The Department of Defense has begun to look toward Silicon Valley startups in its efforts to adopt advanced technologies to keep up with China’s widening military capabilities, the Wall Street Journal reported on Sunday.
In the current defense landscape, the DOD relies heavily on its traditional partners, while China utilizes outside public-private guidance funds. DOD officials said China’s strategy has enabled the nation to surpass the U.S. in a range of emerging technology areas.
Steve Blank, co-founder of Stanford University’s the Gordian Knot Center for National Security, noted that “China is organized like Silicon Valley,” while the DOD can be likened to a Detroit auto maker, which is “not a fair fight.”
To broaden the inclusion of startups in the defense market, the department requested $115 million to support the establishment of the Office of Strategic Capital, a new arm to drive investors to small organizations creating technology that would benefit the military.
Investors have recognized that due to shifts in the startup market, defense is a promising area for investment, according to Trae Stephens, a partner at the venture-capital Founders Fund.
“You really can’t deploy capital into crypto anymore, you really can’t deploy capital into e-commerce anymore. Where am I going to deploy capital? Well, there is a recession-proof category, it’s defense,” he said.
Already, the amount of private capital being invested into the defense and aerospace industry has increased from $1 billion in 2017 to $6 billion, as indicated by figures from PitchBook Data Inc.
Though the DOD has looked into startups for years, only a small number have been able to break into the market. Stephens, who formerly served as an executive at Palantir Technologies, said that the company’s 2016 lawsuit to compete on a contract was a milestone for startups looking to enter the defense market.
He noted that other nontraditional contractors, such as SpaceX, also had to sue for contract positions. But more recently, he said, Anduril was able to break through without a lawsuit.
Stephens expressed his concern for startups, which he said “likely won’t survive” if the DOD continues its current approach to contracting.
According to Blank, increasing the scale at which startups can contribute to defense calls for a transformation of DOD acquisition methods, which he said prioritize a small number of large contractors.
Last year, William LaPlante, under secretary of defense for acquisition and sustainment and a 2023 Wash100 Award winner, questioned the relevance of “aspirational, often-elusive technology capabilities” that have not reached complete development to the artillery-based conflict in Ukraine, which requires the swift delivery of military technology.
Despite his doubts, LaPlante said in a statement to the Wall Street Journal that satellite internet providers, including SpaceX, have aided in the conflict.