Jordan Noone - Rockets and Venture Capital
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Bill: Ladies and gentlemen, welcome to The Business Brew. I'm your host, Bill Brewster. This episode features Jordan Noone. Jordan is a very interesting guy. He cofounded Relativity Space at 22. Relativity Space is focused on 3D printing rockets. He has since moved on from Relativity, he now is a co-founder of Embedded Ventures. They are a VC firm. They focus on taking clean capital. Clean capital means not dirty money and exclude certain countries. They are trying to help founders build companies, what I would consider the right way metrics of free cashflow and things that used to matter, and maybe now matter again. On top of that, they have a component that they're investing in US security. So, I think this is an interesting conversation. I know you'll like it. I enjoyed it. Thank you to Jordan for coming on the show.
As always, none of this is financial advice. All of the information contained in this program is for entertainment purposes only. Please consult your financial advisor before making investment decisions and do your own due diligence. As always, thanks for listening. Hope, you enjoy the episode. Peace. Excited to be joined by Jordan Noone, today. Jordan, what are you? You are Jordan one, you are Jordan Noone. I don't know how many nicknames you go by, but another Jordan introduced us and I'm happy that he did.
Jordan: I'm very, very happy for that as well. I'm happy to be here. My name does get a couple of different variations on it. But me and the other Jordan, we're in a constant competition for who's Jordan one and Jordan two, but I caved a couple of years ago and he's Jordan two or Jordan one. I'm Jordan two. To everyone else I’m Jordan Noone.
Bill: That too.
Jordan: [laughs]
Bill: I'll make sure that I fix that. I'm just going to say, Jordan Noone. Thrilled to be joined by Jordan Noone today. We're going to start it there. How's that sound?
Jordan: That sounds good and I'm thrilled to be here.
Bill: All right, man. Well, it has been a while. How's your life been? The public markets are crashing. I don't know if that's trickled down into your world or not, but it's been interesting.
Jordan: Yeah, it's been interesting to see, I have to say, I'm not surprised as far as what's happening and I think repercussions of some of what we saw in the private side of the markets. But we're early stage. We can talk about where my perspective comes from my background, but definitely, the early-stage venture industry is affected. But I think for us and our unique investment thesis, it's been different than most and we can dive into that. But I have to say, I'm not surprised and we were prepping for some backlash to happen.
Bill: Yeah, I would think, why don't we frame your background? Because my perception is that the stage that you're investing at, it's more about getting something working, and that's how you realize the value, and then the later stages are where the public markets coming down could maybe hurt them a little bit more than where you focus on. Is that fair?
Jordan: That's fair and there's definitely some nuance to the early state side and making sure those companies are able to be good in the public markets. It's something that you see a lot of the venture community forgetting is that you're not only building companies, but so many of the Venture Capital funds and approaches, they want to lock in multiples, flip them to the public, and do a risk transfer as they grow. And it's not necessarily building a long-term sustainable company and that's something that I do find rather frustrating out of the venture community. You saw that with the SPACs as the highlight of that for the last two years. Then this wasn't giving public investors the opportunity for growth that the private investors had. This was something where there were so many companies with terrible fundamentals, no business plans, no growth strategies, no good economics underneath wanting to lock in that valuation, flip it to the public, and then watch it burn, and we're all suffering from that. The public markets and what's entered the public markets, in addition to areas that are outside of companies that have SPACed and companies outside of the venture community, it highlights the worst of the venture ecosystem on pump and dump style schemes. That's something that we saw happening.
That's not our style of investing in building companies. So, we built a variety of companies over the last two years and my background before this that are built on fundamentals. They're real companies, they're real hardware, and none of them are at a scale where I'd say they're default alive, yet, where they have a slot in the public markets, it's reasonable, but they're on their way and that's something the venture ecosystem forgot about for two years. As much as we're seeing, the market tumble, some sides on the portfolio having slower ramp ups throughout this year, because capital is harder to access for them. But people are looking for deals that have long-term growth, good teams, established teams that have built companies in those sectors before and have a reasonable chance of doing well once they're public. That's what we invested for, for two years. Not any of the deals that were the hype and the bubbles that you saw that they've just gone completely crazy in the last couple of months.
Bill: When you say that capital is a little bit harder to access, what does that look like in the area that you're focused on? My sense is higher rates on some of the preferred debt or hurdle rates that you have on the preferred return, but I'd be curious to hear how it's trickled down to what you see.
Jordan: For the portfolio companies, it's interesting because in the private markets, it is a marketplace. The more people that are looking at these companies, the more freedom they have in who they can fundraise from. Like how many funds, how many family offices are looking at these early-stage companies, you drive up valuations. That's what we saw for two years, where there was an overinflation evaluations. That's something that's really tricky in the private markets, because it's something that as that demand decreases, there's a freeze on a lot of that capital flowing today, then a freeze or a pause. I have the question of what company would unfreeze, what would initiate that fundraising flow again. That's what I tried to get those companies to look like. But it's a question there of how to fundraise when there's significantly less supply, then that tends to drive prices for these companies down. The reason that's challenging is that it very much dilutes existing shareholders. These companies planned on raising a certain amount of capital, they have big teams, they have larger expenses. And so, very dilutive or down rounds, where they're raising at a lower valuation or similar. That's something that hurts everyone.
For the founders, they have a public message out there that they're raising it flat or lower valuations. For the employees, their stock options just went down in value, if you go below your option exercise price. You're at this company because you think you can make go from an engineer to be a multimillionaire, tens of million-dollar employee off your shares, you just watch them go down and you just watched all this dilution come in. Then for the company and that can really hurt employee interest, because you're going to these startups for the upside of the volatility and then you just got hurt by it. That can damage the hiring ecosystem there for five years, 10 years, where people, “Why get options when you could get a nice cash paycheck?”
It highlights the gambling nature of it in a way, where the whole community gets hurt and these companies that have had 24 months of free capital available to them. They have founders that don't know how to fundraise, they have business plans and growth that don't make sense. they have no path to revenue, they don't have the skills to raise during a difficult market, and they don't even know how to think about their own company is something that needs to become good economically someday. You see so many companies that have raised valuations where they don't even have a path to revenue. They have a product and they don't know how to monetize it. They raised $50 million, $100 million, what's going to happen to those companies? They're all going to burn. Those founders are not trained to do well and that's something that to tap into my background a bit when we started our first company, which is where I know the other Jordan, Jordan number one from. That was a very difficult fundraising market. The ecosystem was very saturated in companies in the sector and we had a very extravagant thesis on what we were doing and something that we had to win over. An investment community, they did not want to touch what we were doing and that was very difficult.
Bill: You were doing 3D rocket printing, correct?
Jordan: Yeah, the first company, I started its Relativity Space. 3D printing rockets and developing the world's largest metal 3D printers. And so, very capital intensive, very interesting thesis. I was 22 when we started. You take a sector that's dominated by SpaceX, Rocket Lab, and the Virgin Group. We're all thriving at the time we started, this was 2015. You take me at 22, I think Tim was 25. Tim was CEO, I was CTO. You have these two companies in one. If it's hard enough to develop a rocket, launch pads, test sites, all the infrastructure, factories, the regulatory side, the actual tech side of that and then you want to develop the world's largest metal 3D printers, and you spin this all into one company of these two kids who have never taken a business class before, never fundraised, never ran a company, never been managers, and you enter the market, and you say, “Hey, here's what we're doing.”
