How do you turn Texas into a global innovation hub? For Joshua Baer, founder and CEO of Capital Factory, the answer lies in empowering unstoppable founders, fostering a vibrant entrepreneurial community, and leveraging Texas’s unique advantages.
On this episode of Driving Alpha, host Steve Brotman explores Joshua’s journey from launching a startup in his dorm room at Carnegie Mellon to building Capital Factory into the most active early-stage investor in Texas. With nearly 1,000 investments, the firm isn’t just funding startups—it’s creating an ecosystem.
Capital Factory focuses on “dual-use” startups that serve both commercial and government markets, with Texas positioned as a leader in AI, robotics, and national security. Companies like Aptronic, a pioneer in humanoid robotics, showcase Texas’s growing role in transformative industries.
“Texas is our nexus,” says Joshua. “It’s where we have a unique advantage—a center of gravity for innovation.”
By combining talent-driven investing with a collaborative model that partners with VCs, Capital Factory is redefining what’s possible in venture capital.
Transcript:
Steve: Welcome to the driving alpha podcast, where we explore the cutting edge of venture capital and entrepreneurship. I’m your host, Steve Brotman, founder and managing partner and alpha partners. Today, we’re thrilled to have Josh Baer, the founder and CEO of Capital Factory. Joining us today. Josh is a powerhouse in the Texas startup ecosystem, leading Capital Factory, become the most active early stage investor in the Lone Star State since 2011.
Capital Factory has been at the forefront of Texas entrepreneurial revolution. with a portfolio that reads like a who’s who of successful startups. They’ve backed companies like Aceable, Bizarre Voice, BigCommerce, DataWorld, Icon, ShipWell, and WP Engine, just to name a few. Josh and his team have built an impressive operation, employing over 300 people across the state of Texas.
Capital Factory’s reach extends far beyond just funding. They’ve created a vibrant community of thousands of entrepreneurs, programmers, and designers. Who gather for meetups, classes, co working across Austin, Dallas, Houston, and San Antonio. And what’s truly remarkable is the scale of Capital Factory’s impact.
They’ve made almost a thousand investments in startups so far, acquiring the per ratin rates, to almost a thousand of those. Since 2009, their fund invests up to 500, 000 per company, and they reserve some of that opportunity and follow on to their LPs and mentors that invest in their funds. Josh.
It’s great to have you on the show. I’m excited to dive into your journey. Capital factors, unique approach to investing and your vision for the future of the Texas startup industry. Ecosystem welcome Josh.
Joshua: Thank you, Steve. It’s great to be here and excited to chat with you more. It’s always great seeing you as you’re coming down from Parting with us at South by Southwest every year and hosting lots of events with other investors. and it’s been great doing lots of deals with you along the way, but excited to chat with you today.
Steve: Awesome. That’s great. So, it just strikes me here. How long we’ve known each other and how has it been interwound. And, this year we finally got an opportunity through the Upright Saptronic. So, congrats to you and your team for finding that, opportunity that could turn, Austin into the next Detroit.
How do you feel about that?
Joshua: pretty excited about it. I remember when I was just getting involved with business and the Internet, there was the talk of having a computer on every desktop from Bill Gates. And I think we’re now in that moment of having a robot for every person. maybe next time we’re talking here, I could have a robot companion bringing me drinks.
But I do think really approaching that moment. it’s, it’s so exciting. it’s something that’s going to change the world for all of us. It’s going to make everybody’s lives better, in many, many different ways. and it’s going to be maybe as impactful as the automobile, as the car.
Steve: Amazing. So, Austin is the humanoid robotic capital of the world. How does that sound?
Joshua: I’ll take it.
Steve: Well, if it’s 10 times bigger than the auto industry. That’s a pretty big deal. So hold on to your real estate. one of the things that, folks probably don’t hear too often is if you could share just briefly how your journey as an entrepreneur came to the end, you’re a little bit of your back story and how you got to founding Capital Factory.
