Katie Swanson on SAIC's VC strategies, dual-use technology, and AI-driven innovation | E31

Yeah, and I would reframe that to say my skill set is in relationship building, rather than sales, you know, because maybe the definition of, you know, quote unquote sales has changed over the last couple decades, But I like to think that I don't want to give anyone something that they don't need or that they don't want. Right? Oftentimes I think sales is kind of tied to that stereotype or that reputation. And I truly want what's best for all the parties involved.

Welcome to Impact TV, a corporate venture video series in collaboration with the Coffin Fellows. Hi, I'm Jack Crawford, a founding general partner at Impact Venture Capital, Alongside my colleague from Impact, Pat Bumpus, and my Coffin Fellow co chair, Alessandro Santo, we're thrilled to welcome to the show Katie Swanson, a venture principal at SAIC. Hi, Katie. How are you doing today?

Hi, doing fantastic. Thank you for having me. I appreciate it. Looks like you have a work colleague there joining you for the Zoom call for a minute.

I do, yes. My dogs are very old and so they're very easy to work with. Let's see, doing a little bit of background, you grew up in Cupertino and we were noticing that, okay, you're right up the street from Apple's original office and even went to the same high school, a very different graduating year than Steve Jobs. It went to the same high school as Steve Jobs.

Is that a big deal in your area? A lot discussion about Apple or Steve Jobs at your high school or in your community? You know, it just kind of seemed like a fun fact. There was the plus of all of the schools I went to had MACs everywhere, and so I thought that was normal to grow up in.

I eventually moved to Nebraska and found out that is not normal, and it is a product of living in Silicon Valley. So definitely a lot of privilege experienced that I didn't understand how lucky we were. Yeah, it's another fun thing is I used to love going to BJ's in high school, and we would park in the Apple parking lot, And people would think from the Midwest that was so cool that you would just park in the Apple parking lot to go get dinner. And it's funny just coming from here and having those normal experiences that other people don't have.

Well, and you look pretty healthy and fit to me. And I noticed there's a bike in your LinkedIn profile. And I'm wondering, I've done a Double Century and some other long distance triathlon, so I spent a lot of time on a bike. Had to ask, that a picture of your bike in someplace that you visited or are you into cycling?

Yeah, no, I love doing triathletes and I wouldn't be a triathlete if I didn't tell you that. So I prefer half ironman distance, because it's a little bit easier than working out all day, doing cardio. So, I love being outside and that's another great thing about living out here is you can just go for a run-in the hills or go for a bike and it'd be a real workout. It's fantastic.

I saw you spend a little bit of time in Canada. Was that you didn't happen to do the half Ironman in Mont Treblant, did you? So I did it the year it was Whistler. I got very lucky.

It was incredibly beautiful. Awesome. Yeah, you're right. Us Ironman always talk about it, right?

It's like CrossFitters. How do you know a CrossFitters are CrossFitter? Because they'll tell you about it. My son and I did that Mont Treblanc half Ironman last June.

So that was quite an adventure together. So it was a lot of fun. Okay, let's pivot to SAIC. For those who aren't familiar with SAIC, what does it stand for?

Tell us a little bit about the organization to kick things off. Yeah, so SAIC stands for Science Applications International Corporation, know, a defense integrator or mission integrator that we work with all aspects of the government. We're focused on solving some of the country's most complex and challenging issues, working in partnership, with the government to do it strategically. So, that's really our focus.

We like to say we're great at innovation and being a part of the venture team, I can definitely say that that's the case. So I'm lucky to be here. I'm lucky to be a part of the team and really focusing on how can we integrate these startups into our missions and our work with the government. So you started with venture experience and fund to fund experience, right?

Ecosphere Ventures, WeVC. Can you just talk a little bit about your journey, sort of doing some direct investing and maybe even some investments into funds to the spot that you're in now at SAIC? Yeah absolutely. So before all of that I was actually a founder and so that experience made me realize that I'm not cut out to be the builder, but I would love to fund the people that are.

So that's definitely the space that I ended up in venture capital. I loved my exposure to VC when I was the founder and like I said decided I want to do that. That's cool. That's how I can make the biggest difference in this world.

