on Earth, in under 90 minutes. That value proposition is a no-brainer for both commercial and defense users.
And then there’s David Kervin at Proteus Space, who is also an absolute beast and a former U.S. Marine. There’s no challenge that he won’t overcome and he is crushing it right now.They’re using AI to automate human engineering to accelerate custom satellite bus design and production timelines from years to months. Outpost and Proteus both have military and commercial applications on the same product roadmap. That’s the key. Startups have to stay laser-focused on a single product roadmap to be successful, and dual use is no exception.