It's something that we learned very well how to explain to the investment community the value of what we were doing. How is it that this weird, wacky idea and these founders turn into what's potentially a multibillion-dollar sustainable market entry? Over the last couple years, it's been seven years and the company is valued at $4.2 billion. Now, we raised 1.3 in private capital. 800 people went on its way to about 1,500 this year and I still remember the two of us in a WeWork in 2015. It's hard almost to connect the dots that it's the same company.
Bill: Dude, that's crazy. How do you even get the idea to the-- When I say the word hubris and what I'm about to say, I don't mean it in a rude way. I mean it in a respectful and I'm in awe of the fact that you had the hubris to go out and do this. How do you guys at 22 and 25, even get an idea like this off the ground?
Jordan: Part of it is the naivety of not knowing better. I have to say that's a lot of diving into it. You don't know the challenge you're up against and you think you can tackle the world. We went forward and I think we were very lucky in the sense and this is stuff that we look for in founders today, because I've transitioned from CTO of Relativity-- I was CTO for the first five years and stepped out of my full-time role there as we hit an inflection point that I felt my skill set wasn't needed day to day anymore that we brought on the right exec team to take the team in the company day to day through the rest of the growth. But I loved the early stage. It's that foundational stage of the company, but it's something that through that journey, me and Tim knew each other as college students. Made a rewind, how me and Tim met and the years up to founding Relativity together. We were at USC together, both aerospace engineers. I met him in the USC Rocket Lab and then it was a student group trying to fly a rocket to space, the first student group to fly rocket to space. They came to our introduction to aerospace class first week of school. I never knew I wanted to work on rockets. It was something I went to work on planes, aviation, I was an aviation buff, then I find aviation boring now. That's not the PC thing to say.
Bill: [laughs]
Jordan: But it was a super exciting project, where the students came in that were running the lab, my freshman year, this was 2010, and they were saying, “We're not doing a competition, we're not flying a rocket to a mile high with an egg in it to bring down on a parachute or seeing how far you can take a glider across a football field,” the standard vanilla student projects out there. They're like, “We want to fly the first student built and designed rocket to space.” That was super exciting. It was self-set goal, no constraints, control your destiny with it, and a bunch of students trying to do something that very few countries have done. There're very few people who have done projects that extravagant. I was actually sitting next to other Jordan during that. We went to USC together as well. We sat next to each other the first day of school. I remember it was aerospace 105, the AME 105 course. We were both Jordans, and we both ended up working on rockets together, and then we worked together at the company as well. But I met Tim that week. He was mentoring me, he was two years my senior. So, he was a junior in college. He was showing me some simulation scripts he wrote to simulate how high will the rocket go, and how to optimize the propellant design, and things like that.
I loved the group. I basically never left. I remember my second week of school. The first week, you know that Friday is when the group came through to the aerospace 105 class. My second week of school, I had done an all-nighter building a nose cone for a Mach-4 60,000 feet rocket we were making to fly in the desert in 19 days. It was a couple of weeks into school. I did an all-nighter the night before building the nose cone. It was a carbon fiber nose cone, we laid up the carbon fiber in the mold, laid out all the epoxy, some structural components in it, cured it in an oven. We're doing all the processing, and this is a Mach-4 nose cone. Titanium nose tip on it, it's cutting edge carbon fiber. I was 17 at the time, a couple weeks-- [crosstalk]
Bill: This is so cool. This is not what I was doing in college. It's amazing.
Jordan: It's not what I expected, but I loved it. I remember going to my history-- I had a history GE that morning. It was the discussion. When you sit with a TA and it's 10 people in the room, and I fell asleep, an 8 AM discussion. I fell asleep and I get an email from the TA later that day. They're like, “If you're going to fall asleep, just don't come.” I responded, I said, “Thank you for permission. I won't be seeing you again.”
Bill: [laughs]
Jordan: Perhaps, the best example of a student and I don't think the response they were expecting, but I actually ended up enjoying that class quite a bit. I didn't go to the discussions, but I enjoyed the content much more than I expected on week two. But no, it was something that-- [crosstalk]
Bill: That's hilarious, thank you for the permission. Don't worry, I won't be there.
Jordan: [chuckles] Looks like, I didn't know that was an option, thank you. But I have that email somewhere. I should pull it up. It was the beginning of my inner rebellion there, but I ended up being an odd student in the sense that I put time into classes that I thought paid off, classes and coursework. I didn't really pay attention to the grades. It was get enough by to pass. That's something that for me-- There are classes that I put a huge amount of effort into that everyone else was like, “These are the terrible classes, homework’s too hard, it's not relevant, you can pass if you don't do the homework.” But I was like, “This is helpful for me to learn. This is something relevant that I want to apply.” Then certain classes that were super easy that everyone loved because they could get an easy A, I was like, “This isn’t worth my time. I'm not learning anything. It's homework for homework’s sake. It's not something where I'm learning.” I got pretty pedantic about how I spent my time and so much of it then went to the Rocket Lab.
I ended up leading the group as a junior and senior. We flew the first two space shot attempts up to about 350,000 feet, which is past the Von Kármán line, which is the space, the internationally recognized space boundary. We flew the first two of those and that was as a student. Fully student built designed, we did all the FAA work, the Bureau of Land Management work, we were doing big report dispersions on where this thing could land. That was the hard part for my generation was proving the simulation, the government affairs, regulatory work to the point that we could get permission to fly these.
Bill: Because you don't want to just shoot something up into the air and it's like, “Yeah, it'll do a land where it'll land.” That could cause some problems.
Jordan: Well, it's a combination of where it lands and then what it flies through, right?
Bill: Yeah.
Jordan: Because if you're flying rocket at zero to mark seven above the continental US, there's planes up there, you need to be careful and that's the main thing is public safety. That's the role of the FAA in this. They would not permit a bunch of 19-year-old students to do this. We had to prove out that our simulation work, the accuracy of it, the processes we have were mature enough that we would be able to safely operate this thing in the middle of-- We pulled them out of Black Rock Desert, Nevada. It's close to where the center of Black Rock City is for Burning Man. It's not during Burning Man time, though.
I remember on the checklist site I still have it. It's a 7711-2, it’s some FAA form. It gives you the instructions for what to do to guarantee you have clear airspace. This is one Black Rock Desert as much as they have cell towers now for Burning Man. There was no cell signal out there back in 2013, when the first one of these went up. You end up on a sat phone. It's me as a 19-year-old running this group and I'm on a sat phone talking to some Iridium satellite. Step one is called Seattle Air Traffic Control tell them, “Hey, clear the airspace, and then you call Salt Lake Air Traffic Control, you clear the airspace, Reno Air Traffic Control clear the airspace, and then Sacramento, clear the airspace.” That's the unfortunate thing about being in the middle of nowhere is that you intersect all the air traffic control zones. So, you have to call all four towers and tell them, “Hey, we like you to move some things. We need a hold here.” Then you call NORAD, the Space Force, the reinforced bunker and the mountains in Colorado. I forget what NORAD stands for, but you tell them, because they know everything that's flying and making heat signatures, especially over the US. It's their job. You tell them, “Hey, this thing's going up in Mach-7 over Nevada. Don't send the fires.”