That’s a big idea, and a big opportunity, be great to hear more about your journey started
Joshua: Sure, well, I grew up in kind of a middle class family in Nashua, New Hampshire, which is a suburb of Boston, Massachusetts. And, it was a great place to grow up. It was a town of about 100, 000 people. really safe, really. comfortable and welcoming and encouraging. I grew up in the eighties and kind of grew up to the kind of info commercials on TV talking about how, you can be anything you want to be and anybody can do anything.
And, I really kind of believed all that, you know, like, and I feel like, that I, Had any, secret weapons. I worked really hard and I, did a lot to get to where I am, but at the same time, like I didn’t have anything in the way and had everybody cheering me on.
and as I look around, particularly around entrepreneurship, one of the things that, makes me. Realize how lucky I was is that I had so many role models who were entrepreneurs and none of them were big business people. They weren’t like super successful CEOs and they weren’t millionaires, but they all ran their own businesses.
And I looked around family, my grandparents. All my grandparents ran small retail stores. My father was a photographer that ran his own photography studio. My mom was a school teacher, but had a little stationary business on the side making wedding invitations and things like that for my dad’s clients.
and so just everywhere I looked around me, people ran their own businesses. And so as then I became an adult and I got into thinking about what I was going to do, what I immediately noticed was different about how I approached it and thought about it versus a lot of other people. I knew. Is everyone else was just so much more afraid of it, like it was much more intimidating to them.
Whereas for me, it seemed, I think, much more accessible and approachable because I had role models. I had people all around me that did it and were able to by. And so that was to start off with, I think one of the greatest things that helped me get to where I am. Was just lots of role models in my family.
I think it kind of begs the question of nature versus nurture. It’s probably both very entrepreneurial family. I have a sister who I didn’t grow up with. we were close now, but for a long period of time, we didn’t see each other looks just like me. If you see us, we’re like, obviously brother and sister.
but she is so entrepreneurial and it kind of blows my mind because she had a lot of challenges and a lot of things holding her back. And a lot of people telling her that she maybe couldn’t be anything she wanted to be. And she ended up going into the film industry into the movie industry, which is very entrepreneurial.
and she’s just one of the most entrepreneurial people I’ve ever met. and we have so much in common yet. We totally didn’t grow up together. So really interesting. I think both things are important. but I think those were an important part of the start of my journey.
Steve: how did you end up in Texas?,
Joshua: I went to school in really the first middle of internet blooming. Right. And so, in high school, I was on America online and, you know, FTP sites and news groups and things like that. And then everyone’s on dial up and then right as I went into college and I went to school at Carnegie Mellon, which was one of the top computer science schools, and I think still is.
and you know, the mid late nineties, it was like broadband was just coming out. So. I didn’t have broadband at home when I got to college. We had ethernet in our dorm rooms. Like we could be on the internet all the time. You could run servers on your computer, in your dorm room, which they wouldn’t let you do anymore, but you could get away with them.
so that was really amazing. and while I was there, while I was in school, I actually started my first business. It was one of the first email marketing tools, kind of like a MailChimp or constant contact. and I was really just helping people to, you know, Email their customers and as they were as all these businesses were coming online and I ran that kind of out of my dorm room and really made a lot of dumb mistakes and hired all my friends and fired all my friends and you know, learned lots of lessons that way.
but then at the time I graduated, I had a small business. and so then it was really interesting time. I graduated in 1999. It was the peak of the first. com boom. And I had a business. I didn’t really need a job. It wasn’t that big of a business. It was, you know, doing a couple hundred thousand dollars a year in revenue.
And there was a company down in Austin called Trilogy Software run by an entrepreneur named Joe Limont. And Trilogy, has a massive impact on Austin, probably bigger than almost any other company. I mean, there’s a number Dell and others that are really big, but it’s one of the biggest.
And in particular, because They were recruiting all this talent to Austin from MIT, Stanford, Carnegie Mellon, other top schools, and in a very entrepreneurial way. And this was back again in the late 90s, early 2000s, before Y Combinator, before Techstars, before anything like that. And the first thing they did is they took all these recruits right out of school and they put them into a summer boot camp that was a lot like an accelerator where they form teams and launched companies.
