Josh Baer — the founder, CEO, and principal investor of Capital Factory — passed away on June 16th in a plane crash. Josh was my friend, and he played a critical role in everything I've started or built in the eight years I've been at the center of dual-use innovation. Without Josh, I'm quite certain my path would have been very different.
Josh left a tremendous impact on the world. I want to tell a small part of that story — Josh's impact is far, far broader than this, but this is the chapter I was a character in, and one that has had a far-reaching impact for our country.
One week earlier, it was reported that an unmanned surface vessel from Saronic, an Austin-based defense tech startup, rescued two AH-64 Apache pilots after their helicopter crashed in the Strait of Hormuz. Two pilots, a downed aircraft, an active combat area — in the best case, the entire theater re-tasks every asset to search and rescue to bring the pilots home. The worst case? Let's not talk about that.
Josh Baer rescued those pilots. Okay — he didn't personally rescue them. But he built the ecosystem that powered a thriving dual-use economy, the one that enabled companies like Saronic to exist in the first place. And this is my tribute to my friend, so I'm going to take a little liberty with the legend that is, and will become, Josh Baer.
Josh founded Capital Factory in 2009 after starting and exiting five software startups. He had a couple of duds, but overall his companies were wildly successful and helped establish the commercial software ecosystem around email. I've heard and told this story a thousand times — Capital Factory was essentially an extension of what Josh was doing naturally. Josh starts a company, hires employees, raises money, exits or moves on. Then he has time on his hands, extra space in the Austin center at 7th and Brazos, cash to invest, and founder experience. So he helps other entrepreneurs with space, mentorship, and sometimes capital.
Right out of the gate, Capital Factory scaled its accelerator and fund; by 2019, Pitchbook listed it among the three most active investors in the state over the preceding decade. In 2016 the U.S. military took notice — first the Defense Innovation Unit established a cell at Capital Factory, followed two years later by AFWERX.
When the Pentagon went looking for a bridge to America's commercial technology community, Josh had already built one. Take it from Secretary of Defense Ash Carter's own words at the DIUx launch:
"And thanks to everyone here at Capital Factory. This morning, Josh — where's Josh? There you are — Josh, thanks for being part of the inspiration of this day. Appreciate it."
Josh built it. That's where I came in, in August 2018, just a few weeks out of military retirement. The Army had just announced that Futures Command would be headquartered in downtown Austin, and the Army Applications Lab would be established at Capital Factory. The DOD came to Austin looking for commercially focused, venture-backed emerging technology companies — but were the startups looking for the DOD?
They were — but they were clueless! This is why, in the fall of 2018, Brandon Conover and I launched the Texas Defense Innovation Forum at Capital Factory. My first one-on-one with Josh was that November. I told him TDIF was creating a community of experts in defense go-to-market and technology integration. It was as true as any statement by any founder at that stage, and Josh saw right through me — but he also saw the promise. I asked him for money. He responded with a lecture about why I should never start a nonprofit to do something I could build a sustainable for-profit business model around. I learned more in those 45 minutes than I could have imagined was possible.
I didn't get a check. What I did get was the seed for a collaboration that turned into a mentorship that turned into a friendship — and a promise that Capital Factory would support TDIF's programs, host them for free, and put its event staff and marketing machine behind them. I hit a home run and didn't even know it.
In January, TDIF launched the first Defense Academy for dual-use startups — a program since replicated many times over in the U.S. and abroad. It was a smashing success, which prompted my second one-on-one with Josh, on the newly opened 8th-floor Center for Defense Innovation. To paraphrase:
Josh: "Kevin, what you're doing with Defense Academy is great. We need it to be at Capital Factory."
Kevin (confused): "Josh, it is at Capital Factory. We do it in the classroom on the 16th floor."
Josh: "Not what I meant. It should be an official Capital Factory program."
That brief exchange — followed by dinner the next week, at which I learned that Josh basically only eats six things — is how I became a Capital Factory employee, and how Defense Academy became a Capital Factory program. And we did quite well. Over the first 12 months following the launch of the Center for Defense Innovation, 31 portfolio companies won over $63 million in non-dilutive product-development funding. What didn't make the first-year recap was Josh's reaction: "I was hoping we'd get two or three funded. I was blown away!"
We were all blown away — but we shouldn't have been. We used Josh's playbook, and it worked just as it always had:
- Recruit companies with disruptive tech and visionary founders who have hustle.
- Provide mentorship experienced in their tech, business model, and market.
- Get them access to capital and talent to scale.
- Get the hell out of the way.
The next five years were multiples upon multiples more. The USG/DOD ecosystem added NavalX, the Army Software Factory, the Marine Innovation Unit, TMDx, NSIN, DARPAx, and others. The academic and nonprofit community added the Bush Combat Development Complex, Texas Robotics, TDIF, and Hacking 4 Defense. I can't count all the defense and dual-use ventures that established, moved, or expanded into Austin from 2016 on — but we could identify 20 or more, with a total investment impact north of $5B, and likely higher. For context, the total value of all VC investment in Austin companies from 2016–2020 was about $7B.
Then came the next shift: hardware over software, and scale. Dual-use hardware companies like Apptronik, ICON, LIFT Aircraft, Firefly, Firehawk, Cesium, and X-Bow. True defense companies like Saronic, Allen Control Systems, and Bravo Ordnance (which happens to be my company). These are at the cutting edge — putting the hard in hardware, and scaling. Those ten hardware companies have nearly matched that entire 2016–2020 Austin venture total on their own: well over $5B raised.
It's difficult for me to separate Josh from the dual-use growth story. It would have been similarly difficult for Josh — Capital Factory was his life. I don't mean that to take away from his family; Josh was a great, involved father, and his 50th-birthday speech was 10% about capitalism and 90% about being a father of teenagers. But Josh lived to help founders reach their full potential, and he did exactly that.
I can't finish without one story that shows how committed Josh was to the community he built. In April 2020, in the deepest, darkest days of the pandemic shutdown, Capital Factory laid off half our team — just over 60 people, mostly junior facilities and events staff responsible for a physical space that was now closed. Over the next three months, Josh took calls, made intros, wrote recommendations, reviewed resumes and cover letters, tapped his network, and got every single Dreamteamer re-employed. In 20-plus years of military service, I never saw a leader so committed to his troops.
Having written this, I'm at a complete loss for how to end it. So I'll end with a goodbye. Josh, we will miss you. Every time a Capital Factory company lands on the moon, or rescues a downed pilot, or intercepts a drone attack, I'll remember the role you played. I'll tell my kids about you. I'll remember what you taught me. And I'll see you again on Fiddler's Green.