Military Veteran StartuP Trends 2022

by Tim Hsia, Context Ventures

There has never been a better time to be a military veteran pursuing entrepreneurship.

Over the last decade, we have seen an explosion of interest by military veterans in pursuing entrepreneurship. Simultaneously, military veterans have made strides in securing capital to deploy in support of the ecosystem.

The resources available to military veterans pursuing this challenging route are growing every day. Moreover, as more veterans enter the space, they are met with mentorship and guidance from more experienced entrepreneurs who are eager to share their lessons learned. We hope that this document adds to that spirit of mentorship by providing a succinct reference document for those beginning their entrepreneurial journey, and those looking to take their ventures to the next level.

We expect to publish this report annually. The inaugural issue of the Military Veteran Startup Trends has the following goals:

  1. Provide context for military veteran and spouse entrepreneurs so they are empowered with resources that can support them. 

  2. Explore the existing ecosystem of military veteran and spouse entrepreneurs so that these founders know they are not alone. 

  3. Provide context for venture capitalists who seek to support this exciting ecosystem. Whether these allocators of capital are veterans themselves, or they simply seek to support those who are, we hope this report will serve as a useful primer on the ecosystem. 

  4. Explore trends that occur within this broad ecosystem

Military Veteran Entrepreneurs

In the startup ecosystem, we’ve seen an explosion of interest (and one that we think is overdue) in founders from diverse backgrounds: Women, African-American, Hispanic, Asian-American, LGBT, immigrants, and historically overlooked geographic areas. One group that spans across these diverse backgrounds is the military veteran community. Veteran entrepreneurs can be challenging to identify because not every veteran entrepreneur promotes this part of their background. As a group of humble, quiet professionals, the idea of benefiting from their selfless service is anathema to some of these entrepreneurs’ core values. That said, some of our country’s most successful entrepreneurs had military backgrounds:

The above list contains only a small portion of the millions of veteran entrepreneurs dating back to the founding of our nation.

More recently, post-9/11 veteran entrepreneurs are making a large impact on the startup ecosystem. The following are post-9/11 veteran entrepreneurs/founders who have reached unicorn status. We expect this to merely be the vanguard with many more to follow in the years ahead:

Here are a few veteran and military spouse entrepreneurs who have demonstrated tremendous early traction as they build towards unicorn status over the coming years:

These military veteran (& spouse) entrepreneurs have displayed tremendous grit and leadership capacity to get their ventures off of the ground and build impressive traction.

Here’s a partial list of veteran entrepreneurs we are tracking. It is impossible to list out every single veteran entrepreneur but this is a first attempt to capture the thousands of veteran entrepreneurs and the explosion of interest in entrepreneurship amongst military veterans: Military Veteran Report 5.14.22

One report indicated that: “Veterans over-index in entrepreneurship. In 2010, there were 1.3 million veteran entrepreneurs (incorporated and unincorporated self-employed) or 12.5% of working veterans. By contrast, in 2010 the entrepreneurship rate of non-veterans was 9.6%. The 5-year average (2005-2010) entrepreneurship rate was 13.5% among veterans and 9.9% among non-veterans meaning veterans were over a third (36%) more likely to be entrepreneurs than non-veterans. In the private sector workforce, veterans are at least 45 percent more likely than those with no active-duty military experience to be self-employed.”

Military veterans are making an impact, not only on the company building side of the entrepreneurial spectrum, however, but also as allocators of capital.

Venture Capital for Military Veterans

With the rise of venture capital as an asset class, military veterans have made an impact. Many of the very first venture capitalists were veterans:

There are a number of well known “Sand Hill” venture capitalists who served in the military as well:

  • Paul Madera of Meritech (Air Force)

  • Han Kim of Altos (Army)

  • Ken Gonzalez of NightDragon (Army)

  • Dan Gwak, Chris Morales, & Eddie Kang of Point72 (Marines, Navy, & Army)

Outside of Sandhill road, there are a number of military veterans in the venture capital industry who either have a focus on veteran entrepreneurs OR like to invest in veteran entrepreneurs. These funds are led by military veterans:

Here’s a complete list of venture funds led by US military veterans: Veteran Fund Analysis 3.29.23

Resources Available to Veteran Entrepreneurs

There has never been a better time to be a military veteran entrepreneur. The resources, community, and ecosystem are much stronger than it was six years ago when I started Media Mobilize. Here are some of the resources available to veteran entrepreneurs that we highly recommend:

  • Bunker Labs: this is the leading non-profit that supports veteran entrepreneurs from inception to CEO seeking to scale their company. Bunker Labs provides free resources for military veteran entrepreneurs, to include co-working space through a partnership with WeWork (which was tremendously helpful to Media Mobilize when we started the company), and peer support through their Veterans in Residence Program. For entrepreneurs who have cleared a certain revenue threshold, the CEO circle is sponsored by JP Morgan, and prominent leaders have spoken to the group such as Jamie Dimon (JP Morgan’s CEO) along with Robert Gates (the former Secretary of Defense).