And it was kind of like, why combinator crossed with survivor? Because every 3 weeks they would kill half the companies and then you have to go work for the big company. but then by the end, there were like 5 or 6 companies that survived that were viable and effectively got funded by the big company and became companies. And so I was, in really attracted to that, worked on those, ended up working on one of those six, that made it to the end. And then we kind of launched that internet business, sold it to another internet company. and what do you know, it was 2000 and the market was crashing and everything was different.
but I was in Austin. And Austin was a really great place to be. that’s what got me here was trilogy. and it moved so many other really great, smart people here in Austin. If you still now here, 25 years later, if you look around. are kind of like the, one of the major signals you want, like insider signal on a company that’s breaking out.
It’s when they’re kind of series B and all of the trilogy leadership move in. And you just see that happen to all these Austin companies. there’s this huge core of. Talent and team and other people that all work together and all developed all these amazing, expertise and skills.
And we’re brought here through Trilogy. And, most of the top companies in town, they’ve got a whole bunch of Trilogy people there. And it’s a great breakout sign.
Steve: so you decided to just sort of after experiencing that you’re like, okay, I’m going to open a capital factory to do this.
Joshua: No, actually not yet. No, I came here with them. I was still running my company on the side because I had been running it on the side whole time. And so then in 2000, the market crashed And I realized they weren’t going to be investing in startups the same way that they had before.
And so I didn’t want to go work with for the kind of big fortune 500 stuff that they were doing elsewhere. and my company was still running and it was actually doing well still. actually, when I started working on my own company full time for the first time, and that was around 2000 and, interestingly enough, in some ways it was like a market trial, right?
You know, like everything had just crashed from the. com boom, but I was in email marketing and email marketing exploded then, right? that was like huge explosion for email marketing. And so right place, right time from an email perspective. I’ve, did so many things wrong, but being in the right place at the right time makes up for a lot of doing the right things wrong. and the business still grew from there. And so I ran that for, yeah, really for another five or six years before selling that. Then I launched another business.
after selling my first business, that’s when I really got started actively angel investing. I’ve done it a little bit along the way, but I started investing a lot in people. I’d met at Carnegie Mellon people. I’d met at trilogy people. I was meeting in Austin. There weren’t that many angel investors.
Then there was no angel list. There was no website where you could find a list of all the angel investors. and so we really felt a need to like band together and to both helped entrepreneurs and to create deal flow. and that was really the beginning of capital factory, which was in 2009.
Steve: Very cool. That’s when you started 2009. And when did you start investing out of capital factory? Because at first it was like, more of a accelerator. Type situation. When did you raise your first bit of money
Joshua: the way it started was, I had no idea in any way what I was doing. and so we, just said, okay, we’re going to give five companies 20 grand each because we were just kind of like from the outside cargo cult culture, like looking at I combinator and tech stars and other things, and just trying to figure out what they were doing, because we invited them to come to Austin and they want to, So we were like, I need a hundred grand. So I was like, all right, I’m going to put a five grand. I went up to like 10 of my friends and they all put up five grand. And then I was like, okay, everybody find one of your friends. That’s an entrepreneur and an angel investor. And they all put up five grand and then we had a hundred grand.
And then we read a blog post and put out a call for the companies, and picked five and gave them all their 20 grand and realized that. We had no money left. we couldn’t even buy pizza, so, yes, we had to get everything else donated and kind of scrap together.
But that was the beginning of the 1st year. and we did that for a couple of years before in maybe 2012. I think we raised our first $8 million fund, a really small fund.
Steve: Amazing. And you just, raised a fund recently. Is that correct?
Joshua: We have a few different series of funds enough that we don’t really number them anymore. cause it’s more like, you know, which quarter or which year. but we have a few different investment vehicles and so, our primary vehicle, which we are, Investing out of right now is a rolling fund called the Texas fund, and that is so we have a quarterly raise for that.
and, that fund, really focuses on companies based in Texas and dual use companies, companies that are both working with the government and with the. Commercial markets, so they’re not totally dependent on the government, but they get a lot of free funding and resources and other things to the government that helps accelerate them.
