I'm not an economics expert, but I spent some time in that industry and it's like I was on another planet. I think the VC-unfriendliness of defense isn't just a

I'm not an economics expert, but I spent some time in that industry and it's like I was on another planet. I think the VC-unfriendliness of defense isn't just an industry norm, it's a direct byproduct of the really weird structure of that market. I can't think of another industry where... 1. There are almost as many sellers as there are buyers (if not more sellers than buyers). 2. Virtually all revenue comes from contract-based programs. 3. The IT+personel security needs are so high that you can only outsource substantial work to other players in the same industry, or firms that specialize in working with the industry, so cutting costs by outsourcing doesn't work as well as it does elsewhere. That very small pool of buyers can kick the can down the road whenever they want, so a huge chunk of money has to go into simply predicting when your company's next payday will happen. When your forecasts are wrong, you have to spend a bunch of time laying off employees who no longer have anything to do. Or it goes the other way, and you have to frantically recruit the best engineers you can find, and shuffle them all through a rigorous (read: expensive) background check process. Oh, and on the topic of background checks- don't forget that you have insane security needs, even by tech industry standards. All of this makes for an environment that just isn't VC-friendly. Overhead is high, revenue is unpredictable, and the industry is designed that way. No amount of genius management/engineering can change that.