The Valinor Model
Harnessing America's technology advantage requires innovation on all fronts
A modern defense and government technology company requires a modern corporate infrastructure. We are at an inflection point in the defense and broader government technology industry - finally, technologists are flocking to build for the mission. Engineers do not just want to build e-commerce solutions and social media apps. They want to build drones, software that solves real public problems, and autonomous vehicles. The tides are changing.
But our methods of capitalizing and building these products have not changed. We apply the same venture capital funding methods to these new types of products. As a result, defense and government technology companies have been raising large VC rounds, inflating their valuations, and minimizing their opportunity for exits. Yes, this model works for some companies - Anduril and Palantir have seen great success, but this path doesn’t work for every product. Some government products may have fewer customers or can’t necessarily be dual-use. Other products may just not make sense for the VC treadmill. On top of this, we know that actually selling technology to the government is often the hardest part, and most VC support ends with a few introductions to their federal advisory board.
We need a better model to capitalize and deploy defense and government technologies. At Valinor, our mission is to get more products into the hands of warfighters and public servants who need them.
Let’s talk about biotech
Why? How are biotech and government tech related? There are a few similarities that are relevant to the Valinor story. Both require lots of capital and have high regulatory barriers to entry. Biotech also has a category of problems that are important, but don’t attract much capital (e.g. rare diseases given the small patient market). This is similar to the defense and government market that has many problems that are critical, but may have limited customers or a smaller market size. The final important similarity between biotech and government tech - if you do make it to the promise land, contracts can be extremely sticky and valuable.
How has biotech innovated from a corporate structure perspective? Meet BridgeBio ($BBIO). Through MIT-level financial engineering, BridgeBio launched in 2015 to solve the problem - how do we create a company that incentivizes going after untapped problems, namely rare genetic diseases. The result? A hub-and-spoke, holding company corporate model. At the hub, an all-star team of capital allocators, scientists, and market experts works to develop and acquire products of interest. At the spokes, lean and focused subsidiaries form around those individual products. Each spoke benefits from the shared services at the hub and can focus exclusively on developing their individual product.
Take it from the BridgeBio launch press release:
This structure is ideal for building value in product-focused investments, and allows for rapid capital reallocation should an asset fail. “We tried to put in place, at the outset, a corporate structure that optimized for focused R&D at the level of each asset but that still provided diversification for investors. This diversification in turn provides more predictable positive outcomes and makes these pre-commercial programs more attractive for a broader pool of capital. Ultimately, the structure also allows for liquidity in ways that are unique as compared with the traditional c-corp or fund structures seen in this industry.”
The Valinor model
So what is the Valinor model? Valinor is taking the lessons learned from successful corporate structures (see below) to create a new type of company in the defense and government technology space. We are a holding operating company focused on untapped problems in the defense and government markets. With this hub-and-spoke structure, we have the ability to go after many small to medium-sized problems that are important, but aren’t seeking the attention of VC-backed companies. We will start by developing these products ourselves, but also have the ability to acquire other products when it makes sense.
Our process:
Hire the best and brightest software or hardware engineers that have a deep passion to build for defense and broader government missions - our Builders.
Similar to the operators in the successful examples above, our Builders are seasoned, proven leaders - giving Valinor a cultural and structural advantage.
At the hub (“Valinor Operating Company”), our all-star-team of go-to-market operators provide a platform to our Builders and subsidiaries with:
The mission exploration and discovery to learn about critical gaps to inform the products they want to build
The prototyping infrastructure from development software stacks to hard tech lab support leveraging our strategic partnerships with the best in the ecosystem
The support to drive value for their products faster inclusive of business development, procurement expertise, government affairs, compliance, legal, company building operations, and more.
At each spoke (“Valinor Product Company”), create a subsidiary company focused on an individual product, incentivizing the Builder directly in the success of their product and giving them decentralized, operational control over the engineering decisions.
Our model is focused on speed to delivery and value - each product can quickly spin up by leveraging the shared go-to-market platform of the hub.
By employing this innovative corporate structure that has long served other sectors, we can create a product factory for government and defense tech. Builders can build. Risk will be diversified. Capital can be reallocated. High startup costs will be eliminated. Product companies can be held or sold. Most importantly, there will be speed to value for both technologists and government end-users.
We need to bring innovation on every front to the fight. Finance and engineering nerds unite.
We are already underway with our first set of Builders at Valinor. More on this to come.
Build with us. Deploy products. Win.