40 innovators. 5 cities. 1 conclusion.
America wins
In today’s Diary:
The West Coast lie everyone believes
California startups bloom in Texas
A giant gun pointed at space
1 man is raising a city
Hey Rational Optimist,
I’m writing you from the back of a cab in NYC after an epic two-week tour across America.
I’m headed home to Abu Dhabi and can’t wait to give my three kids big hugs.
ROS cofounder Dan Steinhart and I met over 40 innovators across five cities working to solve some of the world’s hardest problems. They’re building some very cool stuff that will make you question your ambition levels.
We spent most of the trip in Los Angeles and San Francisco. Why California? To steal a line from bank robber Willie Sutton, “That’s where the innovation is.”
People love to hate on California. And hey, it’s often deserved. It’s the state that spent 17 years and billions of dollars on a high-speed railway… yet hasn’t laid a single mile of track!
But take a tour around warehouses in LA and San Francisco (as we did) and you’ll meet a bunch of very patriotic twentysomethings building cool stuff to make sure America remains the greatest country on earth.
When it comes to frontier technologies, California still dominates. At ROS we have a startup database we use to keep track of all the exciting things happening. When you sort by location you can see California absolutely dominates:
If you make the mistake of watching the news…
You’d think California is toast. Boy could that view not be more wrong.
Last week I went for an early morning jog down Redondo Beach. As I was running along endless miles of beaches and watching kids practice volleyball I was thinking, “This is the best place on earth.”
A few days later I was running down near the Golden Gate Bridge in San Francisco. Families were building sandcastles together and throwing sticks into the water for their dogs to go fetch. It felt like being in a quaint sea town, not fentanyl zombie central.
We took a group of 25 investors around LA to meet some of the founders building the future. One question many asked was, “Why are these incredibly bright kids building in California?”
Longtime ROS members know California caught a serious case of “The Blight.” We heard directly from founders how hard it is to build stuff in the Golden State.
One innovator building nuclear fusion reactors told us he’s being forced to build his test reactor elsewhere. Doing it in San Francisco would mean pouring special “freeze-dry” concrete and paying millions of dollars to a bureaucrat with a clipboard who literally stands there watching the concrete dry.
Another founder we met is building a new way to launch cargo into space. The city wildlife inspector is trying to shut down his test because they may disrupt the nesting habits of local birds.
I could tell you another dozen horror stories like this.
Why do the most ambitious kids still move to California to build their startup?
We asked the founders for you. There are three reasons.
No. 1: Money. Most startups run on O.P.M.: other people’s money. And California still has the best venture capital ecosystem in the world. It’s the easiest place to get your crazy idea funded.
No. 2: Talent. LA is the only place in the world you can go hire 50 world-class aerospace engineers. Likewise San Francisco has the highest density of top-notch roboticists in the world. If you’re a startup building in these areas and you’re NOT in California, what are you even doing? The advantages extend beyond hiring. One founder told me he stays in California because there’s a culture of helping entrepreneurs that doesn’t exist elsewhere.
No. 3: Ambition. Founders like being around other founders. There’s a friendly rivalry between them. If you see your buddy crushing it, it makes you step up your game. This drives everyone to new heights.
For all California’s faults this is why it remains innovation king. My job is to travel the world looking at cutting-edge innovation. Not garbage software we can live without. The real stuff that pushes humanity forward. And I can tell you nowhere else comes close to what’s being built in California right now.
When it comes to frontier tech it’s California + Texas vs. China.
Call me crazy but I’m even considering moving to the West Coast!
If you think California is screwed my advice is turn off the news and go visit some factories. You’ll meet ambitious kids trying to solve some of the world’s toughest problems. I’ve been doing this for two weeks straight and am on the verge of an optimism overdose.
California for the startup. Texas for the scale-up.
That’s what we heard from many founders on our travels.
California remains the global center of innovation. It’s where all the wacky (real) ideas are born. Founders will incubate their ideas in California. But they’ll go to Texas when it comes time to scale up.
I was just in Austin, and man, the place is booming. It’s the No. 1 spot for California refugees.
“California for the startup, Texas for the scale-up” can be a winning formula for America. I believe Los Angeles will be the most important city in America over the next 30 years as the innovation avalanche shifts into high gear.
Dan talked about Gundo last week. It remains one of my favorite American towns.
If you have ambitious kids or grandkids tell them to visit Gundo. They may fall in love with the town like I did.
Let them feel what it’s like to be in a place where people decided decline is a choice and they’re not making it. That environment is contagious in the best possible way. One visit might be worth more than four years of college. School tours to Gundo!