Bill: [laughs]
Jordan: They're like, “Okay.” Then once you get the all-clear from NORAD, you still have to do air, and ground checks, and make sure that there's nothing visually that you can see, and to make sure everyone's following the notice to airmen, and the air traffic rerouting, and everything. But then you can fly. That's something that was a very rigorous process for a-- I was 19, when we flew the first one. That was a just a crazy, crazy period. My foundation was balancing the formal education. With the formal education, the areas I found valuable and I was pretty upfront with professors. Sometimes, they respected me for it when I told them that I found their class not worth my time, but I was going to get a passing grade that they respected my pushback and they're like, “Yeah, we wouldn't take this either if we were a student.” That's academia for you. Sometimes, they get pretty offended.
Bill: We wouldn't take our class. But by the way, we've dedicated enough time to be tenured teaching this class, but we definitely would not take it. That is academia for you.
Jordan: It's academia. I made my friends and enemies within the department. But at the same time, we ended up doing something that was amazing for the school. The first two attempts, it did blow up during ascent. But we got the regulatory work, we found out what the issues were during flight, the generation after me did a lot of ground testing, a lot of development to work through what those issues were on the ground and some subscale flights, and then they successfully flew on the fourth attempt in 2019. I stayed mentoring and supporting that group just like credit my whole career with that group. But to long story, long answer your question of how we came to that thesis of starting Relativity, part of it I think was the control your own destiny part of running the lab at USC. We controlled everything. We designed, we regulated it, we did all the simulation, we did all the manufacturing, we built machines to automate making some of the parts because we were testing and iterating so quickly that we didn't have the labor to do it. We didn't have the resources to make these things manually, so, we built things like a filament winder, which spins carbon fiber threads around tooling to create carbon fiber motor cases and the shells and then that went into the structure of the rocket. But we built that machine as students in a lab with basically no resources, but it was definitely controlling our own destiny in a way that I very much missed going into industry.
I graduated 2014, I went to SpaceX for 18 months. Tim had graduated just before me and went to Blue Origin, which is Jeff Bezos’s space company based out in Seattle. I was working on the crew capsule. I worked on the Cargo Dragon capsule, the crew capsule, and then the one in between those which was the paddle board capsule, which tests the abort system for guaranteeing the astronauts can stay safe during an anomaly on the rocket. Tim was at Blue Origin and he was working on 3D printed components. He famously now bought the first metal 3D printer at Blue Origin, convinced Jeff to invest in the technology when everyone else at Blue was saying, “It's just art. You can't make real parts with 3D printing.” It was very inertia limited because of that. At SpaceX, we were 3D printing the abort engines on the crew capsule. They were the first human rated 3D printed rocket engines.
We saw this amazing benefit of 3D printing at a small scale, one part at a time and then for me, it's the lucky happened chance of my career. Then I ended up getting cold feet when I was converting from an intern to full time at SpaceX. And cold feet not on signing, but cold feet on signing a lease, a yearlong lease with a bunch of the other interns converting. I moved back in with my parents on the other side of LA and I was doing the hour-long commute between my parents’ house and Hawthorne twice a day. A lot of, I guess, adults learn at that phase. I was like, “What do I do while driving” and I started calling my friends. I called Tim and we shared our exposures where we both loved 3D printing, we saw the benefit, we saw no one else wanting to adopt it at scale was viewed as a hobby or like an art project. Especially the metal 3D printing, which a lot of people are not familiar with is your printing actual metal, high strength alloys, things like that. It's not just plastic printing. We saw this vision as we were talking about it that it's not just making a slightly higher performance part or this unique 3D printed part that you can't make traditionally.
We started asking the question of, “What if there was a company or a factory, at least predominate or dominated in 3D printing?” It's something that we saw as you get away from fixed tooling. if you need to change the design, you change it in software. If you want to get feedback, quality control, understand what the factory is doing, it's all digital. By nature, it's a digitally native process. If you want to change something, you want to get feedback, you want to improve your process every time, you don't have to build out these extravagant QA systems, data systems, try to figure out how to get traditional manufacturing approaches to get data in and out of them, you just use a 3D printer. Even if the parts are worse, which from our perspective, they're better printed. But even if the parts are worse, the company is better. That's something that most people, 99% of the people even in the rocket industry will never understand Relativity as a company, at least for a long time, where we viewed it as a-- it moving digital automation, digitization of the factory forward hundred years by 3D printing predominantly because it's a digitally native process.
You have a fully digitally controlled and digital feedback factory. You're not giving work instructions to technicians, you're not giving checklists to QA, quality assurance people, then it's all done in software. All the benefits in the flywheel of software is now applied to an aerospace factory, where it's dramatically needed on modernization and efficiency. It's that iteration speed focus the flywheel of software entering aerospace manufacturing that was the true thesis. That's something we distill down, we fundraised off of. Again, 99% of the people in the industry will just say, “3D printing is this extravagant hobby of ours” and not see that it's a way that every time we print apart, the next one is printed better, the next one's printed faster.
Every time, a rocket goes up, a rocket gets tested, you can change in software, the design. You're not adding new work instructions to technicians, you're not retraining people, you're not changing what's on the factory floor for tooling, you're not buying things waiting for them for six months to show up, so, you can install them in the factory. It's a software change, it's a code change. You can build code to write that code. You can build automated infrastructure on that automated infrastructure and it's the aerospace factory of the future. But again, very few people understand that thesis, but we got as early founders, I think it's a strength, especially of Tim's and then I learned a lot from him in the early days of telling that story in a way where the market recognized it. Then people who had never invested in space before they got it. People who had invested in digitization of other industries, this wasn't a slightly better rocket or a slightly cheaper rocket. This was bringing digitization to theit aerospace industry.
That unlocked so much of the investment community that would have never touched space, never touched rockets prior. Because it wasn't just a slightly better rocket, this was moving the industry forward at least hundred years. You'd be appalled at what happens within an aerospace factory today, then on lack of automation, digitization, anything's software wise, it's very crude. Very much hit it with a hammer style approach. But that's at the foundation there and again, long story long to your answer or your question, sorry, on what led to the Relativity thesis is that all started clicking and we did what I think anyone would do, and searched on the internet for how to get Venture Capital and Y combinator.
Bill: [laughs]
Jordan: We've never taken a business class, finance, legal, anything, right?
Bill: I know. I just like it how you said that. That was funny.
Jordan: Even for us, even in the engineering world, anything, I'm constantly googling things. I don't have an amazing memory. I know where to find things and that's about enough. That's a lot of what engineering trains you to do this.
