Solving challenges for mission critical companies, expertise in the national security sector, coupled with successes operating technology companies, represents a rare combination among venture capital /growth equity firms.  After successfully exiting two prominent businesses in 2021, the sales of BlackHorse to Parsons and BlackLynx to Jacobs, respectively, and completing a $340m capital raise for Fund III, hear how Peggy Styer and Jack Kerrigan of Razor’s Edge Ventures find, fund, and foster technology companies that are solving significant challenges for mission-focused customers. Discover what makes them tick, lessons learned, and what is next for Razor’s Edge.  Sectors of investment interest include cybersecurity, data science, data infrastructure, space, C4ISR solutions and sensor technologies, to name a few.

Hi. Hello and welcome to episode six of Beyond Strategy, an ACG National Capital Region podcast focused on the leaders that drive innovation, enhance understanding, and achieve market clearing outcomes in the national capital region. I am Andy McEnroe of Raymond James's Defense and Government investment banking team.

And I am Jenn Wappaus of the Infinity Group at RBC Wealth Management.

Today, we are excited to sit down with Peggy Styer and Jack Kerrigan of Razor's Edge. Razor's Edge invests at the intersection of national security and commercial enterprise. The firm seeks to find, fund, and foster technology companies that are solving significant challenges for mission critical customers. Sectors of investment interest include cybersecurity, data science, data infrastructure, space, C4ISR solutions, and sensor technologies to name a few.

Peggy is a co-founder and managing partner at Razor's Edge Ventures. Before founding Razor's Edge with her partners, she was co-founder, CEO, and chairman of the board of Blackbird Technologies, which ultimately sold to Raytheon. Peggy also co-founded and served as the CEO of RavenWing, a mobile communications company that was acquired by Boeing. Peggy brings a unique perspective to her investing role as she has been a successful operator her entire career.

Jack is also a co-founder and managing partner at Razor's Edge. Before founding the firm with Peggy and their other partners, Jack was the chief operating officer and general counsel at Blackbird Technologies. He was also a co-founder of Raven Wing and successfully helped both businesses transact, with Blackbird being sold to Raytheon and Raven Wing to Boeing.

Peggy and Jack have been active on the investment front for nearly two decades in numerous angel, venture, and growth equity endeavors and have yielded over one billion in shareholder returns over the last five years.

Peggy, Jack, and the rest of their partners and teammates at Razor's Edge just completed a $340 million fundraise. This was Razer's third fund following the successful $158 million fund that it closed four years ago and its inaugural $55 million investment fund. Now, let's dive in further to the world of growth and venture equity investing in the national security and government contracting arena. Here's our discussion with Peggy Styer and Jack Kerrigan of Razor's Edge.

We're excited to be joined today on Beyond Strategy by Peggy Styer and Jack Kerrigan of Razor's Edge. Thank you both for being here.

Our pleasure.

I'd like to start at the beginning for each of you. Peggy, you've described yourself in some of our off-recording conversations as a lifetime entrepreneur or a builder of businesses. Will you take our audience back to the beginning? What was your first business and why did you start it?

You'll laugh. It was actually in middle school. I was a computer programmer, and I did fortune telling machines. All my friends, whether Johnny or Joey liked them better. It was really exciting.

Interesting. How did the experiences on business one-

Andy, I never knew that. Otherwise [crosstalk 00:03:11].

Yeah, I'm.-

Okay, middle school. That's all you talk about in middle school.

I'm taken aback. I would have thought it was something very forward-leaning, which I guess fortune telling is forward-learning.

High school, Scorpion software. We were into gaming back then.

Okay. From those from those origins, fortune telling and Scorpion software, how did that experience relate to the businesses you subsequently built and ultimately building Blackbird technologies?

I lived in Southern California, worked for this little company that was acquired by British Petroleum, who was then the biggest company in the world. It was really interesting working for a company like that. They bought this company because they thought it was the next new thing, hired a bunch of people from all over the world. We learned whether it was better to hire sales guys and teach them tech or hire tech guys and teach them sales, all kinds of fun things like that.

But then they just changed their mind and said, "Well, this is a blip on our balance sheet. That was fun, but let's do something else," and fired 150 people in a day, paid me and another guy to close it out for a year. It was really hard to see just the disruption. I thought, "There has got to be a better way to run companies than this." Ever since then, I went out on my own and became unemployable for anybody else. Didn't work for anybody else until 30 years later when Raytheon bought our company.