  • PenFed VEIP: The Pentagon Federal Credit Union’s non-profit arm, the PenFed Foundation, houses a program called the PenFed Veteran Entrepreneur Investment Program (VEIP). The VEIP features a “masters” program in raising capital - selected entrepreneurs have a chance to refine their capital raising skills through structured lessons and mentorship from experienced venture capitalists. This program takes place over an intense 6-week period, and seeks to enhance entrepreneurs’ fundraising strategy while connecting them with investors in the space. Moreover, the VEIP is home to a venture capital fund with a mandate to invest in military veteran led businesses.

  • USAA 100th anniversary pitch competition: USAA and powered by Bunker Labs sponsor a pitch event that takes place across the country. Military veteran entrepreneurs have the opportunity to pitch in regional events, and winners from these regional pitch events are able to compete in the Final Pitch Event. The cash prizes for winners range from $10,000 to $100,000 for the national winner. Moreover, all ten participants are featured in storytelling campaigns by USAA and Bunker Labs. It is still possible to apply for the Seattle and the Charlotte pitch competition.

  • Military Veteran Startup Conference: an annual event hosted by Context Ventures which brings together the military veteran startup community for in-person networking and presentations. In its inaugural year, 2022, over 200 people attended, and next year we have extended the event to 1.5 days and are forecasting over 400 attendees.

    1. Panels included: Women Veteran Entrepreneurs, Crypto/Web3, Veterans Entrepreneurs Building Consumer Brands, Veterans in Venture Capital, and more.

    2. Some testimonials from attendees of this year’s event: 

“Great crowd of entrepreneurs and investors from every branch of service and every geography. Would attend again and recommend others join”

- Mike Leffer, Early Light Ventures

“There are quite a few veteran entrepreneur events/conferences/programs out there… This is the ONLY one where I felt there was a balanced mix of early and late stage entrepreneurs, along with legit professionals and career investors. THIS is what the community was missing!”

- Ryan Hogan, CEO and cofounder of Hunt a Killer and a Navy Veteran

  • Next year’s summit is on February 2-3, 2023. Tickets are free for Veteran Entrepreneurs, Veteran Spouse Entrepreneurs, and Veteran Operators. Along with the panels conducted at 2022’s event, MVS Con 2023 will introduce other panelists and topics to be discussed. Here are some of the panels that we already have panelists confirmed for:

    1. Veterans leading unicorn companies

    2. Venture Capitalists leading Sand Hill VC firms

    3. Leading Dual Use investors

Join us at the Military Veteran Startup Conference 2023 for an opportunity to learn and network with entrepreneurs and venture capitalists within the military and veteran community. Sign up here.

And for veterans interested in the following industries-topics, then please let us know at leaders@contextvc.com and we’ll provide you complimentary admission: The Email Conference and the Direct to Consumer Conference.

  • The Veteran VC Coalition (VVC): The VVC hosts monthly office hours with a group of venture capitalists that support veteran entrepreneurs. Coalition members will provide feedback on pitches, decks, fundraising, introductions, strategy, and anything else entrepreneurs may need assistance with. Sign up here to meet with the VVC.

“The Veteran VC office hours were a fantastic way to get face to face with many investors from the veterans in the VC community that we wanted to engage. The chance to hear feedback from all of them at once was worth weeks of effort on our own.” - Steve Chang, Headlamp

  • The Small Business Administration (SBA), provides opportunities including:

    1. Boots to Business: An entrepreneurial program offered on military installations around the world and a training track of the U.S. Department of Defense Transition Assistance Program.