Bill: Yeah. Well, that's the skill you really need. You need to know how to look stuff up now more than you need to know how to remember it. I don't know if that's a good thing or a bad thing for our brains, but that is what's required in today's skill set.
Jordan: Yeah, it depends where, but we saw Y Combinator, startup incubator we'd never heard of before and we're like, “Sure, that sounds cool, a weird name. Let's fill out this application.” I remember doing that with Tim and then we met Mark Cuban. Tim just did a release on this a couple of weeks ago. It's been floating around the press for a while, he named the email, spaces sexy 3D printing a rocket. He basically described two sentences what we were doing the benefit, and then asked if he wanted to invest, and he ended up leading the seed round. He gave us $500,000, which in 2015 was a massive seed round. For us and I compare that a little bit to draw forward to the current market, you see companies with no plans, no background, no relevance, raising $20 million seed rounds. We did what we did starting with 500k and a little bit more from YC on top of that and it trained us to be really diligent. We hit some milestones very early, very efficiently.
And then, essentially to fast forward the Relativity journey to today, we round by round, fundraising round by fundraising round de-risk to the tech. We started with small printers, demonstrating the process, fundraise, we demonstrated a big printer, rocket quality parts, and making our own metal 3D printers, which was part of the thesis of making the company was that no one else is going to make a printer that made the perfect rocket. We had both in one house. You can adjust the rocket to be more printable, and you can make the printer better at making rockets, and meet somewhere in the middle as a business decision on where. But we de-risked it step by step, and then the company is very much on track towards flying not that far down the road this year.
Bill: What was it having Mark as part of the financing stack? Did it provide a level of accountability or did he help work through? It sounds to me, the group that you had together from a financing support standpoint, you said that you haven't taken any business classes. it seems to me that they were like, “Okay, start small, test this or at least, you work together on a plan” I'm just hearing you talk, it sounds incredibly efficient what y'all did. So, I'm just curious. One, how did your venture group help you and two, how does that influence what you're doing now in the Venture Space?
Jordan: That's a great question. I think it's something that we didn't even fully realize at the time how valuable those early investors were at shaping us, but shaping us in a very balanced way. One of the things and people can listen to anything me and Tim says is plenty of both of us on the internet. We're very different people, but that's something that I think is very valuable in building a balanced company, where Relativity thesis was beyond extravagant, very much for people could be viewed as pie in the sky, were these people to have this crazy idea and make printers that have never been made before, and rockets that have built with this brand new manufacturing process. But we very much balanced that. Me and Tim can wear both of these hats where you can go full vision, but then down fully into the execution of it, and have an idea that’s sufficiently risky that there's huge opportunity there, but sufficiently understood and de-risked that you can actually do it and achieve it.
Relativity is one of those companies that's really on that cusp, where it wasn't unachievable. We've proved that now, but it wasn't boring. It wasn't a vanilla change, it couldn't get venture backing, they didn't cause a difference in the market, they didn't get recognized by customers. You have to have that idea that balances very well that difference and that's something that for me and Tim, we balanced that very well. For Mark and YC, Mark Cuban and YC, for YC, we ended up-- YC is really good at building up companies very aggressively. They're one of the top Silicon Valley classic Venture Capital groups. But a lot of it is momentum is signal, and Mark is very much foundational, and that balance is necessary from your investment group. We learned both of those, and we apply both of those like they say very healthily into what we do today at Embedded Ventures, and that's going to pull forward into modern day, started Relativity in 2015, and got to a size and scale that I didn't feel I needed to be there day to day anymore, and I wanted to go back to the early stage, and apply those skills on a second chapter. I didn't really know how.
The balance I saw between Mark and YC, the balance between everything else we did on investors we brought in over the years. I stepped out end of 2021. One the people that I met along the way, her name is Jenna Bryant, she's my co-founder now at Embedded. Embedded Ventures is the name of the fund. I had known her because she was a partner at another Venture Capital fund here in LA. Then she had reached out to me, I want to say end of 2018, beginning of 2019 reached out cold on LinkedIn, and asked me, if I wanted to participate in an event series bringing together venture backed founders that had success working with the US government with Relativity has had an amazing gov affairs track record. Part of that, too is we saw the value as students are working with the US government hand in hand and helpfully.
I was a 19-year-old negotiating with the FAA and Bureau of Land Management. Very helpful to have a healthy relationship there and not what you see with so many startups of scorched Earth, ask for permission later with it. So, we leaned into that, I had a very good track record, Jenna recognized that, and she recognized that because she had a portfolio company that she wanted to see delivering a solution to the US government, US Department of Defense. She has a personal passion there, because her brother's a V-22 Osprey pilot. He's in the South China Sea right now. He's on the USS America there and his Osprey doesn't have access to Wi-Fi. It's something that for someone who's in the US military going across the entire world, planes have Wi-Fi, there're other ways to get Wi-Fi on these things, why doesn't he have Wi-Fi?
It was something and I'd have to ask her on the full specifics. I think you would love a conversation with her, too. But in the sense that there were certain security restrictions, there were certain things on latency, real time performance, guaranteed performance of the system is this aircraft that can go anywhere and everywhere in the world, extremely efficiently with the vertical takeoff and the Rototilt on it, and it couldn't guarantee good access, good security on its Wi-Fi. She had a portfolio company that was doing gaming and latency improvements, dynamic rerouting of traffic for the gaming world to bring internet access in real time, network performance from let's say the US to the Middle East, so that you could get real time connectivity and play Fortnight live between someone in the US and someone in the Middle East an amazing technology. Dynamic rerouting of traffic, guaranteeing performance, live monitoring of all of this.
The dynamic rerouting can be extremely beneficial on a security side. Man in the middle attacks, certain security loopholes where you don't want traffic going through certain intermediary locations. Directly applicable, almost even maybe a bigger opportunity than gaming. It's not synergetic. But that company, they had no heritage with working with the US government. They had venture investors that had significant foreign control and their largest contract was with Saudi Telecom, which makes it really hard to work with the US government, because you have so much foreign influence and concern there. So, it was a technology that was relevant, that was needed, and the company accidentally built themselves in their investment and contracts in a way where they completely blocked themselves out from what could be a massive future revenue stream. Her question to me and what she wanted to put on during these events was, how do you train these founders early on to work with the US government provide value back to this country that gives us the freedoms and liberties to create these companies to start these companies, to push back on these companies, if you want to? If you want to speak up against them, you can.
But those freedoms and liberties, we've all lived through, and that's something that we're passionate about seeing happen. She was very much between that passion, a patriot. Both her and I very patriots in this in the sense of just we've had great careers, great journeys, and it's because we have the freedoms to do so. We have the freedom for that American journey dream and I've personally had the fortune to have gone from engineer from a working-class family, then to starting a multibillion-dollar company, and then a fund, and then more things that are popping out of that fund. I want everyone to have that freedom and I think that's something that is under threat and that's something we can talk about later if you'd like. But Jen and I, we hit it off at those events. There was stuff that she saw from the venture ecosystem. She was a partner here in LA at a fund and stuff I saw as a founder that I'd want to see different.