We'll come back to that in just a moment. Jack, I do want to bring in your career as well. You go from being a corporate attorney to a COO and general counsel of a successful defense technology firm in Blackbird Technologies to now a managing partner at a venture slash equity growth capital firm. What are those transferable skills that you've brought from different parts of your career, and how does that weave together to work for Razor's Edge?

Well, I like the succession. The last thing sounds more interesting. I forgot I started as a corporate attorney. Peggy saved me from a life of boredom. But I think if I look at a common principle, I think I've always been very curious and creative. I'm always trying to study and coming up with new ideas how to be more effective. I think that's helped me throughout my career. Keep in mind, I was trained by the best with Peggy.

I was a young lawyer. I never put my diploma up when I was at Blackbird because I didn't want everybody to know how young I was. I learned a lot about leadership just by building a company with Peggy and really trying to make people around you better. I think that's been our common link of where we've been successful.

We've jumped into your backgrounds and what led you here today. But before we go any further, I'd like to take our audience to learn a little bit more about you and what makes each of you tick. Normally, we ask our podcast guests to learn more about how to describe their core values and goals. But since you both are here, Peggy, what's one phrase that describes Jack as a leader in business? And then Jack, what's one phrase back about Peggy?

Jack is a true entrepreneur and loyal until death. I think if he embraces you as family, he will make sure that he takes care of you, and it's mutual. I think he forms a group of people around him that can run through fires together. It's really been a pleasure to work with him for 20 years now, Jack?

Twenty years, yeah. Damn, she set a pretty high bar. I would say Peggy is a badass CEO. Best CEO I've ever worked with. Really, I learned a lot about leadership working at Blackbird. I always thought... I went to law school, I know you guys are investment bankers. You always think the biggest gunner, the fastest mover is always the best leader. And really, the best leaders are the people that make everybody around them better. I think Peggy kind of mastered that. I think that's a lot of what like what we look for when we're investing, I guess, is like young Peggy's. Not that you're old.

But I think when you've been in that environment, you know what it looks like and I think it allows us to make a lot of contrarian bets. I think a lot of professional investors often oscillate to people that really aren't true leaders, at least in the national security sector. Yeah, badass CEO that has helped build the foundation of what we're doing today. Am I allowed to say that?

Yeah, I love that phrase, but I do want to pull that thread a little bit. What are those leadership qualities that make a badass CEO in the mold of a Peggy Styer?

I think the cliché term is servant leadership, right? But it really is about... When Peggy was CEO and I was general counsel, so much further down the org chart, if I had like two hours of people coming to my office, they'd get the stink eye. You know what I mean? I just didn't have the patience to deal with the stuff you have to deal with.

We would be in the middle of some crazy new program or proposal. Peggy managed her time well, but I think she really made everybody at Blackbird like from the top Silicon guys that were forward deployed to like these eight-hundred pound brain engineers all feel like they were very much part of the core mission of the company. I think that's really was the DNA of what made it successful.

It's funny how Jack has... He's always been a mentor and a coach and loved M&A. Somehow he managed to combine all that in like a daily, hourly...

It's good we got to run a fund.

Approach, yeah.

Well, let's talk about that. You come off the sales of Blackbird and RavenWing and you say, "We don't want to run businesses anymore. We want to invest our time, energy, and capital into growing the next generation of businesses." What was the thought process during that transition?

It was actually a little reversed there because we were operators. Blackbird was one of the best places I think we've ever worked, and some of the people that we worked with there, we'd work with any time and have worked frequently with a lot of them. But we knew we weren't going to be at Blackbird forever because of the type of business it was. And so we thought ahead and said, "What would we want to do beyond serially running companies like this?" And we thought we'd really like to mentor others and help them with the potholes of growing a company because there's a lot of similarities across whatever of kind of company you're trying to build. So we said, "Why don't we start a fund?"

Meanwhile, we already had Blackbird, so there was a lot of overlap. We just sold another company we had at the same time called RavenWing to Boeing and we showed our management team how easy it was to run a company which was supposed to be really hard. But it turned the other way around. So we said, "Why don't we as operators go out and help others?"

