"Global Chaos" — The Inflection Point Driving the Coming Transformation of Utah's Quiet, yet Decades-Old, Emerging Ecosystem that will be at the Center of the Next Business Revolution in the "State of Deseret"

Welcome to this 3,500-word Report, the longest ever published by Utah Money Watch.

We share this today because we believe the information reported on today, along with the implications contained herein, potentially portend a massive transformation for the business ecosystem in Utah.

As such, we welcome your feedback and commentary.

Chances are you missed it ... unless (that is) you were in attendance two weeks ago at 47G's inaugural Zero Gravity Summit in Salt Lake City, Utah.

I happened to be 1 of the 600-ish attendees at the sold-out event promoting and celebrating Utah's supposedly small and nascent defense, aerospace, cybersecurity, and advanced tools ecosystem.

I was there to learn, network, and potentially uncover a previously untold story for readers and subscribers of Utah Money Watch.

As such, I was in the audience when one of Utah's venture capital OG's, Blake Modersitzki (Managing Partner of Draper, Utah-based Pelion Venture Partners), took the stage with Eric Levesque, Chief Operating Officer and Co-Founder of South Jordan, Utah-based Strider Technologies for a brief chat.

Contextual Background/Disclosure

For the record, I've known Blake since the late 1990s when he was Vice President/Managing Director of Novell Ventures.

And I provided some PR services to Pelion in early 2023.

Conversely, I've known Eric and his twin brother, Greg (CEO and Co-Founder of Strider), since I interviewed the two of them in September 2023 on for a Silicon Slopes podcast following Strider's $45 million Series B funding round.

I also helped break the news about Strider's recent $55 million Series C funding round two months ago in a story for Utah Money Watch published here.

{NOTE: Pelion was the lead investor in Strider's Series C funding round, and Blake gave me advance notice about the funding announcement the night before it was released so I could break the news in Utah the following morning. As part of the funding, Blake was invited to become a Strider Board Member.}

The Unexpected A-Ha Moment

So, I'm siting there, and I'm watching Blake and Eric riff back and forth about

• The Strider mission,
• How Blake/Pelion first met Strider and the Levesque brothers,
• How Pelion was invited to participate in Strider's earlier funding rounds, and yet
• It turns out that Pelion turned down these investing opportunities because the team members that make such decisions felt Strider was a consulting firm.

To Eric's credit, he stayed in touch, providing update after update about Strider's ongoing progress.

As a result, when he noted in passing last December that Strider was likely going to raise more money after the first of the year, Blake knew that he had to invest.

And whether that was as Pelion (his preference), or by himself, Blake said he was "... all in."

As it turns out, everyone on the investment committee at Pelion was in agreement, so the VC firm invested.

But here's where the on-stage conversation took an interesting and unexpected turn.

As explained in Strider's news release, Pelion led the $55 million investment round, which was "... the largest single investment in the firm's history." {NOTE: That's Pelion's history.}

What was not disclosed in the release, however, was what the phrase "largest single investment" actually meant, something which Blake proceeded to disclose.

"We typically write checks in the $5 million to $10 million range," he said. "But for Strider, we invested $35 million."

"Wait," I thought, "Your check size for this Strider investment was 3.5X to 7X larger than normal? Like, what the crap?!?!?!"

And then Blake explained.

Pelion's investment in Strider was driven by a new investment thesis Pelion calls

"Global Chaos."

In a nutshell, Utah's largest (and arguably) most successful venture capital firm is now looking for unique, disruptive companies and technologies designed to address (even attack) the 14 most critical risks facing both America and the "Free World" from adversaries and bad actors around the globe.

As he explained to me after his on-stage conversation with Eric Levesque, when he and his Pelion colleagues examined their portfolio companies, they realized that Pelion had already invested in firms that address 9 of the 14 sectors the U.S. Department of Defense has essentially dubbed "Mission Critical."

Prior to my discussion with Blake I had no idea that the DoD had identified 14 specific sectors it felt critical for maintaining or advancing the cause of freedom, both at home or abroad.

As such, I knew I needed to discover

• What are these 14 DoD-identified sectors, and
• What role, if any, does Utah play in said sectors?

The World, and Utah, at an "Inflection Point" in a "Decisive Decade"

As it turns out, the White House published on 12 October 2022 a National Security Strategy report.

In this report, U.S. President Joe Biden wrote in the opening pages that

"... our world is at an inflection point. How we respond to the tremendous challenges and the unprecedented opportunities we face today will determine the direction of our world and impact the security and prosperity of the American people for generations to come." (Emphasis added.)