I would have wanted a little bit different, what the ideal fund profile that I would have wanted backing me as a 22-year-old. What they were investing in, what they were willing to lean into, what the incentives were between them as shareholders and us as the operators and founders. Then similarly, on the national security side, how do you bring the Venture Capital ecosystem out of just consumer, out of enterprise software, SaaS software, how do you get them to invest in these areas that protect the economy and the growth of everything we're doing? But reviewed as too risky, or too difficult, or too slow for venture investment. The innovation tends to drive into other sectors. Her and I hit it off on all those areas and when I stepped out of my full-time role at Relativity, she pinged me. She said, “I'm starting this new Venture Capital fund.” She was leaving her other fund before they did fund too there. She wanted to see things sufficiently different and go out on our own. She asked if I wanted to be an advisor. I said, “Sure, that sounds like a great break while I figure out what I'm doing next.” Help advisors Venture Capital fund while I counselor figuring out what my life looks like for chapter two.
It ended up being something and that was her intentional ploy. She has a recruiting background and I'll talk about that momentarily, but her intentional ploy to help build the fund that I would have wanted to work for and then ask if I wanted to come on as a cofounder and general partner. It was no brainer at that point. She's amazing to work with, one of the most unique people in the Venture Capital community that I've seen and I've met pretty much all of them at this point. It's something that she comes from-- She's an Auburn grad, Alabama native, then went to school in fashion design. She's a War Eagle and she's studied fashion design, then moved here to LA to be a hip hop dancer and an actress, and she started her career doing that, and then started doing tech recruiting on the side to pay the bills. It’s kind of move into Hollywood, and entering your career there, and she needed to pay the bills, she relied on what was viewed as a tech background. When she did fashion design, she learned CAD, Computer Aided Design for doing fashion cutouts and prints. So, she learned somewhat reviewed is and she laughs at it now.
In 2010, 2011, when she moved here to LA, tech skills. She got picked up by a tech recruiting firm recruiting for startups as a tech scene in LA here grew beginning of last decade and then she loved it. It was something she never had exposure to tech before. She never knew that she was really into it. Growing up as a girl in Alabama, you're not told you can be a scientist. You're not trained to think that you could have a future in STEM or tech. But all of a sudden, she loved it and she started her own boutique tech recruiting firm, she worked for top startups in LA, recruiting for contingent equity, where the person has to stay in the role for a year, and thrive, and grow, and not quit, and not leave in order for her to get those equity grants. That's something where she learned very quickly, how to find top talent in the startup community that could help grow companies, could handle the hypergrowth of it, people would want to work for. It was aligned. It's not something where you just get a headhunter fee, and then you walk away, and it doesn't matter what happens to the candidate. That built a skill set in her that was ideal.
When you're looking for early-stage founders, you have to know that community very well, you have to know how to train them to recruit, you have to help them recruit, you have to build that network up, but you also need to get the skills of evaluating. Is this someone who can handle growing a company? Is this someone that it's going to go to their head the moment they get a big venture check? Things like that where there's a challenge there in making sure that these are the right people at the early stage. That got noticed by the Venture Capital ecosystem and she got recruited as a partner, and then decided that her, her background, the uniqueness of it. She wasn't in love with the traditional Venture Capital ecosystem. She wanted to see something different. In doing so, she started Embedded Ventures, recruited me, and I'll pause there, because I know that was a long stint there the transition between Relativity and Embedded. But that's how I jumped from Relativity to Embedded was her recruiting me in and noticing that we could build something together.
Bill: That's super interesting. Something that's come up in background research on you has been clean capital, and raising clean capital, and I'd love to hear you talk about that a little bit.
Jordan: Yeah, happy to expand on that and it's something that definitely segues from a couple spots. The primary and that falls into our day job at Embedded is, we turned the background of mine and Jenna's passion on the national security side. A little bit of us being outsiders to the community. Me, being this USC rocket scientist to go found her, and her being Auburn and graduating from CSUN for her fashion design degree. But this fashion designer from Auburn to CSUN, and some hip-hop dance, and she's still a dancer. She loves dancing, she loves using her skills there, and then entering the Venture Capital community. We had a different approach than what most would have, but we wanted to pull in that national security focus. Part of that national security focus and the theme of what we were talking about with that example in Jenna's portfolio, the example from Jenna's portfolio with latency issues of her brother, what she wanted to see be delivered to the national security community. My background on the government affairs’ side, what Relativity had done and bridging all of that together, we ended up getting a first of its partnership with the US Space Force.
It's something that Jenna and one of our partners of the fund, Mandy Vaughn ended up brainstorming together, and then creating last year was his first of its kind partnership with the US Space Force to work hand in hand in shaping with the future of some of these companies look like. When you're in the space sector, you can't avoid having government contracts, government exposure. Something very relevant to the national security startup community is foreign ownership concerns. There're groups like Cepheus, the Committee on Foreign investment in the US, then there're other groups with similar goals, but it's really looking at flow of intellectual property control capital into making sure that these efforts that are at their core trying to develop a US and national security strength or asset and do we really control that, do we really know where the information about that is going, do we know how capital is being used, perhaps, offensively? Where it's looking at gaps in the US venture community, where the US venture community is so focused on short-term returns, on consumer tech, on SaaS that they leave a hole in the market, where people trying to do hardware projects, people trying to do deep tech projects, and people trying to do national security projects. They have to turn to foreign capital because US investors won't back them. Then it's something that whether that's an intentional strategy or not by people trying to infiltrate the national security community here in the US.
There's a gap and it's filled in a way that leads towards infiltration of ownership and difficulties in getting all of that goodwill to tech development in companies and those companies to have delivered applications to the US government. Because of that foreign ownership concern is there a hard and firm set of rules on what exactly that means? No. It's not something where it's any one country, any one profile, but it's something that I think is-- The US has become more aware of things like foreign influence in social media, then shaping of US thought, political divides shaped by assistance of Twitter bots, and in other ways to do that. Is that the only spot where there's foreign influence? Absolutely not. You have to realize very much that the US. We're trained to think financially very short term and then politically on four-year cycles or two. It's very short term. It's very short term. I think what we've done in the US here has been a wonderful 250-plus year experiment approaching 250 years. Experiment here, but that's something where the length of this country is less than the timescale that other countries think about. That's something that is very tricky. It's very tricky and I think it's gone well historically, but I think, the US has struggled, especially on a government side to adopt certain tech waves, and then the short-term thinking economically, and then short-term shareholder thoughts or even the divide.