And in doing that, they’re also, kind of dual purpose and that they’re solving some commercial need and they’re helping make our country safer and better and things like that too. So that’s really our focus. That as a quarterly fund, you know, it’s like we launch a new fund every quarter and we make about 10 investments per quarter.
and through that, we’re not leading any deals. So what we’re primarily doing is we’re nurturing this, pipeline of deals. Those companies are not companies we just met this quarter. They’re companies we’ve been generally working with for a long time, and we’re helping them to get connected to other investors bring and customers bring their round together and then investing alongside the other investors.
And that’s what allows us to do that kind of pace.
Steve: So, um, if I was a listener and an investor and LP. You know, it sounds like if you’re opening every quarter, so they should just get in touch with you if they have interest in what capital factor is doing
Joshua: Yeah, totally. Texasfund. com is one easy starting point. There’s a few. it’s on AngelList. anybody can go find it there or sign up. And my email is also really easy to remember. It’s josh at quityourjob. com. And if you email me, I’m happy to help get you connected with our team to learn more about it as well.
Steve: Excellent. That’s great. it sounds like, from an, entrepreneur’s perspective. What are the types of things that you look for? You mentioned your own background and family, as entrepreneurs, I presume that’s a bit of a positive if you see that in an entrepreneur’s sort of scope, but not everyone comes from an entrepreneurial background or, you know, family.
what are the things that you look for that make that entrepreneur stand out amongst the thousands of companies you see every year?
Joshua: Yeah, I think their family history is probably something I’m usually not aware of, or getting insight into every once while you find that out, probably later rather than earlier. but for me, it’s, I’d say a few things. one, we don’t just invest. One way we’re investing in people in different phases and different stages.
And so, you know, the main thing we invest in is traction. Like we’re investing in things that are real and we’re looking for customer traction for investor traction for, the execution on what they can go build, but we’re really looking for, customer traction. And so we help them get customer traction.
That’s part of our value add is that. Before we even invest, we’re helping people to get connected with customers so that they’re there right at the right point, right. As they are getting customer traction, we see, and we know, we should go invest and we should be part of it. but that’s, the number one thing is like actually seeing it working.
We are not a pre seed investor. We’re not typically investing pre product or pre market. we help in those phases, but we’re not typically investing in those phases.
Steve: you can still become involved with capital factory pre revenue, if you will.
Joshua: Yeah, totally. Capital factory. It’s a community of entrepreneurs. It’s a place, there’s things going on all the time and it’s a community you can be part of and people are part of it when they’re just getting started and they’re coming to meetups and events and they’re meeting their co founders and to be honest, like we’re working with people who are building their third or fourth companies.
So again, to my point of, like I said, it’s not just one way. Like the primary way is we’re investing in what we can see and what’s real, but there are other signals too. if we invested in your last company and you really impressed us and you’re starting a new company, well, then we’re probably more likely to want to get involved earlier.
Right. and there’s some other examples, like that, that’ll accelerate those things. for me, what I really personally look for is I look for the person. Who was made to go do this, the person who is going to do this, whether or not they get funding, whether or not I helped them, they are unstoppable, like you cannot stop them from doing this.
And that usually involves more than like, I think this is a clever way to go make money. That usually it’s not about like, here’s what the exit is. It’s usually about a passion for solving some problem and for making a big difference and for really getting to different future. so that’s one thing that really stands out to me and that I look for.
And then another thing I, a question our team is asking a lot lately. that we’ve even are able to articulate better after reading Mike Maple’s recent pattern breakers book. good friend of ours and mentor of ours, and a great book I’d highly recommend is just really identifying what market factors, what external factors are going on that make this the right time for this business right now, why is this the right place and the right time right now for this?