We had the fund and we had Blackbird. And so very clearly in the process to sell Blackbird, we said, "We're going to go ahead, we're going to transition with you for a year or so, and then we're going to go out and run this fund." The best laid plans, Jack had the contract all written up. This is very clear terms. Got to the end with Raytheon, and they said, "By the way, we really like what you're doing at the fund. You've been running it for a couple of years now, maybe three years of overlap, and we really like what you're investing in, so we'd like to buy the fund also."

Jack and I kind of looked at each other and we said, "Well, remember that part where we said up front that we're going to help you transition and then we're going to go off and run the fund?" And they said, "Yeah, we really like that. But how much do you want for the fund?"

What number did you put down?

The deal died for one weekend. Keep in mind, I was negotiating as the only non-founder. Longest weekend of my life. I was pretty sure Peggy and I were still going to be tight afterwards. I love Steve and Richard, but I wouldn't hold it against them. But yeah, it was all in parallel. I think a lot of people thought it was a unique pivot, but to us it seemed like a natural extension of what we were doing. I think we all had been working together for about 15 or 20 years. We really made great friendships over those years as partners.

But then with a lot of the folks we were working with, I just think we felt like we had a lot more to do. But building companies takes a long time. I think our sense was if we raised a fund, we'd be able to do in five years what used to take us 20 years. I think we've begun to prove that out with Razor's.

What we did at Blackbird was talk to customers, figured out what their hard problems were, looked out and about in the commercial world if they'd already existed, then we would go help them find and incorporate that. And if it didn't exist, we would create it. The fund is the exact same thing. We like to invest in technologies that the customers need, like space, making that. Instead of a two-billion-dollar satellite, two-million-dollar satellite, so you could do a lot more with what your customers need.

The ones that aren't necessarily first in line to get those services can have the information they need in a timely manner. Cyber, AI, all the kinds of technologies that are really coming into their own right now, getting those into the hands of customers that can use them. Government's our first customer, but then a broader set of customers after that.

Well, it's like you're reading my notes, because this podcast is called...

I think we maybe peeked at it before.

The podcast is called Beyond Strategy, so I do want to pull that back a little bit. What are the central tenets to Razer's Edges investment strategy and how has it evolved since it was part of Blackbird to now as a standalone entity?

I think this is probably not going to be earth-shattering. I wouldn't say we're a master strategist. I think when we do really well, it's because we really stick to the basics. I think so. It's always about backing the best people with the most impactful mission. If you get the right management team, the right founder, and you're doing super cool work for national security, business takes care of itself.

I think when we deviated from the basics, it's when we've gotten in some trouble. I think we're famous as a fund, and you guys have seen this in your time with us. I think we're one of the only groups of investors that send Rocky 4 YouTube clip to our CEOs to just reinforce that. Stick with the basics, people and customers. When that's your obsession, you do well.

How do you allocate amongst your venture and growth equity strategies? What's the thought process when you go into a fund and as you see your investments progress?

It's funny. This is our third fund, so it's a lot easier now. We've been doing it for 10 years. In the beginning, we thought very much like operators and we still do that part. But we also said, what is venture? What are we supposed to be doing when we're trying to help all these companies? And so we hung out with some Silicon Valley guys and we hung out with different type of funds and and we learned along the way. But what we learned is figure out what you do and and stick to that and do that well.

What we do well is mentor technology companies in the space that we know and the customers we love. As for our third fund, it seems we help found companies. We talk to customers and find out what their real problems are. Again, just like we did at Blackbird, go out and find a small company that has the right approach to life and taking care of their customers and camaraderie across the company, and we make an investment in that or acquire it. We get some organic growth around that, maybe a couple more tuck-ins, and they just thrive.

I think creating a culture that resonates across the company... If the cultures don't match, then you're dead in the water. Those kinds of things across a number of different types of companies. You'll laugh, because a lot of our companies... It started with Blackbird. We'll have BlankLynx and BlackHorse and BlackSky. For one, it was a joke beginning when we started doing it. But now, it's really hard to name companies. So having that sort of branding works for us, and we can remember their names.

She thought it was a joke. I thought it was being cool. We have like 10 more black names in store and then we're switching to birds after that. We got SpaceHawk. SpaceHawk is in the future. We don't know what it does or exactly what the strategy is, but there will be a SpaceHawk.