San Francisco is enjoying its own “hard tech” revival…
The city is buzzing and has thankfully snapped out of its “software only” coma.
I want to tell you about some of the coolest startups we met in the Bay Area. To make things interesting we’ll run a mini awards ceremony. This is just a quick taste. Lots more coming soon!
Most useful innovation: Matic Robotics
Matic is building AI-powered vacuums that actually work. People love their Dyson vacuums. Now imagine your Dyson knew every inch of your house, where it gets dirty and when to clean it. That’s Matic:
Founder Mehul has been working on this problem for years. I’m convinced he’s the next James Dyson:
Coolest thing we saw: Longshot Space
Inside an old Navy tunnel in Alameda with four-foot-thick walls sits the largest gun in the world:
Longshot Space is building a giant gun to launch stuff into space. The amount of insanely difficult little problems these guys have had to solve to make this work is incredible.
Cofounder Nathan is also one of the nicest guys you’ll ever meet.
Ultimate rational optimist technology: Terranova.
We’re told sinking cities may be a bigger risk than climate change. And right now, the best idea anyone has... is to build walls.
One ambitious twentysomething in Berkeley, California, looked at this problem and said, “What if you just raise the ground?”
Laurence Allen is building robots that can lift whole cities by injecting wood slurry under the earth. He’s wicked smart and a founder to bet on.
A team absolutely crushing it: Zipline
Zipline has been innovating in drones for 12 years. After California told Zipline, “You can’t do that here,” it went to Rwanda to prove out its technology and now delivers over 70% of the country’s blood supply. It’s saved thousands of lives by rushing medical supplies to those in need.
We toured Zipline’s factory and it’s now ramping up production fast:
This team is absolutely crushing it and will win.
Best startup energy: Pilgrim Labs
Most founders spend time perfecting PowerPoint presentations to raise money. Pilgrim Labs founder Jake Adler filmed himself cutting open both thighs with a biopsy tool to demonstrate his new hemostatic dressing—and sent the video to investors.
Jake is a Thiel Fellow. He talks a million miles an hour and wants to build America’s first “biotech prime.” He’s developing a suite of technologies to tackle what I think is the most underappreciated risk: bioweapons.
Fastest mover: Poseidon Aerospace.
Last April I visited Poseidon founder David Zagaynov in his downtown San Francisco warehouse. He’d just revealed Poseidon’s first product, a 13-foot seaplane nicknamed “Seagull.”
The day I visited it was just David and his cofounder there:
Seagull looked like a little toy in that huge warehouse. I visited the team last week and… whoa. They’re now building multiple 50-foot-wingspan seaplanes that can fly over 1,500 miles. David told me they’ll soon have to find a bigger warehouse!
Poseidon is signing contracts with real customers and has its sights set on disrupting the regional cargo market.
Startup destined for the front pages: Bedrock Robotics
Bedrock is building “self-driving” excavators. It’s doing for heavy machinery that Waymo did for cars—except it’s moving 10X faster.
I had the pleasure of visiting founder Boris Sofman in San Francisco. The very next day I got to see Bedrock’s autonomous excavators in action just outside of Austin:
California for the startup, Texas for the scale-up!
Bedrock was the most impressive operation I saw over the past two weeks.
I’ll fill you in on my excursions in Austin, Atlanta and New York next week.
I saw the future over and over again.
It’s better than you can possibly imagine.
The No. 1 takeaway for me is just how important it is to get out there and meet people. If I didn’t think this was important I wouldn’t have traveled 25 hours and left my wife and kids alone in Abu Dhabi for two weeks.
I heard the same from the group of 25 or so investors Dan and I took around LA. Many are ROS members. They read it religiously every week. But there’s a difference between reading it on the screen and seeing a young, hungry, driven founder describe how they’re reindustrializing America.
Above all else the trip was a reiteration of the rational optimist thesis.
Yes there are plenty of problems in the world. The corporate media covers them all too well. But the thing they miss—and what I saw over the past two weeks—is very smart people are working to solve these important problems.
It’s time to reorient your investing antenna. The next generation of category-defining companies will make things, launch things, fly things, mine things, and power things. Are you positioned for the innovation avalanche, or betting on the last era?
Smart People Doing Hard Things. That’s all we need to build the next great American century.
—Stephen McBride
Start up in California, scale up in Texas makes perfect sense; They get out of California as soon as they start making taxable income and their equity is threatening to leap in value. Surprised you didn't mention that. Thanks for the great work.
J.
I enjoy these updates! ROS is much needed. A great counter to the 'look at these problems' media.