Army Tries to 'Find, Fix, Finish' Startups.

• Author: Magnuson, Stew

AUSTIN, Texas--For the Army, the gleaming glass and steel skyscraper a few blocks from the Texas state capitol has to be considered a "target-rich environment."

Several floors of the building have been overrun with exactly what the service has spent the last few years hunting down--entrepreneurs and startups possessing that most elusive quarry: innovation.

This anthill of young go-getters might be a reason why Army Futures Command chose Austin as its headquarters. The city, best known for being the "music capital of the world" also wants to challenge Silicon Valley as the innovation capital of the world.

One place that is happening is within the skyscraper where The Capital Factory--a sort of one-stop gathering place for tech startups--has taken over several floors since it was founded 11 years ago.

"We're the only ones that have really tried to take an entire startup ecosystem and put it underneath one umbrella of a brand name," Gordon Daugherty, president of the company, explained to a roomful of National Defense Industrial Association members touring the facility recently.

Workspaces are popping up all over. Tech accelerators are a "dime a dozen," he said. Venture capital funds were once primarily found in California. The Capital Factory sought to put the three together under one roof.

More than 2,500 entrepreneurs called the building home in 2019. Its accelerator and venture fund portfolios have about 500 startups. The organization has hundreds of mentors to "wrap their arms around" the typical 21- or 22-year-old entrepreneurs just out of college who need both a guiding hand and some funds to get their ideas off the ground.

The Capital Factory only asks for 1 percent equity, Daugherty said. "And they live with us as long as they want, all the way until they crash and burn or until they exit--they sell the company or do an IPO."

But why in Texas? Why in Austin, a spot once primarily known as a college/government town and for its vibrant music scene. The answer gives some insight into why the Army has taken up some floor space in The Capital Factory. The Defense Innovation Unit and the Air Force's AFWERX also rent offices in the same building.

Texas by itself would be the 10th largest economy in the world if it were a separate nation, Daugherty explained. Located in a hub with Austin, are San Antonio, Dallas-Fort Worth and Houston. The latter two metropolitan areas are home to a host of billionaires and all their capital, including dozens...