You watch, there'll be one tomorrow from somebody else.

Yeah, there goes the URL.

Be on the lookout.

Hopefully you get the royalty from this podcast for that. Well, I do want to come back to how you combine businesses in a little bit, but maybe taking a step back because you brought it up, Peggy, and would welcome both of your thoughts on this. You mentioned solving problems for your customers. When you think about the technologies and solutions in the national security community, how do you find the winners that you're going to put your capital and time and energy and effort behind?

Like I said, third fund, a lot easier. A lot of the entrepreneurs we invested in early on have come into their own. Sometimes somebody that was a CTO at a previous company and has really grown into being a CEO at another company or will match across different companies for teams and things like that. The whole network that will refer their friends once they know that we've taken care of them on one adventure. It's success breeds success.

But so the platforms are probably only 70% of what we do. We also like to take emerging technologies. And 30% of our thesis is to do basically true venture. For instance, one of our companies did a miniaturized mass spectrometer, which was the old CSI. What is this white powder that used to be... The lab coats and a big large table-sized computer, and they managed to miniaturize a [inaudible 00:16:39]. When we invested in them, it was parts on a table. Believing they had something like the Holy Grail that so many companies have been looking for for so long to invest in, I think largely came down to a team that had worked together before and really had a passion around that concept. We took them from parts on a table to an IPO. That's the other part of the thesis that we have.

Yeah, that was a good one. In terms of our where we're most focused on in terms of new ideas, I think one of the advantages that we have is most of the partners of Razor's still have TS/SCI clearances. We've been working with the same customers for, in Peggy's case, 20 years. Mine pretty close.

Twenty? You're being kind.

Pretty close to that. We've delivered a lot of great capabilities to those customers, so we just have a lot of trust and you have a lot of dialogs with the customers. And so we'll come up with ideas that we'll go and present to them based on a lot of mostly what we're hearing from them. And then we've been at this for 10 years, and so you have a lot of great founders that we took good care of. They took good care of us, and they come back to us with ideas.

One of the things I'm most proud of and I know we'll get into what we're doing now, but our two new platforms, BlackSea and BlackSignal. BlackSea was largely put together by some introductions made around the maritime thesis we had. And then it's really fun for us to... Like parents watching their kids grow up, seeing the people that we work with coming back to us and being the source of either giving us ideas or refining ideas that we've given to them.

Peggy, you've noted that Razor's Edge has an active role with its portfolio companies, helping them achieve organic and inorganic growth. How do you guys do that?

For better or for worse, we're still operators at heart. The goal in helping a company grow is not to get in their way, but to help them. Sometimes it's tough love, like yeah, that sales guy, he's a nice guy, but not necessarily hitting his numbers and he might not be the right guy for this kind of company. But on the other hand, helping them, introducing them to customers, helping them hire the right people, help them think through a thesis they have, just being a sounding board, so actively helping them grow companies, because a lot of companies go through the same sort of struggles. Again, missing the potholes in life. If you can help them... There's always more potholes.

Well, let's put that in context of your recent exit, some of my favorites, and Jack's mentioned a few of the executives from those businesses, the sale of BlackLynx to Jacobs, the sale of BlackHorse to Parsons. Can you walk our audience through how you built those businesses, the lessons you learned along the way, and then how they're being applied to the new portfolio companies that you're currently building?

I mentioned getting back to the basics and sticking to the basics. I really had those two companies in mind. We started BlackHorse in I think 2017, and the main focus there was as you move from a counterterrorism environment to great power competition, the type of cyber company you create had to be a lot more sophisticated. You had to have computer network operations, but you had to have electronic warfare, signal processing. We even had some quantum crypto stuff in there. I can't say that I completely understood it, but we thought that might be important. We had a good thesis.

In the case of BlackHorse, we bought a company run by a guy named Tim Newberry who is out of central casting for the kind of founder that we back. He was all about the mission, really high IQ. And combined him with one of the best CEOs I think in the market, Mike Kushin. When you get the idea right and the people right, it's a good example of... We did a lot of pitch meetings and things like that and tried to introduce them to customers, supported them in M&A. But that was just an outstanding team. It's fun when we get to go from being more day to day to almost like coaches and to some extent cheerleaders when they're doing so well. Part of your job on the board is just not get in the way and let them do their thing.