His opening letter went on to explain how critical it is that the U.S. "... seize(s) this decisive decade (to) advance America’s vital interests, position the United States to outmaneuver our geopolitical competitors, tackle shared challenges, and set our world firmly on a path toward a brighter and more hopeful tomorrow. (Emphasis also added.)

Separately, the DoD published the 2022 National Defense Strategy of the United States just two weeks later.

In this 2022 NDS report, General (Ret.) Lloyd J. Austin III, the U.S. Secretary of Defense, wrote,

"... (this report) directs the Department to act urgently to sustain and strengthen U.S. deterrence, with the People's Republic of China ... as the pacing challenge for the Department. (This report) further explains how we will collaborate with our NATO Allies and partners to reinforce robust deterrence in the face of Russian aggression, while mitigating and protecting against threats from North Korea, Iran, violent extremist organizations, and transboundary challenges such as climate change." (Emphasis added.)

He continued:

"In these times, business as usual at the Department is not acceptable. ... To meet this moment, we will tap into our core strengths: our dynamic, diverse, and innovative society; our unmatched network of Allies and partners; and the tremendous men and women of our armed forces." (Emphasis also added.)

Boiled down to its essence, the 2022 NDS report states:

"To advance the goals of this Strategy requires deep and broad change in how we produce and manage military capability."

As explained in their fascinating book, Unit X: How the Pentagon and Silicon Valley are Transforming the Future of War, authors Raj M. Shaw and Christopher Kirchhoff outline the fact that the underpinnings of this transformation within the DoD and the U.S. military-industrial complex actually stretch back more than two decades.

It was then that future U.S. Secretary of Defense, Ash Carter, Ph.D. (17 February 2015 — 20 January 2017), wrote in a seminal 2001 paper that

"Tomorrow's defense innovations will largely be derivatives of technology developed and marketed by commercial companies for commercial motives. (As such) ... the military must be the world's fastest adapter and adopter of commercial technology into defense systems."

It was through Dr. Carter's efforts that the DoD began its first tentative and often torturous steps in 2015 to explore sourcing and purchasing options outside of the traditional prime contractor world with the formation of DIUx (the Defense Innovations Unit Experimental).

Simply put, the DIUx was an attempt to use the business approaches common within the venture-backed technology startup ecosystem for identifying and purchasing DoD and military products and services.

In other words, "Move Fast, and Break Things."

For those not familiar with the purchasing processes of the DoD, military, and the federal government, moving fast is not their mantra at all, especially since they tend to have zero interest in breaking things (or buying things that break).

Given the tale spun with in Shaw and Kirchhoff's book, it's a surprise the now named DIU even survived, let alone thrived.

Yet today, the DIU website clearly states its focus as:

"Accelerating Commercial Technology for National Security."

In fact, the DIU homepage goes further with this language:

"We are the only DoD organization focused on accelerating the adoption of commercial and dual-use technology to solve operational challenges at speed and scale."

Accelerating?

Yes. In other words, moving fast.

So now, fast forward some 20-plus years from the writings of Secretary Carter to the publishing of both the National Security Strategy and the National Defense Strategy reports in 2022.

After the two foundational documents noted above were released publicly, the DoD published some seven months later its National Defense Science & Technology Strategy 2023 report.

It is in this report that the DoD finally gets specific as it outlines what it has defined as 14 Critical Technology Areas where it will focus its efforts to "... accelerate technology advancement and innovation ... to ensure our national security over the long term."

The report further states that

"... our defense science and technology enterprise must 'leverage asymmetric American advantages: our entrepreneurial spirit and our diversity and pluralistic system of ideas and technology generation that drive unparalleled creativity, innovation, and adaptation.'”

The DoD's 14 Critical Technology Areas

The 14 Critical Technology Areas identified by the DoD in its National Defense Science & Technology Strategy 2023 report are

1. Biotechnology (think bioweapons and defenses against them, but more),
2. Quantum Science (from futuristic computing and computing systems and beyond),
3. FutureG (it's not 4G or 5G or 6G, it's the generations beyond them for faster and wireless and wired communications with new capabilities),
4. Advanced Materials (everything from lithium to cobalt and more to enable current and future generation chip-level systems),
5. Integrated Systems-of-Systems (think networks of all kinds driving secure and impenetrable communications),
6. Trusted AI & Autonomy (everything from self-driving vehicles to weapons platforms, all controlled autonomously by safe, secure, and trusted artificial intelligence systems and beyond),
7. Space Technology (everything from ICBM platforms to SpaceX and Star Trek, and the technologies to defend and defeat them),
8. Renewable Energy Generation & Storage (no military gets far without energy, even if that energy is stored in oats or hay to feed horses; and in today's military, that energy is ideally transportable and/or createable in-the-field),
9. Microelectronics (ideally, the smaller the better, including Microelectronics that are human-implantable and non-traceable),
10. Advanced Computing & Software (smaller, faster, better, cheaper and easier to use),
11. Human Machine Interfaces (think of future generations of, or competitors to, Alexa, Siri and more),
12. Directed Energy (weapons systems that use visible or invisible light/frequencies),
13. Hypersonics (weapons systems that far exceed the speed of sound), and
14. Integrated Sensing & Cyber (likely AI-powered and algorithmically driven self-contained and all-knowing solutions for identifying and defeating external threats).