And why is it not just incrementally? Making things better, but there’s some other factor that’s going to make this, accelerate, make this an even bigger impact, make this really transformational or an inflection point. And, we talked about Aptronic, you know, humanoid robotics. We think that’s at a similar inflection point.
Aptronic has been working on this for like a decade. Okay. This is not like some new thing. You’ve been building robots forever. What’s different is that the combination primarily of AI reaching a point. Where the robots are able to interact and we’re in the real world and solve much more complex problems where the robots can learn from people instead of from programmers, like, you can actually show a robot how to do something by you doing it.
And then the robot goes and does it right? You don’t program the robot. You say, watch me. I do it like this. Now you go do it. That is what’s all possible now because of AI and was never possible before, and is going to create this explosion of applications and uses for humanoid robotics that is now it’s right now so there’s a lot of other examples like that as well for a really simple example that Mike Maples talks about is with Uber and Lyft.
It was that the iPhone got GPS. Suddenly the iPhone knew where it was all the time. And. That was never possible before. Like taxi cabs couldn’t have an app that could find you, it wasn’t possible. And fortunately taxi cabs weren’t going to build the app, And so that was this fundamental change that they took advantage of that just was an inflection point.
Steve: right. And the key point that you just made was taxi cab companies are not going to create tech companies. Right. So there’s an opening I think that’s a critical insight. I think. Right. I don’t know if you’ve seen the sequoia sort of, sample deck that they’ve put out. but 1 of the court, it’s like 10 slides, which is great, and I highly recommend entrepreneurs, is when putting together a deck, but 1 of the core pieces that I think a lot of entrepreneurs forget.
Is to include why now, why is like right now the right time to go after this? So I think you hit that right on the head there. and in terms of finding you to, I mean, go to capitalfactory. com is there a process for entrepreneurs to apply? beyond I guess their meetups and things like that. So getting to meet you guys.
He is good. But is there any other way to, to do that same, similar to the, uh, LP connection as well?
Joshua: Yes, so, it’s a personal experience, so it’s not go fill out a form and apply. It’s come talk to us. and so we are, our doors are open every day. we don’t have an ivory tower. And so it’s really easy to get inside. It’s really easy to just walk up and meet people and talk to people.
And in particular, if you’re talking about that type of thing, we have a venture team and there are associates whose job are to go meet new people and help connect them to us. And then if you know me or get interested in me, I’m happy to you and I’m easy to find. At capital factory, because I’m at those events and I’m going to things too.
and so, it’s just come up and talk to us. Come meet us again. My emails, Josh, quit your job dot com. You can email me and I’ll help you get connected, but it’s come meet somebody because a personal thing. And so you don’t have to like, be here in person all the time. But if you’re never going to come here in person, you’re not going to get as much out of it. We want to meet you.
Steve: and it’s typically companies based in Texas.
Joshua: it’s funny that you say that like, yes, and that’s our motto is like, Hey, like we focus on Texas somehow, even with us telling everybody, we’re just focused on Texas. I’m not doing anything actively to recruit anybody outside of Texas. About 30 percent of the companies that we engaged with this year are not from Texas.
They’re from Boston and San Francisco andChicago and LA and other places. because They’re doing a lot in Texas. They’re doing a lot with dual use with the government, and they want to plug into those things. but Texas is our nexus. Texas is where we have this super unique advantage. We have our hands plugged in across the state.
We know everything that’s going on. We are really the center of gravity of all those activities around entrepreneurship. So that’s what we bring, but you know, Texas is a huge market. Texas is big. Texas is a lot of going on. And so that’s what we can help plug you into.
Steve: That’s awesome. So, with VCs, you know, one of the things that I often think about, I mean, you have an operating background, and you started companies. you know, have you noticed a pattern of VCs in the Austin area? Are they often operators, or do they often join a VC from right out of school? you become a VC in Texas?
what’s your observation?
Joshua: Yeah, that’s a great question. lot of people want to be VCs. there’s no straightforward path. I don’t think there’s no, VC school. And then, you know, like sign me up for all the VC jobs. cause in the end being a VC means asking somebody to give you money, and trust you with money.