The benefit of capitalism and democracy is that we have the choices of where we build companies and what we work on. But if you think about, let's say, strategic development of the CCP in China, every company, there's a dual use tech company. They're mandated to be dual use tech companies. There's a no divide on what is government tech and what is commercial tech. When you have direct control, you control where the strategic innovation is. When you have a democracy and capitalism, what we have-- capitalism and democracy as we have here, you have to incentivize people to develop national security tech. Right now, the people working on it. It's people that have the passion or they have, perhaps, a growing anxiety or fear in them of what the country is going to look like in 20 years or the global power map is going to look like 20 years, 30 years, five years. It may be much shorter than that. But the challenge we have that is a real, real challenge, and I don't have an answer, and I don't think anyone you talk to at any level in this country will have an answer on how do you encourage strategic innovation in this country through capitalism that matches the direct control of our competition. Because we essentially have to get the public, and the business owners and the founders to want to develop the strength in the country on a national security side more than a country, where they can directly control where every single person's work goes, where every single company's tech goes, and what they're all working on. It's an extremely difficult challenge and that's where the breakdown is really happening in my mind, which is, we're just so focused short term, so focused on consumer is how do you compete? How do you compete on a decade's long or hundred-year long timescale? If you read documentation that the CCP publishes, their plans, their five-year plans, their 50-year plans, it completely over dominates the US and build the infrastructure to completely tank our economy, divide us politically, and develop the technology that we either just fall apart because of the infrastructure under us falling apart over slowly just bought out and owned by not ourselves. You see artwork coming out from--
I don't want to call it famous. I view it as infamous. I wish it was almost more widespread out of the awareness it would cause in the US. A piece of artwork of what it would look like for a CCP owned like Times Square, where the US just slowly migrates into being a subsidiary or an outside country for China, an acquisition there. That's something that-- We're trained to think the US is inevitable on continuing. We're trained to think that we don't even have to think far ahead strategically, because we're so good and so powerful. But I think a lot of that is going to be tested. It's already being tested. This decade is proving that out. Then on testing, can the US on an infrastructure and power side stay ahead? I want someone to tell me, why they think the US is developing strategically enough to stay ahead? Because I have been in that community for 12 years now. I can say from my perspective, they're not.
Bill: How do you use your influence and your position at your firm in order to incentivize the outcomes that you're looking to achieve, while also competing against a VC firm that's in the same vintage that maybe just sprays a bunch of bets on consumer tech that really doesn't actually matter? But boy, the IRR is great. How do you balance that tension?
Jordan: I'd say, well, the first part I'll push back on briefly is that the spray and pray IRR returns a consumer, it was great. It's not anymore. I think that the markets realize that. Some of the parts I highlighted on the Relativity story in the diligence of being lean, building a good company, understanding how to fundraise, understanding what you're doing in general, and how it fits in the market, and learning how to fundraise when it's hard is something that-- There's unfortunately about two years of founders in the last 24 months of companies. The capital was free, they didn't learn to fundraise, they learned to take checks. But that's very different than fundraising, especially during a downturn. They have no strategic plans on how their company fits into the market. Some of them don't even have monetization plans. You hear of companies that got $50 million checks from top tier VC funds. I talked to some of the founders. I'm like, “How do you guys make money?” They're like, “We don't have plans for that yet.” They don't know-- [crosstalk]
Bill: What’s money? What is this thing you speak of?
Jordan: Yeah, it’s how you monetize your product.
Bill: Our plan is to raise more.
Jordan: Yeah. No, it’s how do you monetize your product and they're like, “We don't. That's not needed. We'll just keep fundraising” and it's incredible. But they're trained to think that that's normal and that's really going to hurt. It's already hurting. You see the horror stories, you see the layoffs. It's going to be very bad this year on what the outlook for the last 24 months of most startups look like. A lot of our goal is a fund was to show that you can make money in good returns, do good and do well, while having a thesis like ours. It does involve diligence. Sometimes, we can invest extremely quickly, if stars are aligned on our understanding of the company and sometimes it takes a while. That's something that we missed out on deals, we missed out on founders during the last 24 months. We're approaching the 18 months of running Embedded close to 18. There were founders, very good potential, very good backgrounds, and they had investors on their cap table that told them that if there were other investors, new investors that had questions, they wanted to ask questions before investing. They were too difficult to work with and to pass on them. That's something that us wanting to do diligence. Even ask some questions, even like diligence. They were saying, “No, we can take checks without answering questions. Why should we work with you?”
Maybe that was my hubris there getting offended, whereas you're passing on us and what value does anyone else bring to you? We, at least try. Everyone has their value add. It’s sometime a running meme. Then if the venture industry of the “value add.” But I think we've grown some companies in the sector and we're the only partnership that gives briefings to the four stars at the Pentagon out of the entire venture community. Everyone else hires lobbyists. We have an open-door relationship with the Pentagon for briefing on how we think this is going to play out and you're passing on us in the sector. That happened and I would sometimes tell them like, “We used to have to fly places to fundraise. It wasn't just phone calls.” You would fly to get a 20k check to get the right investor and your capital.
Bill: Yeah, they didn't just come on Zoom.
Jordan: Yeah, and they're saying that the Zoom’s too much.
Bill: Yeah, that’s nuts.
Jordan: I've had founders I've talked to and bless their path through the current market that said, they don't have time for Zooms. I'm like, “What else you're doing?”
Bill: That’s crazy.
Jordan: Maybe you’re [crosstalk] down building a company, which is fantastic, but I heard you’re fundraising and they're like, “Yeah, we are. Whoever commits, we'll take the check.” [chuckles] But no phone calls. It was a pretty incredible market for two years, but we deployed $10 million last year as Embedded, and then six portfolio companies, we did three of them fall along. So, we did nine deals last year. And that's something that of those companies that $10 million is increasing this year as far as what we have under management increasing pretty significantly. We were very patient on some of those deals. For all of them, I think of the six companies and we spent a while this year heads down with them just to make sure that they were very solid going into the current market. Five of them, I'd say, no problem. No change in plans.
One of them is going to be raising at a 3x instead of a 5x in eight months. I'll take it. I'll hold myself back from complaining that-- It was a company we wrote the first check in them. It's a 3x on the follow-on check. It's a 16x on the original check from 18 months ago. I'll take the double-digit multiples on the early checks and the high single digits, mid-single digits on the later stage checks without complaining. That's something that as far as how to build that community up and how to show the venture ecosystem, I'm hoping. We've actually seen quite a bit of this through the downturn, the last couple of months is that everyone's scared, no one's deploying capital, a lot of people have capital committed. These funds raised massive funds. Everything's committed and locked in.
Just everyone's afraid to spend. They don't know what's going to be good, they don't know what the markets doing, but it's something for us. Aerospace doesn't deal with downturns. Aerospace, communications, imagery, satellite launch, everything happening in space and how that affects certain industries on the ground, that's still active. Aerospace is a very robust market, at least the space side. Aviation can be a little troubled and clearly was during COVID, but other than that, it's a pretty robust market. The national security side, the government side, everyone who relies on that data, it's very robust.
Then the companies we worked with, I think each of them could easily be at scale, a good public multibillion dollar company. They're not ones that we look at as ones that are just there because they're hypable. They are because you can bring in the right co-investors, that bring in the right follow-on investors, that give the right signal that you get a pre-IPO investor to push them over the hump, and then go public, and then you watch them burn. If we had to and for our deals, we do have exit timelines on them. But if we had to hold them in the public markets, well, after the IPO I think they would be good companies and I wouldn't be afraid of holding them. That's something where--
The way that I've seen it happen is, everyone talked about K shaped recovery post-COVID. Money started printing, rates started going down, people were finding creative ways to deploy that, the SPAC market went crazy and wonky, and you saw people that had massive access to capital historically doubling down, certain mega funds, deploying and deploying, and raising and raising. Then for the early stage, early fund managers, us included was like, “Why work with us when everyone else can generate 500% returns year over year right now? Why find a new fund manager?” That was a little frustrating, but understandable. First time fund managers, it's always a very uphill battle on fundraising, especially with institutions.