Same with BlackLynx. I think it was a little bitty... We called him Toymaker to... NSA actually. He was a professor of University of Maryland, came out of that and had a really cool company. He'd had it for 20 years. Five million in revenue, still had a mortgage on his house. One of the smartest guys out there. He wasn't necessarily the best businessman, but wicked smart with customers and technology and things like that. Once we started...

Wicked smart, like you're from Boston.

Wicked smart.

He was. Still is. But helping him grow that company, went through a couple of iterations of should we go commercial... Those were early days for us. I think that was our first investment we ever made in the fund. Turned out to be very successful when we ended up steering into high performance computing as a software solution to basically processing at the edge. Went on and added a really strong team. Doug Wolfe, who was a former CIO of the CIA and first job out of government. Again, another wicked smart guy but hadn't ever run a business before. So Jack particularly was hands-on with them.

And then one of our other partners was really good at introducing the capabilities to customers that really could use it. I think spent a lot of time and it was really enjoyable.

Great outcomes across the board. In both of those situations, though, you use strategic M&A to bolster capabilities and find new access points in addition to finding great executives in Doug with BlackLynx and Mike with BlackHorse. Can you tell our audience how you identified the capabilities, how you convinced like-minded business owners to come together for that common goal?

Yeah, I'd say whenever we do these platforms, I think if you go back to our original investment memo and look at ultimately what we built, we were about 50% right. They have been maybe for my investors 70% right. Basically, you have the core concept, but then you let demand signals and what's going on in the market mold what you're doing.

Like in the case of Blackhorse and tuck-in acquisitions, if I were a gambling man at the start of that, I thought it would have been more CNO heavy. It turned out to be more electronic warfare heavy because we came across a group of founders at Amplus, a couple expert systems folks and ex-Blackbird guys, so friendly M&A relationship. They just had exactly the right culture for what we were doing. I'd say we we tweaked the strategy a little bit and they were a big force multiplier.

I think one of the things Peggy and I are probably most proud of, whether it's those two deals or just in general, is virtually every M&A deal we do is proprietary. I'm sorry, we love bankers on the sell side. Bankers do wonderful things for hardworking companies, so we're grateful for that. But when they're small five, ten-million-dollar type companies, to buy them, you have to get to know folks. You have to really understand the risks. You have to have a theory of how you can grow them. I think we've had a pretty good track record of meeting founders who refer other founders to us, and that's usually sort of the source of our M&A and that shapes sort of the capabilities that we go after.

Yeah, we're big believers—I know you guys are too—is getting good advisors along the way. Whomever you're hanging out with, you don't save any money by getting a bad lawyer. I know you guys have introduced us to a lot of young companies that they just needed time to grow and help along the way. And so then it's good for everybody when they get a little more...

What makes an ideal Razor's Edge portfolio company?

We like technology, all kinds of technologies. We really have a broad spectrum. But other venture firms will invest in service companies. We like solution companies. Like I said, we're in space, we're in AI, we have a couple data analytics. But anything that's really interesting and meaty. We have a team that does a lot of our own due diligence and jumps in there and then we can help guide them to the right customers to help them along too. That's our sweet spot.

Jack, you referenced this earlier, the new plans for the new fund. Do you want to extrapolate or elaborate on what's coming forth here in Razor's three?

Sorry, I went into the commercial a little early, but more of the same. I think that as Peggy was saying, we ran fund one concurrently with Blackbird. By the time we started fund two in 2017, I think we really had I guess our strategy where about 25% of our capital is allocated to early stage venture deals where we think a company based on our Perch and national security has some ability to go public. Good examples of that are like 908 Devices, Peggy mentioned Hawkeye 360.

And then about 70, 75% of our capital is more towards the platform companies, and that's BlackHorse, BlackLynx and prior funds. And now we've just launched BlackSignal, BlackSea, and then we've made two cyber investments that are undisclosed right now but are going to be sort of cyber platform companies. I think-

You don't want to break that news right here on Beyond Strategy?

Probably not, I'd want to talk to the founders first. But in all the cases, like Peggy said, we have a real focus on technology differentiation. I think that in the early years with the fund, I don't think we've ever been in a better position as far as just having very differentiated capabilities aligned with where we think the missions are going. And then what makes our jobs really fun is we just have unbelievable founders in these companies. High IQ, work every bit as hard after closing as before. Every investor tries to measure that, but I think we've been very fortunate in the group that we're working with. We're just going to keep doing what we've done and have a lot of fun doing it.