So I started working I got exposure to venture capital, working with a venture capital accelerator and helping manage their fund of funds and making investments into some of the funds that we were building up. And so, you know, I absolutely love that. It dove in very strategically, very legally, you know, globally at some capacity as well, supporting funds from all different kinds of countries, including Mongolia, which was a fun experience. And after I left that, then I stayed on with the two funds that you mentioned, Ecosphere out of Texas, Cleantech Fund, and WeVC out of Canada investing in Western Canadian technology.

So I've been able to continue to help them strategically and help vet investments on their behalf, and also I was advising early stage startups on their fundraising roadmap, strategic plans, things like that. So I've learned I've met with a lot of founders with a lot of different experience across a lot of industries and seen how strategic capital can make such a big difference in this space. And, SAIC was a perfect place to do that because, SAIC, you know, it's something that we've been working on as a company to create that venture fund, and we have an incredible CEO who's really excited about the venture opportunities, and so I saw that as an opportunity to jump on and help with the strategy behind how can we bring Silicon Valley into Silicon Valley innovation, I should say, into the government and really bring some of those interesting companies into what's happening.

So that's how I ended up here, and I'm loving it and I think we're doing some really interesting things. Did you do all this from Northern California or did you spend time in Texas or Canada or was it, were you always sort of the window and filter in innovation for these other companies while living in the Northern California or San Francisco area? Yeah, I've always been in this well, not always, but the majority of this career I've been in the San Francisco area. I'm really bullish on diversifying your portfolio.

I think that's kind of a pretty normal space to live in. My background is really in clean tech, so that Texas fund I've been really close with from that standpoint because of my love for clean tech, my experience my technical experience in that area and how to message those things, especially when there were some controversial things going on with investing in cleantech, what, three years ago or so. So I really enjoyed maneuvering that. From the Canada aspect, there's a lot of cheap companies up there, which means a lot of cheap technology, and at the end of the day, if U.

S. Investors can invest in a country like Canada, then well, first of all, that's huge upside diversifying your portfolio. And then also you can help these companies come to The U. S.

And get their really specialized interesting technology. That is sometimes quite a bit more innovative than the stuff we're seeing in Silicon Valley because there is so much competition here. So it's been a journey and it's really interesting. And I like looking at all different areas of investing.

That's super helpful. We have a number of portfolio companies that are looking at sort of not only the commercial markets, but also sort of the national security and defense markets. We had one actually at Ponderra. I don't know if you recall the company.

It was focused on fraud, waste, and abuse in the government sector. And it was acquired by Thomson Reuters because they wanted to get access to more government customers, which is interesting. Many of our portfolio companies now are starting in commercial, I'm finding that they're highly relevant in some of the government sector. You have this sort of dual use strategy where you're looking at how do you invest and support and mentor and connect companies that have a bit of a focus on commercial and national security.

Can you talk about that sort of dual use strategy as part of what you do at SAIC? Yeah, absolutely. I think dual use is a really important topic of discussion because it is so hard for a company to exclusively be defense just because of, you know, the life cycle of contracts and how you actually get revenue from being a purely defense company or government focused company. It takes longer to, you know, start pulling in the revenue that VCs or financial VCs at least really like to see, and sometimes you get don't get that return at the end.

And so there's I always get the question from founders of, I really want to be a government startup, but I can't afford it because I can't get from, you know, the pre seed world to A, B, whatever you need to be in order to, be successful in that space. And so, I think it is a little bit of a balance of, yes, you need to be focused as a founder, especially in the early years, but you need to make money, right? And, so, you know if you can be dual use, then the focusing on commercial in the early years is almost necessary because that's the revenue.

That's what will get you to your North Star if your North Star is working with the government. Yeah, the other thing, actually, you guys do and certainly research this a bit is you seem to be an accelerant into the government channel. I mean, to some degree, the vast majority of the VC community will take a look at a startup focused on the government sector and say, oh, wow, long sales cycle. And you're elephant hunting.

Yes, if you get in, have a very large customer. But the timeline comment that you made resonates with me. And so anything you guys can do to accelerate that for startups, I think, makes great sense. What I found interesting, we've invested in 40 companies now.

Those companies have attracted follow on capital from Intel and Zoom and Yamaha and Kubota and Goldman Sachs and SK Hynix and a bunch of others, right? A big part of our strategy, as you know, is co investing alongside of corporates. Most of the time, the corporates are focused on sort of Series B, Series C rounds of financing. They've been coming earlier in the financing food chain into this Series A more recently, but you guys will even do seed and Series A investments.