And, that’s, That’s a complicated thing. That’s also usually about relationships, you know, is a part of it as well too. And so, for me to get started as a VC, I had to go invest my own money, you know, and I didn’t have very much money. So I couldn’t be a very big VC. I’m still not a very big VC.
We’re very active VC, but we don’t have, a lot of assets under management compared to a lot of others. and so most of my LPs, most of my investors. Our other entrepreneurs, other high net worth individuals, other family offices in Texas, who are, yeah, they see all this going on.
They want to be plugged into it. They want to be part of it. They want to invest, follow on in these companies. They want to meet, use this as a way to meet companies that they can go identify ones they can invest more in. and they want to be part of all the things going on because there’s just a lot going on.
A lot of things that are meaningful that they can, Be part of both to experience to influence to do business with, you know, it’s a big community of people doing business altogether, but all around startups and supporting and helping these startups. And so we have so much going on with the national security with the all the different military services with the different parts of the government with different universities.
There’s just a lot of different things going on at capital factory that people want to plug into.
Steve: Very cool. so at Alpha, we work with over a thousand VCs on their Paratorate opportunities. and so we’re, primarily engaged with that events like yours were also ecosystem developers. how do VCs, fit into the center of gravity for Texas and the capital factory? you look at that?
And how do they, run in your orbit?
Joshua: Yeah, we have similarly, probably around 1000 VC partners. we’re more about getting them access to pro rata and getting them deal flow than taking it from them. So we’re on other ends of the spectrum there. they’re both needed, you know, but just we’re just much more on the earlier side.
And so we’re working with a big list of investors saying, hey, come look at our deals that you might want to go invest more in, or follow on to in some way, and then family offices and others that might want to participate alongside us and deals that we go to. really in addition to investing with us, there’s constantly, again, there’s just, literally every day events going on at capital factory in Austin, in Dallas, Houston, San Antonio, we just had a big event yesterday in Washington, DC, that are the kinds of things that other investors want to be at, because they are getting access to deal flow, to insights about where, you Investments are being made by the government and others.
What trends are coming? What really matters what they need to worry about with geopolitics and how that fits into investing with adversarial capital and other things that could affect what they do, how what they’re doing might be affected by the new administration that’s coming in. There’s just a lot of different things that matter that we want to talk about.
And so, there’s a lot of reasons why venture capitalists want to invest. Come to capital factory, want to co invest with us, want to be part of these things. And it’d be hard for you to imagine a VC in Texas. they don’t end up at the capital factory or we don’t end up doing something at one with one of their events, you know, over the course of the year.
so we’re working with all of them all the time.
Steve: right. But you’re not edging them out. You’re not leading the deals. You want those VCs to come and lead your deals
Joshua: Yeah, exactly. We’re not competitive with them because we’re not leading any deals. So our model only works when they find deals to go to. And then we’re just saying, Hey, let us put in a few hundred thousand dollars or a million dollars alongside you. And usually they like that they want that. And also, as there have been more and more venture from outside of Texas, getting involved in Texas.
There’s this kind of, sweet spot of wanting to have local capital involved that’s not competitive. And we bring a lot of local resources. We have local contacts and, all these other ways we can help, but we’re not trying to go lead their next deal.
Steve: great. you actually touched on this a little bit in terms of you hinted at it in terms of the macro and the new administration. and then there’s, some technology trends and Texas in general, you know, that’s a big question. how, how do you at least parse for yourself as you’re thinking about some of those 3 elements, sort of the macro situation, the administration, you mentioned dual use as one of capital factories focuses.
Do you want to unpack that a little bit for us in terms of how you see the future of these trends?