But it's something that that K-shaped recovery. What I do there, a divide of those with access to capital, doubling down on deployment and those that had significantly having less opportunity. I think for us as early-stage fund managers and we're going on, we've been at this a couple of years now and have quite the track record now on fund one [unintelligible [00:58:37] deployed to date. I see that K inverting in various ways, where you see people that have access to capital, they're afraid to spend it. There was a friend of mine, they just raised a billion-dollar fund. They have a big space investment in their first portfolio, they raised this on this thesis that they could have fun, too, have the same thesis, the same space wins, and I got a call from them the other day, and they're saying, “We have no idea how to deploy this. All of our LPs are looking at us as this investor that can navigate this deep tech market and we're not qualified to do that.”
It's been surprising because even those same institutions and banks that would-- we'd be trying to do everything we can to win them over last year, get their attention in any way, give them free help, free diligence help, advice on companies, you see them all turning around right now and saying, “Hey, it was great meeting you last year” and then dragging our feet for six months on seeing if it made sense to work together. Now, they're saying, “Hey, can you help us on all these companies?” We're like, “Why?” They're saying, “Their portfolio’s struggling, they need to deploy the rest of it in good companies before anyone notices that the first half of the deployment is about to go to zero.” You see that across a lot of funds into the spray and pray. They need to deploy and get double the multiples on their second half of their deployment in less time because their first half just completely tanked and catch up before anyone notices. They're coming to us and saying, “Hey, your portfolio, none of them are struggling. You guys’ actually diligence them, you guys have reasons to think now that they can get follow on investment.” They're like, “Can we work with you?” Then we can say, “Hey, we only work with people who back our funds.”
It drives attention our way. We do have a limited time and we have a portfolio to grow. The free help from us is gone, then because of that. But that's that K inverting in various ways where the market-- This is a question I ask. I think I missed it the beginning like, the market is looking for deals that will unlock the market. No one wants to be sitting on idle cash right now, idle commitments. They need to be accruing multiples and gains on these for them to have any level of fun level metrics by the time these funds are at end of life. They can't be sitting forever especially after the first chunk of that just went to zero. That's something where they look to us and that's something I found very flattering from the LP base, the limited partner base, and from people who have kept an eye on us since we stepped out to run a fund together two years ago, which is recognizing that, “Hey, maybe we didn't make sense during the craziness of 2020 and 2021.” But in 2022 market, where you need good companies that have legitimate reasons why they can grow, founders, operator experience, then people who've built companies in very difficult sectors before, especially for us, we can be a first check in a company, because the founders relate to us.
If you're a 22-year-old founder with a cool idea, you can google, how to get venture investment? At the time, the top two things that came up was YC and Mark Cuban. That was our story. But now, if you're a space startup and you're looking for space startup founders to learn from. Yeah, they sometimes, stumble upon me. Not always. But they're like, “Hey, Jordan never took a business class, he started a multibillion-dollar space company as a 22-year-old. Sometimes good head on his shoulders.” I don't want to pat myself on the back too much with this, but I am willing to talk to these people because I relate to them. That's my community, those are my people. Those engineers and I love that community, and between the USC work, the SpaceX work, I am that engineer gone founder, and they noticed, I have that investor title now. So, they ping me.
We can get into deals during formation of these companies. When they're still solidifying their idea, but in a way where we see the glimmer of stars align as market timing, them being able to make something in that sector, where no one else will invest in it today. In five years, they're going to look perfectly timed. Some big government contract, some change in the space market, we have to invest off a thesis we find highly defensible, able to win over significant market share. We don't just invest in space companies because they are space companies. They have to be very good investments. But I do think all of them are good companies and it's something that they come to us very early. We become first checks in these companies, these sectors that maybe you're very young today or maturing and growing, but sectors where it takes someone really in that community on tech development, on risk, on talent, on the government affairs, on just even the experience of building a company like that before the space sector because Relativity is a degree removed from what most of the portfolio does today. That ends up being very robust for building a thesis between general partner thesis fit.
A portfolio that's growing, me and Jenna very much complement each other in ability to grow the companies, recognize the talent, recognize the risks, help them grow, and recognize them. It's something that us is these two very unique, general partners that had never managed to fund before. Us being slow, patient, and diligent seeing these companies in a market that didn't want to be diligent, didn't need to be diligent, that will be very much recognized now and that is to know to wrap that up, it's [crosstalk]
Bill: I might argue that the market needed to be diligent, but didn't want to be diligent or it needed it, but it didn't need it, if they were-- [crosstalk]
Jordan: Yeah, they got what they were asking for and you can see hints and stuff I've commented on for years as far as-- There being no reason to expect that any of that capital being deployed ever generated returns or the majority of it.
Bill: I’ll tell you the thing that makes me nervous, man, is we're going into a period and we're in the period of decreased liquidity. All that just money that was thrown at stuff that wasn't worth anything that did employ some people, whether or not those were jobs that should have been jobs is a different question. But I don't know, it does make me a little nervous about the recession that is probably going to come in the not-too-distant future. But those are big thoughts that beyond my thinking.
Jordan: The combination of inflation, haphazard capital deployment, it's not over yet. It is probably would all say. What does that mean for us? I can't predict the future with it, but I can definitely say everything we were feeling and seeing for years, most of the funds that are going to have massive markdowns, public and private, those have not been realized yet or those fund managers are waiting to see some level of delaying those, working through those for a quarter or two while they try to rebuild positions in something grubbing. There are things. You do see even in the public markets, people seeing how cheap things are right now. Then certain companies make no sense in the public markets as far as being too low on just traditional like earnings ratios. You see people almost taking advantage of the volatility of the public markets, something that never should have happened.
The public markets to hold on to that capital, wait for the market to completely tank, and they're going to make great returns too, but they're working off the volatility on the public side instead of the private. But I think people will learn to redeploy in good companies, those good companies will do well, regardless. That's why they're good companies there and you'll see that resurgence. But I do think the decay of that and people desperate to find good deals right now, then to get into and with the help, perhaps with people like us and our portfolio, it's going to be pretty rough on the ones that don't, because those double-digit multiples are going to turn into high double digit percent losses. It's very scary.
You see reports of some of that, everyone who's like a public fund with mark downs or some of the pre-IPO funds out there, there's news, and you can read about them, I'm not going to give names. Then of funds that have lost majority of their gains for decades are gone and erased in months. That's going to have a backlash for a very long time, and you're going to see a massive transition, and who's managing that capital. I think it was a scare that was necessary, but it's a scare that's unfortunate, because even in the space market, you saw so many space companies SPAC over the last year that were the premier examples in the market of bad fundamentals, of incentive structures that make no sense on sponsor paid payouts, on investor payouts, getting these things to flip into the public markets.