Why don't you just talk about your stage focus as part of your investment strategy? Yeah, so part of it is, we the guardrails, I think, are that we want to be we won't invest in pre product companies because we need something to put into the government. You know, from the standpoint of we invest early, it's really hard when you're investing in a later stage company to get enough say at the table when you're telling them, Hey, your roadmap is great if you're looking to go this direction, but if you want our customers, you need to focus on these things.

And so if you own, you know, a small percentage of the company, then they might write you off and say, You know, what we're doing over here really works, and then how does that become a strategic investment? Right, and so when you have a little bit, of a bigger seat at the table, if you will, then you can guide, the founders and the team to focus on and listen to what it is that as a strategic, you're saying your customers really, really need. So, I think that's where the value lies in investing early and, And also being that focused, federal go to market partner, it allows us to give them a lot of those unlocks that otherwise might be a little bit difficult for them to seek otherwise.

Yeah, without a doubt. I could see that. But I also understand the need for some kind of minimum viable product initially to be able to show the business units what you've got. At the concept stage, it's even difficult for us.

We're taking a big risk when we invest before the product's complete. They don't have to have significant revenues, something to show. Makes great sense. Let's talk a little bit.

Our firm, as you know, invests in artificial intelligence applied to security, finance, digital health, education, and some others. We're always looking at sort of how AI applies. And certainly, some of our most significant investments are in the AI infrastructure space that we really feel like are building the foundation for all the things AI that are to come. We've also talked about how do we use AI internally for decision making.

As you guys think about AI as an industry sector to invest in or utilizing AI as part of your internal operations, maybe just share with us a little bit about the discussions that are going on inside the four walls at SAIC as it relates to AI. Yeah, so one thing that's really impressed me with SAIC is our lean in to AI and the capabilities there. Know, it's really our focus with AI is truly efficiency and efficiency internally, efficiency with our customers. So how can we make their lives easier?

How can we make it more efficient? And that's what we really look at when it comes to AI. You know, from a Silicon Valley venture capital perspective, then I don't think I can hear a pitch without someone saying, Oh, an AI. We use AI for this, right?

And at this point you need an AI strategy. It's almost not a value add because it's a need to have, and so understanding the AI strategies of the companies we invest in, if they're not labeled as an AI company, is incredibly valuable to ensure that we're aligned in those values and the understanding of what AI is being used for and the focus around that. Yep. Makes great sense.

Let's talk a little bit about value beyond capital. So in doing some research on some of the SAIC venture platform, it looks like you've got an innovation network, strategic partners program, some elements focused on go to market. That seems to be a big part of it, of solution building. Looking through some of these, it reminded me a little bit of the last interview that I did was with J and J.

And they have J Labs. There's 13 J Labs around the world. Alison Reins runs one of them in the Texas area. And she was just talking about not only the infrastructure that they're putting in place, but they also have J Powells, I think they call it, where they actually include an internal champion to help guide through the vast network of J and J.

It seems like you've built some of that internal capability with some of these things that you've integrated into the Ventures platform. Can you describe sort of it looks like most of it's focused on go to market strategy and really sort of helping the company, the startup company, navigate through the large network at SAIC. But I'd love to hear your words and how you describe it. Yeah, so as an investor, I like to think of my job as mitigating risk wherever we can, and so ensuring that we can help these startups, and we can help our customers.

And going back to the AI question, make it as efficient as possible and as cost effective as possible. So how do we ensure that when we're making an investment, it's not just a check and it is that strategic partnership. How can we ensure that they are getting put into these contracts that we're winning and then executing on? So I don't touch that stuff.

You know, the VC team doesn't touch that stuff. We're investors. We work with startups and we make magic happen that way, but we need the relationships within SAIC in order to ensure that these investments of ours are going under contract. And so there's definitely an aspect of, Okay, well, who from a technical standpoint owns this deal and is held accountable for their success from a technical standpoint within our software stacks, etc.

And so that is very similar to what you're speaking about with J and J. You know, you need to have those advocates from within the corporation and you need that buy in. From my perspective, the more buy in and the more advocates you have, the more likely success will be. Know, there's more turnover in large corporations.