    2. Women Veteran Entrepreneurship Training Program: Provides entrepreneurial training to women veterans, women service members, and women spouses of service members and veterans as they start or grow a business. SBA funds these entrepreneurship training programs available exclusively for women veterans through grantees: IVMF - Veteran Women Igniting the Spirit of Entrepreneurship 

    3. Veteran Federal Procurement Entrepreneurship Training Program: Delivers entrepreneurship training to veteran-owned and service-disabled veteran-owned businesses nationwide interested in pursuing, or already engaged in federal procurement. Veteran Institute for Procurement 

  • VetsinTech: “supports current and returning veterans with re-integration services by connecting them to the national technology ecosystem. VIT is committed to bringing together a tech-specific network, resources, and programs for veterans interested in Education, Entrepreneurship, and Employment.”

  • Rice Veteran Business Battle: The Veteran Business Battle is an annual pitch competition that takes place in April. This pitch competition brings together military veterans from across the country for a two-day pitch event in which entrepreneurs compete for $25,000 of dilution-free grant money. Since 2015, participating companies have gone on to raise over $5,000,000 of capital from investors.

Business Models - A Focus on Dual Use

Veteran entrepreneurs start businesses in every sector of the economy. Over the last decade, we have seen significant investment in supporting innovative companies solving the government’s toughest problems. The US Government has started a number of initiatives to incentivize innovation in the defense and government space. 

This investment of time and capital by the federal government has further incentivized military veteran entrepreneurs to explore this exciting and meaningful space. Moreover, venture capitalists have made strides to support the national defense by allocating capital towards so-called “dual-use” startups - businesses that have the potential to sell to both a commercial client, and the government.

There are 4 major trends why a healthy number of veteran entrepreneurs are building dual use or defense tech startups:

  1. The annual DoD budget is massive ($715 billion)

  2. Several recent startups have shown that it is possible to build a billion dollar business: Palantir, Anduril, Rebellion, & Shield AI

  3. The Ukraine war is a reminder that war is unfortunately a feature and not a bug of human existence

  4. A whole generation of post 9/11 veterans deployed overseas and endured military equipment that they felt could have been better tailored for warfighters.

Dual-use businesses pose their own challenges, which have been written about by Academy Investor Network (they also published a 2021 Dual Use Report). Federal government prioritizes small businesses led by military veterans and with $2.5 billion of funding provided each year by the Small Business Innovation Research Program (SBIR), is a good option for military veteran founders pursuing dual use startups.

Non-government allocators of capital have also emerged over the last few years to support the government’s mission, and the founders who focus on this space. Here are just a few funds that focus significantly on dual use startups:

  • 8VC

  • Lux Capital

  • Shield Capital

  • Decisive Point

  • First In

  • Red Cell

  • Harpoon Venture Capital

  • Ridgeline Partners

  • Academy Investor Network

  • Squadra Ventures

  • Scout VC

Potential Future Analysis

Please note that this year’s report focused on US military veteran entrepreneurs and VCs. And that despite our best efforts we likely did not identify every notable military veteran founder or venture capitalist. It’s not always easy to see if someone has a veteran background. Some startup articles prominently highlight a veteran’s background: This West Point grad started a booking system for restaurants, and VCs just funded it. Whereas other founders will avoid mentioning their military service in startup announcements or on their Linkedin profile.

We hope to build upon the foundation we’ve provided in this inaugural issue of Military Veteran Startup Trends in future annual reports by including insight into the following areas:

  • Acknowledge and identify more military veteran entrepreneurs, startups, and VCs not identified in this year’s report

  • Deep dives on specific trends

  • Deep dives on specific entrepreneurial teams of venture capitalists

  • Focus on military spouses and partner founders who have overcome equal challenge in launching their businesses with fewer resources than our military veteran founders

  • International military veteran founders based in the USA

  • International military veteran VCs based in the USA

  • International military veteran founders globally

  • International military veteran VCs globally

Acknowledgements

This report could not have been completed without the assistance of Carina Cho and Brendan Aronson. I am immensely grateful for Carina and Brendan’s support, edits, data-research, and overall assistance. This report would not have been completed or as strong without their support. I am also thankful for JP Morgan’s support for supporting the Military Veteran Startup conference and their support for the veteran entrepreneurial ecosystem.

I would note that while this report has taken significant time to put together it has been a labor of love and a fun annual report to complete because 1) it’s a synthesis and reflection of all the information I’ve accumulated over the past decade or so and 2) I love history and specifically military history, which was one of my majors at West Point, and this report is in some ways an extension of military history.

Lastly, this report is for the veteran entrepreneurial ecosystem. We are rooting for military veteran entrepreneurs to make a massive positive impact as they grow their companies and help the American economy. The work they do in building strong businesses could rival their impact they had while in uniform.

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