Joshua: Well, first of all, I have some experience, but I don’t claim to have a crystal ball, and if anything, a lot of it. I don’t think I can really predict the future. I’m constantly surprised by what happens all the time. and, somewhat caught off guard by, Wow, didn’t expect that to happen, you know, or things to go that way.
so really I’d say while I might have some predictions, my goal is to stay very nimble. I do believe that, Entrepreneurship and technology are two very strong trends. They’re not hype or bubbles. They’re not going anywhere. And, the world has tons of big problems that will need all kinds of ways to solve them, but there’s no way we’re solving them without technology and entrepreneurship.
Those are two big, big pieces of the puzzle. And so we’re really focused on where our technology and entrepreneurship is going to have the biggest impact. And that may move, you know, like that may shift or change. But that will always be really important. And that’s where we add value. And so, in particular, over the past, you know, 5 to 10 years, that’s really changed around government dual use technology, how the government acquires technology and services to help make them more innovative and more competitive. Starting with the military, because the military has the biggest budget and they move the fastest. So they’re the first ones to go adopt these kinds of things, but it really applies to the whole government to everything that we go to and everything you hear about doge and, you know, the Department of government efficiency under a lawn and the deck and the new administration.
That’s very much in line with that. And so that’s a new term and is exciting and, I think will be really great. The idea of we need to make the government more efficient and do things better, of course, is not new. And the number 1 way that that’s been shifting is that it used to be that really, really big problems could only get solved by the government.
The only way we could get to the moon. Was the government the only way we could create the Internet was the government, right? The only way we could create the national highway system, was the government, right? But those things have changed. And now the way we’re getting to the moon is not the government.
It’s actually private companies competing to get to the moon. The way that we’re launching stuff into space is not the government. It’s actually SpaceX. It’s actually private companies. The way that we’re doing a lot, innovations in nuclear power and fusion. It’s private companies.
Going and driving this and so that’s happening across the board. So if the government wants to be the most innovative and have the best tools, so they can provide the best services and be competitive with other nations, then they have to work with the commercial industry. Like, they realized, fortunately, they couldn’t go build their own cloud.
Right, like, they’re never going to build a better government cloud than using Amazon and Microsoft and Google and others. Like they just have to find a way to go do that. They understand that with artificial intelligence, right. They’re not going to go build their own chat GPT. They have to find a way to use chat GPT and X and, Gemini and all these other tools, right, that their budgets that Google and Facebook and Apple and others are putting into these are much bigger than the government’s budget for R and D. So that’s really the big theme. And yet at the same time. There are all these structures put in place to keep that from happening it’s all these rules that say you cannot buy stuff from small businesses. They’re risky. They’re dangerous. and all these, things that the big companies have put in place to protect their interests.
And so that’s really where this all comes into play is how do we change the rules? How do we make it easier and safe for the government to be able to buy things from small businesses and from innovative businesses when they call some startups, small businesses, but from startups and from innovative businesses that are more competitive, that have newer things that often met a better value.
and still let them get what they need to get done.
Steve: Yeah, you’re familiar with the announcement that Palantir and Anduril and a bunch of sort of dual use companies have made with sort of their consortium. Are you familiar at all with them or
Joshua: I am. Yeah. And I mean, not deeply, but yeah, I saw that announcement. It’s really exciting.
Steve: I mean, it’s sort of echoes what you’re talking about, which is how do we, tap into this dual use economy, for everyone’s benefit.
Joshua: there’s a book that I read recently That I really enjoyed some books are really boring. This one is really kind of history book kind of thing. This one was really interesting and fun to read and it’s called freedoms forge, and it’s about world war two. And how the U S industrial base activated to make us help us win that war, and to get to the production levels and things we needed.
And the automakers were building airplanes and the construction workers were building submarines. and not only did it help us win the war, it created great fortunes and built some of the, what are now still huge businesses that remain like Kaiser Permanente and Bechtel and others, that got to create a lot of their business during that time.
Steve: there’s a lot of also disruptions. My grandfather actually was an entrepreneur he had plans to create the 1st. dishwasher or excuse me, clothes washer that you can put in your sink and at that point in time, and, with the shortage of metal, at that time, he basically had to shut down his operation and go work for one of the big auto companies as an electrical engineer and start putting treads on tanks.
that’s pretty big deal. I don’t think you’re talking about that type of disruption, but. absolutely,
Joshua: I mean, it is that type of disruption though, like, yeah, it’s like, suddenly the priorities change and everyone has to literally everyone changes what they’re doing. Thank you.