I mean there's what 23,000 people. Are they all going to stay throughout the year? Probably not for one reason or another, know, that's just the expected math of working at a large company. And so you need to make sure that when you're making that commitment to a startup and saying, we're giving you this dollar amount for this equity, and the reason you want us on your cap table is so that we can continue to build your revenue streams with our customers.

I want to make sure that when I'm making that promise, I mean it. And so, of course, having those internal relationships and having that internal process is absolutely key, and getting that buy in during the diligence process is also something that I think we've been able to do really well. I was surprised to learn that Lockheed Martin, I think they said 80% of the investments they make are followed by a commercial agreement. That just seemed amazing to me as a large percentage.

Do you have a target? How do you think about sort of a commercial relationship following investment or along the way? I'm just assuming that you get some level of BU sponsorship as a tailwind for sort of integrating a new technology. But is it are you also working to actually get a commercial relationship established alongside or immediately after your investment?

Yeah. So we that's a part of the stipulation of making an investment is that we have that strategic collaboration agreement. So, we are committing to them that this is our value add. This is what we're going to do for you, and part of that is the strategic piece behind SAIC Ventures, right?

Well, the way I say it to founders is, Hey, we'll take you to market with our customers. We'll make money off of what it is you're doing. You'll make money off of it off of what it is that both of us are doing, and then your valuation will go up. I mean, if I've ever heard a win win situation, it's that one, right?

And so, so that's the goal. That's what we try to do, and, I think without that strategic partnership, the wouldn't be as valuable from that relationship. I mean, what can we do on their cap table that other people can't, right? And I'd say that that value add is a pretty big one, especially now that I've worked with government customers quite a bit.

It can be tricky. There's a lot of nuance there. It seems like, as I learn more about your skill set, it seems like a big part of it is actually sales. Really understand, in a sense, how to take innovation and sell it not only into SAIC, but also understand sort of go to market strategies and other things.

It's really interesting because so much of what we do as venture investors is find product market fit and then accelerate the go to market strategy, right? It seems like that's a lot of what you're doing in your role. Yeah, and I would reframe that to say my skill set is in relationship building and rather than sales, you know, because maybe the definition of, you know, quote unquote sales has changed, over the last couple decades. But, but I like to think that I don't want to give anyone something that they don't need or that they don't want.

Right? And oftentimes I think sales is kind of tied to that stereotype or that reputation. And, I truly want what's best for all the parties involved. SAIC wants the best for all parties involved, and so the best way to do that is to understand your stakeholders, understand what it is that they want and need, and then connect the dots on how to figure that out.

If I just describe sales, you can call me a salesperson. That's fine. I think there is a nuance. Sometimes there's a well, what you described in my eyes is more like business development.

To your point, it's sort of you're looking at the value proposition for both sides, and I completely agree. You're sort of finding something that effectively enables people to get what they need on both And there's real value in doing that. Would have been a big part of to the point you were making, it's about relationships. It's about developing those relationships and then really understanding the need from both sides.

So, speaking of relationships, as we look to collaborate with you at Impact Venture Capital, we have, I think of the 40 portfolio companies, we have eight that I think are relevant to your strategy. So we're going do a deep dive, not today, but we're going to do a deep dive with you guys and sort of go through those portfolio companies and see which ones are relevant. Some of those may be opportunities to co invest. But using that as an example, how else are you collaborating with VC firms?

Is it sharing market insight? Is it co investment? Are you making LP commitments into funds? How else are you collaborating with the traditional VC community?

Yeah, I'd say our primary collaboration is that I again, going back to figuring out what every party needs and providing that. We are a VC firm, or fund, but, at the end of the day, we want to support our customers and our customer needs. And so if there's something out there that our customers need, but it doesn't make sense for us to make a financial investment for one reason or another, we're going to grab onto that opportunity and take it and put it where it needs to go. And so if that's a company that is brought to us, whether, you know, it's later stage than ideally we'd want, or it is, you know, the numbers don't make sense for that financial reason, whatever it is, you know, we will still meet with these companies and we will still plug them in wherever they belong and try to push that forward.

So we're supportive of the startup community in the defense space. We're very supportive of our customers' success. And so any way we can connect those dots, know, sign us up for it. Yeah.

