You Might Also Like: Unseen Upside: Investments Beyond Their Returns

Rylan Hamilton (0:04)

My first experience in the Navy was actually joining Officer Candidate School. So I spent a couple of months down in Pensacola, Florida.

I learned how to put a uniform on, I got in shape, I went through all the drills that they had.

Hillary Roboto (0:18)

In the early 2000s, Rylan Hamilton became a Navy engineering officer in surface warfare. That's the officer responsible for keeping warship systems like power and propulsion running at sea.

Rylan Hamilton (0:31)

When I entered the fleet, I actually was assigned to an amphibious transport ship out of Norfolk, Virginia.

But the ship had actually just deployed to the Middle East. So here I was, a very young ensign in the Navy, and my first deployment orders were basically getting onto a plane, flying to Bahrain, and then taking a helicopter to the ship in the middle of the Persian Gulf.

Hillary Roboto (0:54)

But later that day, Iran started launching missiles a couple hundred miles from the ship.

Rylan Hamilton (1:00)

We weren't going to war with Iran. It was definitely focused on Iraq, but Iran was definitely making noise. And so here I was in civilian clothes, so jeans and kind of a golf shirt, running around a ship that had never been on before.

Hillary Roboto (1:14)

For decades, the US Navy has been in a class of its own.

Eleven aircraft carriers, seven fleets in a global reach that no other country could match. But here's the thing about dominance. You have to work to keep it. And right now, American shipyards are being outpaced. The Navy has around 291 ships when it's legally supposed to have 355

Its 2026 plan calls for more than 450 ships by the early 2030s. That includes ships with no crews on them. Because the basic challenge hasn't changed. The Navy needs ships in more places for longer stretches. And all the while, they have to keep sailors safe.

Rylan Hamilton (2:03)

In today's environment, these threats exist. Our Navy ships are under attack, whether it's in the Indian Ocean, the Arabian Sea, the Red Sea, you name it. And so just across all the services, we need to think differently.

Hillary Roboto (2:16)

That's why Rylan and his team at Blue Water Autonomy are betting on autonomous ships. And Blue Water is just one company in a much bigger wave.

Over the past year alone, defense tech startups that are building things like hypersonic missiles and AI-powered factories have raised billions of dollars. So investors like Renny McPherson are really paying attention.

Renny McPherson (2:41)

Our entire firm is composed of veterans who've been downrange, who've seen what violence can do.

And we are completely set on avoiding conflict, not increasing it. But yes, clearly, if we are able to invest in companies that can deter aggression through showing adversaries that we have hard power, that is a important and good thing.

Hillary Roboto (3:16)

This is Unseen Upside by Cambridge Associates, where we explore investments beyond their returns. In this episode, we'll follow the money moving into a new generation of defense technology, from the forces reshaping global security to a ship that can sail without sailors. And how this industry is carving out a bigger space in the investing world.

I'm Hillary Roboto.

Rylan Hamilton (3:50)

When I was in the US Navy 20 plus years ago, we didn't have these asymmetric threats that were threatening some of our most expensive platforms.

Hillary Roboto (3:58)

Today, Rylan Hamilton is the CEO and co-founder of Blue Water Autonomy, a defense technology and shipbuilding company based just outside of Boston, Massachusetts. And when he says asymmetric threats, what he means is cheap weapons that can threaten a billion dollar ship.

Rylan Hamilton (4:17)

When I was either on a frigate or an amphibious transport ship, and we were sailing all around the world, we really weren't that worried about a drone coming and attacking us or anything like that.

Hillary Roboto (4:28)

At Blue Water, they're developing autonomous surface vessels for the US Navy and the broader maritime industry, basically drone ships.

Rylan Hamilton (4:37)

This whole defense tech industry is basically bringing innovation in a much higher speed than we've seen within the defense industry in general over the last 50 years.

Renny McPherson (4:47)

Defense technology really is a newer term.

Hillary Roboto (4:52)

Renny McPherson is the founder of First In, a venture capital firm built by people who came up through the military and intelligence communities.

They back early stage security technology companies. Think things like cybersecurity and autonomous systems. They serve both commercial and government customers.

Renny McPherson (5:11)

For many years post-Cold War, there was a incredible consolidation by the US government, which went to dozens of large security companies, defense companies, and said, we only want there to be a few large, what we call prime contractors, and now they're less than half a dozen, and they do tens of billions of dollars of revenue. And that was by design.