Steve: yeah, no, pretty, pretty remarkable. to shift the conversation a little bit, I’ve had the good fortune of living through my own, regional tech boom in New York, while I had one third of the fortune, 500, was always sort of a backwater, sort of perennial fourth, fifth tier region.
And, you know, over the last 20 years, that’s dramatically changed. And it’s, little less than half the size of Silicon Valley. How do you see Texas, and Austin particular that’s changed over, since you started capital factory, and where it’s going.
Joshua: Well, same thing, as I said before, I don’t pretend to have a crystal ball, I’ve been here for 25 years and the whole time I’ve been here. It’s just been booming and growing and actually something I read. I I can’t back it up that easily with where it came from, but is that Austin has actually doubled in size every year since every 20 years since the 1800s.
So that’s not because of like one thing, right? Like, but somehow this has been a boom town for a long time, and Texas, you know, similar is booming all across that. And so the first leading indicator I’d look at is where do people want to live? Where are people moving? And so far, you know, Texas , has always done well and continues to do very well.
And in the people that move traditionally, and from what I’ve seen people that are not moving because they’re desperate people that are moving to people that have options. A lot of these people could move to New York. They could move to San Francisco and they’re moving here.
It’s, you know, the general flow is this direction. and so that’s talent. That’s interesting people. it’s people that are doing things. It’s SpaceX. It’s Tesla. It’s, Jim Breyer. It’s Joe Lonsdale. It’s lots of other people. Those are some of the big names, but it’s, lots of others.
It’s the university of Austin, you know, this incredible new university that we founded, that is really different and really, approaching things a different way. And so, you know, I think that 1st of all is our biggest strength. I don’t see that slowing down. Austin’s not quite the affordable city.
It used to be, but the people are still moving here and there’s affordability all across Texas. Texas brings a lot of those. There’s a lot of other options. So, I think Texas is going to continue to boom and grow from a venture perspective. Things are better than they’ve ever been for sure. There’s more organic entrepreneurs here.
There’s more entrepreneurs moving here. There’s more organic venture capital here. And there’s more venture capital than ever, that’s willing to invest here. when I moved here 25 years ago, when I started Capital Factory 15 years ago, there were a lot of venture capitalists who said, I will invest in you if you move to California.
If you move to Silicon Valley. Like that was pretty standard. it was kind of the exception was like, no, it’s okay. You can stay in Austin. And that’s unheard of. Now, I would never, I could not imagine hearing that. Like, nobody would ever say that.
Steve: No, stay there. That’s great
Joshua: and how many investors that would say, I only invest in Silicon Valley versus I’m willing to invest anywhere. Like, yes, there are still some investors like that, most of them are not like that anymore. Right? So all those things really play in our favor.
and I think we’ll generally continue to do well. in particular, I know, Jeff Cardenas, the CEO of Aptronic will tell you how he really believes Texas has the unique ability to create this supply chain coming up through Mexico and Latin America.
And really, you know, to display some of what’s happening in China. And as we look to more of this production of human robotics and other things like that, you know, Texas really has both the space, the talent and the policy to go do that.
Steve: Awesome. Well, this has been an awesome conversation sort of epitomizes Why we do this podcast. I have the pleasure of talking to guys like you and gals in the venture industry on a daily and weekly basis and just thought this is the type of conversation that more than just I should hear about.
So this is amazing, Josh. Thank you so much for your time. It’s unbelievable. what you’ve built over the last 20 years or more actually, and what you’re going to build, and look forward to being a part of it. Josh bear CEO and founder of capital factory. Thank you.
Joshua: Awesome. Thank you, Steve. Really great to be here. And, uh, yeah, I appreciate your partnership and looking forward to doing more deals together.
Steve: Excellent. Thanks, Josh.