Well, as we look to add value to you, I think a big part of it is sourcing. We're actually working with a large number of corporates and finding that we're sourcing industry relevant, stage relevant investment opportunities for our corporate partners. And I think that's one of the ways in which we're trying to provide value. We're trying to share market insight on what we're seeing on the front lines.

As you think about sourcing, maybe talk a little bit about where are you entrenched in universities across the country and national labs? Or are you where are you sourcing ideas? And are you working to expand your network of relationships with other corporates or the traditional VC community? Where does most of the deal flow come from?

So we get our deal flow from a handful of places. You know, a lot of it is conferences, just meeting people, dinners, know, right place at the right time kind of opportunities. But one area that I really want to stress is that we have such an incredible tech team who does lean into innovation and young companies and the cool new thing. And so, I'll connect with team members who were out at a hackathon or out at a cool conference and they say, Hey Katie, guess what?

I met this really cool company. They're really early or, you know, I don't know what to do with them, but I got excited about it, and I think you'd probably get excited about it too. And that is actually where we come up with some of the most robust opportunities from a strategic and financial standpoint. But of course, you know, we still see companies from all the traditional ways as well.

I'd say there's no shortage of deal flow, but making that very strategic decision as to who we're going to write that check to, that's the part we spend a lot of time on. If you have your internal employees embracing, sort of, you know, identifying innovation outside your four walls and crowdsourcing innovation, that's very different than some of the old line corporations that serve not invented here syndrome. They're just, oh, we can build that. Let's not worry about it, and sort of getting trapped by your ideas.

That's actually encouraging. I think that's going to serve SAIC really well. Let's talk a little bit sort of the financial investment returns versus strategic investment returns. How do you balance those?

We have some corporates that are not only looking at those strategic initiatives, but also looking at having a positive impact, focusing on the sustainable development goals. And so there's sort of like this triple bottom line of generating a financial return, being strategically relevant, and then positively impacting the world. It can be a lot to sort of balance. But more and more, it seems like corporates are putting a greater level of weight on financial returns first.

What's your view and how are you weighting those elements? So I would say that as SAIC, this might sound cheesy, but anything that makes our customers happy and anything that brings that innovation into the government, I've been stressing that throughout the conversation, and I think that's the number one point, is that if we if we can find that, we're successful. And there's you know, I can't say as a, you know, background in financial venture that the return doesn't matter because, know, if you think about it, you know, if you invest in a company that doesn't have any potential for financial return, that means the company will cease to exist, right?

So you can't say, Oh, I would love this company to just bring us revenue and us bring them revenue, but I don't care about a return. It's like, Well, what do you have? You know? So I think that it's not about necessarily investing in unicorns.

We're not necessarily looking for that, but you know we want to invest in teams and companies that have the technical expertise and the business acumen to survive and thrive with our customers fits their needs, the customer's needs, and can support them throughout the contracts and throughout the opportunities. So and in that, I would argue if our customers are happy, then we are making the world a better place, right? So financial first, strategic sort of second, and then impact third sort of in that, you know, just you're heavily weighting, making sure that there's financially viable opportunity that you're investing time and money into as a first order of priority?

So I would kind of turn that around and say that strategic is probably number one, and it's just table stakes that this company will continue to exist, right? I mean it doesn't it's a waste of corporate money to invest in a company where you're like, oh man, this founder is terrible at managing the business and probably won't be around for two years. It's like that doesn't benefit the customer. It doesn't benefit us.

It doesn't benefit anybody. So it's not about the, what dollar amount do we think we'll get back on this. It's more of do they have the capability to be wildly like be not wildly successful, but be successful in what it is they're trying to accomplish. You know, we've invested in a founder who says, you know, I'm not doing this for the money.

I'm doing it because I want to make the difference, and I'm sure that would scare off some financial investors, but you know, we're aligned. We're here to make that impact, and we're here to you know, we're all mission driven from that standpoint. We're here for the customers. So I'd argue strategic is number one, and, financials is number two.

By industry sector, is there anything that's really got your attention, right now? And we are we're trying to, candidly, our investment strategy is built on gathering market insight in conversations like this that elevate our investing IQ at the seed level so we can invest and bring interesting products back to our corporate partners, right? That they previously enlightened us on. It's been interesting.

