Dear Pentagon: Please Blacklist Silicon Valley Tech Companies Until They Get Serious
Dear Pentagon: Please Blacklist Silicon Valley Tech Companies Until They Get Serious
Venture Capital's Treason Problem Requires Serious Attention
A recent Washington Post report on Sequoia’s ties to China and the blacklist by Biden’s Department of Commerce of several Chinese firms, including Sequoia-backed DJI, makes clear what a lot of us already knew to be true: Silicon Valley, and Sequoia especially, has a Treason Problem.
I’ve seen this over and over again as I’ve sought Silicon Valley capital for my deals. They don’t do the background checks. Cheap money cheapens American defense. The sheer velocity of foreign money flowing into American tech deals is unprecedented.
It’s not as if Silicon Valley wasn’t warned. Silicon Valley just chose to take the money and the cheap labor instead. The FBI built a presence to stop Japanese industrial espionage in 1982 after learning of a gray market which sold defective products to the U.S. military. The FBI warned Silicon Valley about Chinese cash way back in 2005. Politico notes that "Silicon Valley has become a den of spies.”
And the list of Chinese espionage cases in the United States gets longer and longer.
Based upon my career I think a few things need to happen before the military is techified, starting with the most obvious first: We need to clean up Silicon Valley’s capital before it is allowed to invest in key national security technology.
When American companies are the best they ought to win the contracts through objective benchmarks, like NIST, and not through aggressive lobbying. If the lobbying is allowed to persist we will build a tech sheen on the military industrial complex that’ll do little to keep us safe.
Where possible American companies, who have gone through a suitable vetting process, should sue and force the federal government to use the superior and cheaper technology.
This course of action is, in fact, exactly what the only two unicorns in the DOD space — Palantir and SpaceX — did.
What one finds a lot of the time, however, when dealing with the federal government is that some of these Silicon Valley companies have built companies that were betting on customers that did not exist or worse, just grifting off the US taxpayer.
Why, for example, invest in another drone company when U.S. allies (NATO’s Turkey, chief among them) can more cheaply build them? Why buy from a satellite company when its founders are foreign nationals and they haven’t even bothered to do a background check on their early investors?
No, there’s not a serious effort to do counterintelligence on Chinese, Israeli, and Russian investments going into companies in their early stage. Nearly every single major venture fund in Silicon Valley fails in this basic due diligence.
In fact one of the largest Silicon Valley firm — Sequoia — has just concluded a battle between two of its partners over its Chinese ties. (I’m told Roelof Botha bested Neil Shen for the future of Sequoia. I suppose we shall see.)
I’m not a Sequoia fan. Sequoia passed on Clearview.AI, a facial recognition company I cofounded, but they had no problems investing in the Chinese security state. Sequoia partner Doug Leone used Clearview to spy on his Chinese employees and raved about the product but wouldn’t invest. Sequoia won’t buy American but will help build the Chinese war machine.
Alas Sequoia isn’t alone. Founders Fund invested in Israeli company Carbyne, which included Israeli spymaster Ehud Barak as one of its investors, but not in Clearview. Carbyne was also invested in by none other than Jeffrey Epstein.
Draper Fisher Jurvetson is only too happy to partner with the Russian investment authority. Why?
Another — DCVC — is backed by Chinese money and backed a covid test that did not work — and yet still got over a billion in US taxpayer money anyway. It also looks pretty clearly that Innova Medical Group, which also got billions for covid testing from the UK, was a front for Chinese intelligence.
Senator Sheldon Whitehouse, to whom I have donated despite his liberal bona fides, has pointed out that there isn’t sufficient anti-money laundering controls in place. He’s right. And that needs to change.
The report he recently linked is worth reading in its entirety.
Indeed Oregon pensioners invested in NSO Group, the very Israeli company that was spying on American diplomats! Senator Ron Wyden of Oregon calls for Oregon to disinvest and he’s right but the proper solution would have been for them never to have invested in the first place.
Venture capitalist Joe Lonsdale, when he isn’t begging for Saudi cash, praises his other Middle East investor, UAE, which is one of the largest centers for money laundering in the world. Lonsdale is only too happy to take the human rights abusing regime’s money.
And so too are all the people happy to take investments from Elad Gil, an Israeli-American, whose foreign ties seem very odd, to put it charitably. Read one way his blog post on the consolidation of the defense industry looks like market research. Read another, like espionage. Either way, his blog is essential reading.
There’s no real discussion about the sources of capital in these deals and oftentimes founders are totally unaware that they are taking cash from China or UAE.
There ought to be.
Instead, we get complaints from the likes of Katherine Boyle of A16Z about how the DOD isn’t fast enough.
Maybe. Or maybe the serious work of defense requires something like a longer time horizon than either the publicly traded markets or venture funds.
I don’t think it odd that the CIA’s best contractor — General Atomics — is a family held firm. When you meet the Blues brothers, who I am proud to count as friends, the patriotism pours out of them. Here are two brothers who have made a lifelong pursuit of serving America’s national security needs. Indeed Linden Blue, who continues to work every day well into his 80s, is my beau ideal of an entrepreneur. “You lived in an era of ubiquitous information,” he once told. “I didn’t. But your children will live in an era of ubiquitous energy. Plan for that world.”
My only criticism of GA is that its founders are not investing in the latest and greatest technology. They ought to be playing larger than the primes given their long term horizon. They ought to be consolidating the market with well timed investments. That may well change now that they have a new CEO, Vivek Lall, who I also consider a good friend.
The Blues Brothers pose a good question: Ask not what your government can do for you, venture capitalist, but what you can do for the government!
It’s very rich watching some of the very Silicon Valley investors and firms that passed on portfolio companies of mine which have gone on to receive millions from the federal government.
I know of no Silicon Valley company that has chosen to look in the mirror about what sort of things they can do to make themselves more attractive. You can have H1-B visas or you can have DOD contracts. You cannot have both. There are honest to goodness spies operating out of many major Silicon Valley companies oftentimes thanks to those very immigrants who have been brought in.
Silicon Valley also fails to address the role that they have played in making areas unaffordable. Why should the government invest in a place where the cost of housing is so high, in part because of all the foreign money that has been laundered into the property markets?
As Silicon Valley investors cheer on investors or founders who have ties to foreign intelligence I’m left wondering if we might be better off barring all of Silicon Valley from the federal trough — that is, until they get their house in order.
I tell my portfolio companies — which include investments in satellites, radar, facial recognition, and genetics — to avoid Silicon Valley altogether. “Don’t waste your time,” I say, “they don’t get it.’
Far better to look to other, more patriotic -- and less whiney -- sources of capital.