What happens? During that it is not only it flips the risk to the public investors, but it shows how hard it is to build companies in these sectors. For us and how we look at how to shore up the current portfolio, those growth investors could be spooked for a decade. Everything we talk about on national security, on investment, our goal as a fund, not only is to support national security, but on a meta level for this, it's to get the venture ecosystem as a whole to see that this sector is one you can make good money in. Because I want people investing in the sector and to talk about at a high level of that capitalism incentive structure, again. I want people investing because they see the dollar signs. Not because they're a passion investor or a sector investor because we need that as a country for us to get through this century. We need that national security investment and we're not going to get it if people are seeing extremely bad companies with extremely bad returns is the majority of what's coming out of the sector. The market tanking and the space companies.
Bill: Yeah, it taints the sector.
Jordan: Yeah, the sector is tainted.
Bill: Even though, it should not.
Jordan: But it is. That's something that we're all going to feel the aftermath of as we grow these companies, but we'll highlight the ones that are good and that's the challenge for the next couple of years.
Bill: Yeah.
Jordan: But I completely agree with you that I think the worst is yet to come. I think there's no reason to think this is the worst of it on come the capital markets freezing up and people being spooked in the aftermath of the last couple of years.
Bill: Yeah, well, the SPACing and selling of pixie dust pissed me off when it was happening and continues to. But I think that there's always going to be a world where a true growth investor that is looking to buy a real business, that generates real returns that will grow, I don't think those investors are gone. I think the investors that are gone are the people that probably were writing liquidity waves and called it investing. Those people have figured out real quick what they owned and it's not much.
Jordan: That's correct. I sometimes don't know as much as we have venture, we're a Venture Capital fund. The venture community and their style of power law returns and crazy wacky styles of the-- I think you would phrase it as this as the spray and pray investing.
Bill: Yeah.
Jordan: We're venture capitalists. We run a Venture Capital fund. It's early stage, but it's something where we're trying to find a unique spot in the market where we can not only be helpful, but we can recognize an opportunity that is undervalued, because the rest of the market can't recognize it that early. We're trying to use our skill set and this is where I think we've thrived is our skill set to recognize the very faint signals coming out of the founders, the company, our understanding of the market, the US government relationships, everything we have to see where that opportunity is at a lower price than someone else would. There're elements of that align well with growth investing. It's recognizing an opportunity that's undervalued and going to get recognized eventually and correct itself. But it's something that you read certain books on top GPs, top Silicon Valley funds, and their rules for investing is, the company is 300% year over year growth, they're in Silicon Valley, so, they have a good community around them, they have top co-investors that are willing to pay any price, because they also recognize the hype of it, and you then just distribute your checks small enough that you hope one of those checks will get 1,000x.
I hear that and it's absurd because it's what level of that involves any skill. Some of its access, some of its having a very high profile where people want to reach out to you, but none of that is building good companies, none of that is recognizing value. They're using lagging indicators of short-term growth, instead of looking at is, can this company create a defensible long-term good company. The indicators, whether its founders, the market, the approach, it's not short-term revenue at 300% year over year. If that is your signal of a company that's 12 months old and they went from $1,000 ARR to $3000 ARR, and that's what you think means they're going to be a billion-dollar company that's defensible in a bad market, that's a terrible thesis. It amazes me and it makes me at times really want to not be called the venture capitalists. We're investors. [laughs]
Bill: Ah, dude, it's not just Venture Capital, man. That stuff got popular in public markets to this valuation agnostic founder worship stuff. To be fair, I think there's a grain of truth in some of it, and I used to have my brain turned off to that grain of truth, and I don't think that I have it turned off now. However, this is a macro comment. But I don't think that that's the strategy to run in a tightening liquidity market. I think it is the strategy to potentially run early in an expanding liquidity market. But I think it's riding a liquidity wave more than true fundamental analysis.
Jordan: I agree with that. For us, I don't want to call it fundamental analysis because we're too early for that. There's a different set of what I'd call fundamentals there. But it's something that I think-- It is a challenge in the investment market is being patient even while capital is flowing aggressively. It's very hard. There were deals that I would have loved to do instantly, because I get excited about something, and then-- Well, one’s why we have a team to keep me contained and our impulses contained on investment committee. But we have our process, and we run it, and we don't violate that. If it's too slow, it's too slow. But we even did and one last thing I'll add in is a fund and what I'm up to now day to day as well as, our investment thesis, in addition to the dual use tech side, it's Space Technology beyond launch. I don't know if I said that explicitly prior, but we split that in three areas. Its Space operations. It's what I call the usual suspects of things happening in Space like communications, imagery, newer areas like lunar infrastructure, manufacturing in Space, power generation in Space, human transport, but we haven't done anything there yet.
But then a third of its advanced manufacturing, which is my Relativity roots saying that the tools that these companies use and are very useful for terrestrial any Earth application as well. Advanced manufacturing, very relevant for seeing that portfolio grow and balancing it. Then the last third is digital engineering. It's the software tools that support hardware design and the hardware ecosystem. It's a very nascent sector. I'd say, there's been maybe one example of a company that was bought at a decent valuation. They didn't go public, they were bought and merged. The tap in the last 20 years in software tools for hardware designers and you see these hardware projects getting much more complex, much more globally integrated on supply chain on manufacturing, and they're using software that had bases and roots in the 80s, maybe the 70s.
I have been dramatically surprised by it. Relativity was a great example of seeing what the tools were out there outside of the 3D printer and factory stack that are on the design floor. What did the designers use, how do the systems engineers, how do you design these programs that you manage these programs in a way where you understand this complex project that couldn't be that complicated 40 years ago? It uses manufacturing techniques that weren't available 40 years ago. We built a thesis around what we thought would be a portfolio winner in the digital engineering space and we couldn't find it. A lot long story short with it, I didn't talk about it much on the rest of this call, but we ended up spinning that company out hiring on a founding team and now, I do run the company day to day as CEO. And so, I split my time half general partner, half CEO. But it's something for us and we're a little restless with this stuff is that if we see a gap in the market and no one's filling it, we'll go fill it. That's one of the highest performing portfolio companies right now.
On a return side is that we did the first check, we hired on the founding team, we have a day-to-day operational role in the company in addition to supporting the rest of the portfolio. We don't have a name for what that is as far as is that a venture studio, is that a hybrid venture studio, we don't have a name for it other than we saw a hole in the market. We had the right team that we could bring on to fill it, and we did, and that's just another tool in the toolkit we have.
Bill: That's awesome.
Jordan: [unintelligible [01:12:28].
Bill: Yeah, that's cool, man. Sorry, my dog is barking in the back. That's awesome. I'm really glad we got hooked up. I thank you very much for coming on the show. I hope you'll come back and give us updates as things go along. But my thought as we've been having this conversation is, what a potential opportunity you all have with your background and understanding how to raise capital in a lean environment. The potential value add that you could bring founders because I think that's going to be a skill set, where the market demands like very real companies on a go forward basis. So, I'm very excited to see what happens in your future and I'm very thankful that you stopped by. Thank you.
Jordan: Well, thank you for having me. This was very fun.