The first four of these 14 Critical Technology Areas (No.'s 1—4) —Biotechnology, Quantum Science, FutureG, and Advanced Materials — are each considered Seed Areas of Emerging Opportunity.

The second six of these 14 Critical Technology Areas (No.'s 5—10) — Integrated Systems-of-Systems, Trusted AI & Autonomy, Space Technology, Renewable Energy Generation & Storage, Microelectronics, and Advanced Computing & Software — are each considered Effective Adoption Areas where there is "vibrant existing commercial activity."

Last of all, the final four of these 14 Critical Technology Areas (No.'s 11—14) — Human Machine Interfaces, Directed Energy, Hypersonics, and Integrated Sensing & Cyber — are each considered Defense-specific Areas.

As I began to understand the scope and implications of these 14 Critical Technology Areas during the past two weeks, I wondered about Blake Modersitzki's comment that Pelion has already invested in 9 of these 14 Areas.

Which ones? I didn't ask.

But, via a quick scan of its publicly published list of PortCo's (aka, portfolio companies), it looks like

• Salt Lake City-based Krado potentially fits into Area No. 1, Biotechnology, while
• Strider Technologies likely fits into Area No. 6, Trusted AI & Autonomy,
• South Salt Lake, Utah-based Torus likely fits into Area No. 8, Renewable Energy Generation & Storage, and
• Salt Lake City-based Monarx likely fits into Area No. 10, Advanced Computing & Software,

just to name a few possible candidates.

That said, Want to be clear that this writeup is not about Pelion or its PortCo's, per se.

Rather, my underlying question after doing this research is this:

Where does Utah, the so-called "State of Deseret," fit into America's need to address these 14 Critical Technology Areas, especially in light of a growing and pervasive condition of Global Chaos?

Hidden in Plain Sight: Utah's DoD/Military Ecosystem

If you asked most Utahns, they would likely be able to tell you about a number of federal military/DoD installations located in the state, probably leading with such locations/installations as

• Hill Air Force Base (mostly in Roy), along with its
• Attendant Utah Test and Training Range, plus the
• Attendant Ogden Air Logistics Complex.

By reference, HAFB was fully operational in 1942; that's over 80 years of service.

In addition, there's also

• Dugway Proving Ground, based primarily in Tooele County west of Salt Lake City, along with its
• Attendant Michael Army Airfield (located south of HAFB and west of Dugway Proving Ground).
• Tooele Army Depot, also located in Tooele County.

Similarly, Dugway also started full operations in 1942, while the Tooele Army Depot opened a year later in 1943.

If our readers thought a bit further, they might be able to come up with a number of Utah National Guard installations, such as its

• Headquarters in Draper,
• Camp Williams in Bluffdale,
• The Roland R. Wright Air National Guard Base, home to the 151st Air Refueling Wing adjacent to the Salt Lake International Airport.

Yet, when I think about the U.S. military and the warfighters who serve the country, explosive growth is not a phrase that comes to mind.

Explosive and deadly fighting power, and results? Yes.

But explosive growth. No.

The same can also be said about the prime contractors and educational/research organizations that serve the DoD/military ... these are not fast-growing organizations.

Yet clearly, such organizations are here in Utah.

For example, there's Northrop Grumman, the firm most Utahns might think of as the "rocket ship" company. {Here in Utah, Northrop's ties go back to ATK, and before that Thiokol.}

Publicly available data says Northrop has at least 5,000 employees in Utah, and that number may be underreported by several thousand people.

And yet, Northrop is definitely not the only organization in the state supporting the Defense, Aerospace, Cybersecurity, and Advanced Tools industries.

For example, how many Utahns without ties to Utah State University / Cache Valley know anything about the Space Dynamics Laboratory?

As I wrote for Silicon Slopes back in November 2021, Space Dynamics "... is a nonprofit entity formed and owned by Utah State University in 1982 when USU's Electro-Dynamics Lab (started in 1959) was merged with the University of Utah's Upper Air Research Laboratory (founded in 1948)."