Thomson Reuters was talking about the mass adoption of AI technologies and generative AI in particular by the legal sector, and how their accounts and attorneys were embracing generative AI at a faster rate than any other segment. Yamaha, at one point, was saying, hey, you may know us for motorcycles and pianos, but we're actually going into the robotics space because we think that the agriculture market is going to be disrupted, and we're going start looking at automation with robotics.

So we've ended up gathering this market insight, and ultimately, it's elevated our investing IQ and enabled us to circle back to corporates with a co investment opportunity and in some cases an acquisition opportunity. As you look forward over the next two, three, four, or five years at technologies that are highly interesting to SAIC and places where you're highly likely to make an investment or maybe even an acquisition, are there things that have captured your attention or that are high on the investment roadmap?

So, that's an interesting question in the way that you worded it, because, it's not necessarily like we say, we need to invest in this thing next, right? And I think that there are situations in which that would be appropriate and makes a lot of sense, especially for, you know, Yamaha robotics. That's what we're doing. For us, you know, we have so many customers so many needs.

And so it's almost like we're in this playground of we can find something that's cool, find a place for it, within our organization. And I you know, there's a lot of really interesting things going on across a lot of different, like interesting industries. One place that personally I'm very interested in, you know, is maybe on a later horizon is the quantum space. I think that this is an area that's, you know, it's existed but continues to be up and coming, and I'm excited about it.

You know, it's I don't think it's a trend. I think it's the future, which, you know, there's I can relate that to a few different industries, you know, I'd identify battery technology as something that is right now in a trend rather than the future. You know, and I think we're getting closer to what the future actually is and having that battery technology of the future. You know, so that's kind of what I'm talking about from the quantum space of we're living in the future now.

What will that look like? And so exploring all of those quantum companies is really fun and exciting, And hopefully we'll see what's next soon. Awesome. Yeah, thanks for that market insight.

Okay, we're at the rapid fire portion of the program. We got last two questions for you, and then we got to wrap up. Great. Let's see.

Favorite podcast or industry publication? Okay, those are two very different questions. Well, so I love All In with David Sachs. I mean, I especially being a VC at SAIC, the ties between government and politics and technology, it's what I want to hear about.

Perfect. Without a doubt, a huge convergence there. The NDCA actually recently put out I think, a one hour session on how policy was going to potentially impact technology and M and A over the next year and their sort of forecast that. And so in addition to all in regularly talking about policy and technology, I find that the NVCA does a pretty good job of covering the convergence of those two areas, which for us as investors helps to enlighten us on headwinds and tailwinds.

Is crypto really going to start to take off here in 2025? What's going face a headwind? And so that's been interesting. Yeah, so I appreciate your comment there.

Okay, and then last question. As part of my Kaufman Fellows thought leadership project, did two years of research and a presentation on strategic planning for life and how people start their days and how they leverage business tools to apply to life to get high performance in both categories. And so I always like asking the question, is there something that you do to prepare yourself each day for high performing in the workplace or high performing in life? It might be jumping on your bike.

I'm not sure. But is there any regular routine that you find sort of helps you to elevate your game in life? So, I think for me, the most important part of my regular routine is waking up for me rather than for something else, right? So I'm going to wake up to, you know, maybe a chore I have to do or go to the gym ideally, but sometimes there's not time for that.

And so understanding the purpose of the day, right? Making sure that it's not just, you know, you wake up, go through the motions, go to bed and then start again. Right? Understand your purpose for every day.

I'm waking up for me and my purpose is this, and this is what I'm going to do with my day and make my decisions with, you know, ethics, values, and all of those things in mind. I think that is the best way to be effective, and the best way to stay positive and the best way to remember who you are every day and never compromise your values. That's awesome. There are some apps out there.

I mean, there's the fitness apps and the food apps and all those kinds of things that keep you on track. I found a life app that talks about sort of setting your intention for the day. It gives you a little nudge in the morning, sort of what is your intention for today? And so it's got me thinking right in line with your comments.

So thanks for sharing that. Yeah, absolutely. Sounds like a great app. On behalf of Impact Venture Capital and the Kaufman Fellows, thanks to you, Katie, for spending some time with us today.

Yeah, thank you for having me. It was fantastic getting to know you better. That's a wrap for this week's show.