Yeah. If you talk to a company that's founder-led who's been around for 10 years and they've 20 million in revenue, they're doing great, right? They're paying all their bills and they've got a kingdom going. But if they have aspirations to grow bigger, sometimes... It's the largest company every day that they've ever run before, and sometimes you need help with somebody who's done it before, and you just do things faster. I think that's the thing that you buy. You learn more and you do things faster.

We'll talk to these guys, and it helps now that we've done this enough. We've done 25 different companies. Unlike Silicon Valley, where they just try to swing for the fences and lose 90% of the companies on purpose, go big or go home, we have a track record of more than 23 of those 25 have been successes. That's that's our approach to life, is helping companies grow, find their own, and do it more quickly. So you're basically buying time and experience.

You mentioned 23 of the 25 were successful or will be successful. What are the lessons learned from the two that weren't successful?

I'm going to take you through the 23. I'm just kidding. Given that comment, I'll take the the unsuccessful at least. As you look back, I used to always hate when people talked about how they learned from their mistakes, because I was very competitive and think like, "Just don't make any mistakes." Investing is a tough business. I think usually when you make a mistake and you misfire, you left the basics.

It's kind of a life teacher, too, right? Because usually when you make bad investments, it's a character flaw. You let your ego get in the way. You believe that there is some path to easy money and you just got lucky and you're just going to plop an allocation and then it's going to turn into a billion. The reality is I think there is no easy money or if there is, we haven't found it. I haven't found it. Well, Peggy actually probably just found it.

That's not our goal either, right? We want to-

Yeah. I think that when we focus on what our core competency is and building technology companies serving the most relevant parts of the national security mission, I think when we focus on that competency, we tend to do really well. When you start to get a little ahead of yourself and you let your ego drive decisions instead of business judgments, it's usually when you don't do so well.

When I say failure, the company I'm thinking of sold for more than $50 million. It's not a failure, but it didn't do what we thought it should do. But if you tell an entrepreneur who's giving up his baby into the hands of somebody else... Maybe not totally into somebody else's hands, but somebody else gets to help make the decisions, it's scary. And so having sort of other people that they can talk to, that have been through that before in similar situations really makes a big difference. Before we just had to drink a lot with them, and now we just drink a lot and let them talk to other people.

We end all of our interviews with the same question, and it's probably the most important question that we ask. What is the most important thing that we should know about Peggy Styer and Jack Kerringan?

Well, I think there's a lot of ways to live your life and make money, and you just have to pick something that you're proud of. You have to get your head up out of the day to day and every once in a while, just think about, "Am I doing something I care about?" If you're going to do it for so much of your life, pick something you care about, even if you don't think it's going to make you that much money. Live life.

Yeah. I agree. I think that if when you're going to work, you feel like you're changing the world, you feel like you're serving your country, you're not going to work. It's amazing, I always reflect on the good fortune that we've had. It's not like... Well, Spoto's a genius, but the rest of us aren't geniuses, right?

Don't tell him, he's going to hear this. He's one of our partners.

It's a function of if you're all really driven by a common purpose and you believe in what you do and you have a good team, it's amazing the types of things you can accomplish.

So many great life lessons, good business lessons in there as well. A focus on the basics or the fundamentals, of mission focus for national security priorities and using technology to solve our most critical problems. I want to thank you both for joining us today and imparting the Razor's Edge story as well as helping educate our audience on a potential path forward, we'll call it here, in the national security government contracting investing community.

Our pleasure.

Thank you.

Thanks.

Well, Jenn, that was a great conversation with Peggy Styer and Jack Kerrigan of Razor's Edge. Certainly, they're doing some very interesting investing focused on solving problems for the national security community.

Yeah, you can really tell that they care about the portfolio companies that they work with and putting the right team together.

Well, we want to thank Jack and Peggy once again for joining us. And thank you, the listener, for tuning in for this edition of Beyond Strategy, an ACG National Capital Region Podcast. A reminder, subscribe to this podcast wherever you get your podcasts from. For Jenn Wappaus, I'm Andy McEnroe, thanking you again for tuning in.