As it turns out SDL has launched literally thousands of satellites into space, making USU one of the top aerospace research institutions in the world, not just in the U.S.

But SDL and Northrop are merely two of the hundreds of Defense, Aerospace, Cybersecurity, and Advanced Tools organizations in Utah.

For example, Lockheed Martin is here, as are

• L3 Harris,
• Boeing,
• Raytheon,
• Pratt & Whitney,
• Teledyne,
• Textron, and
• BAE Systems,

just to name a handful of the scores of defense contractors based in the state or with facilities in Utah.

In fact, did you know that BAE Systems has over 1,000 employees in Utah, including a so-called "Dark Site" located in Utah Valley?

And don't forget about the National Security Agency's 1.5-million-square-foot facility to the west of Mountain View Corridor overlooking Camp Williams and the rest of the Utah Valley.

Taken further, did you know that there's at least one, potentially two, Level 4 BioSafety Labs in Utah, places where the worst known pathogens and "biological baddies" are stored and researched?

It's true.

There's definitely one at the University of Utah.

It also appears that there's another one at Brigham Young University.

But if it is there, BYU goes out of its way to not publicize it (which I'm okay with).

Is Utah Finally at an Inflection Point for an Explosive Growth Phase in the Defense, Aerospace, Cybersecurity, and Advanced Tools Ecosystem?

So, why go to the trouble to research and report on all of this.

Personally, I suspect few people have any sense that there are are roughly 500,000 people in the state employed in Utah's "Deep Tech" economy, the ecosystem surrounding the Defense, Aerospace, Cybersecurity, and Advanced Tools industry in the "State of Deseret."

Half-a-million?!?!?!

Yup, at least that's part of the data published inside the 47G Program handed-out at the Zero Gravity Summit two weeks ago.

Not only that, that 47G Program shows that

• There are currently $6.1 billion in DoD contracts allocated for spending within Utah, contracts
• That contribute to what it says are the 500,000 Defense, Aerospace, Cybersecurity, and Advanced Tools industry jobs within the state today,
• Jobs that contribute 19.2% to the state's GDP (Gross Domestic Product).

To be honest, those figures were head-shakingly surprising to me.

And yet, when I go back and review the 14 Critical Technology Areas identified by the DoD, I know these things to be true:

1. Utah's ties to the military got back to the creation of the so-called Mormon Battalion in 1846, a year before Brigham Young crested the hill overlooking the Salt Lake Valley and said, "This is the place, Drive on."
2. Utah also has a long and deep history in the computer and software field, dating back to at least the late 1960s with the formation of computer graphics pioneer, Evans & Sutherland, with nearly 120,000 Utahns employed in this industry today.
3. The traditional and renewable energy industries are similarly strong in the state, and ranges from fuel extraction and generation to renewables like solar power and geothermal, with over 85,000 Utahns currently employed in this industry. (And that figure does not include the tens of thousands so-called of contracted door-to-door salespeople out selling residential solar installations.)
4. Salt Lake City's role as home of one of the original four nodes of ARPANET (located at the University of Utah), have also contributed to the state's continuing leadership role in the networking/internet world, including information-security (infosec, cybersecurity, and more).

In fact, by my count, I suspect there are probably over 600,000 individuals currently working in Utah to address the compelling 14 Critical Technology Areas outlined by the DoD, close to 1/5th of the entire population of the state.

Is that a surety? Of course not.

But I do believe this is why the powers that be worked their magic over the past 12+ months to morph several industry adjacent nonprofit associations into what is 47G today.

So now, with over 150 industry, educational, governmental, and affiliated sponsor and member organizations signed-up in less than a year, 47G appears interestingly positioned to serve as the potential linchpin, the driving force (if you will), to bring together several sometimes disparate industry leaders and supporters to each align toward a common cause, a common outcome.

That goal? That common cause/outcome?

I can think of no better one than the one identified as a new investment thesis by Pelion Venture Partners:

Fighting and Defeating "Global Chaos."

How 'bout that for an idea?

In fact, I wonder what such an approach might portend for the often hidebound, 80-year-old military/DoD institutions located in the United States, let alone Utah, especially if they begin to collide with less tradition-bound executives and entrepreneurs?

Hmmmmm, could be very interesting.

In fact, it's why I call this Report

"Global Chaos" — The Inflection Point Driving the Coming Transformation of Utah's Quiet, yet Decades-Old, Emerging Ecosystem that will be at the Center of the Next Business Revolution in the "State of Deseret."

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