The United States military has a long history working with startups, but it hasn’t always been easy. Although the Pentagon’s spending proved pivotal for establishing Silicon Valley as a technological hub and allowed small businesses to gain a foothold, the barriers to entry have increased in recent decades.
The U.S. Navy is now looking to cut the red tape that often discouraged involvement from enterprise, and is once again seeking to court startups.
“We’re more open for business and partnerships than we’ve ever been before,” Justin Fanelli, the U.S. Navy’s chief technology officer, told TechCrunch in a recent episode of StrictlyVC Download. “We’re humble and listening more than before, and we recognize that if an organization shows us how we can do business differently, we want that to be a partnership.”
Finding a Course Out of the Valley of Death
A key part of this new effort is to help small businesses navigate the “Valley of Death,” the gap between initial government funding and commercialization.
The valley has been a significant challenge for defense contractors, particularly small businesses, as it requires securing funding, proving operational worth, and then navigating the complex acquisition process to move from prototype to production.
“All startups face significant challenges and business failure rates,” noted Roger Entner of Recon Analytics. “I am not sure the ones working with the DoD face a higher rate than normal.”
However, many startups may be resistant, at least due to the perception of the Valley of Death.
Fanelli hopes to lead the change in the service, making it easier for companies to avoid the valley entirely. In addition, the sea service is opening doors to companies that may have never considered applying for contracts due to fear that the process was too complicated. According to the report from TechCrunch, one example was a competition run through the Defense Innovation Unit (DIU).
The Navy expected a handful of bidders to apply for what was described as a “niche cybersecurity challenge.” Instead, it received nearly 100 responses, including those from companies that were already seeking to address many of the same problems in the private sector.
“When dealing with any government, there is a ton of red tape, documentation, and other requirements that are beyond what a small company can deal with, and a tendency to avoid decisions because they could blow back on the decider,” said technology industry analyst Rob Enderle of the Enderle Group.
“It is also a problem with corporations which often have rules that can make it impossible to do business with them but the DoD is famous for being very difficult to work with even if you are a large defense contractor, small companies have little chance and all of this pretty much assures the DoD never gets the best or even technology that is current,” Enderle told ClearanceJobs.
This effort also highlights how low-cost, off-the-shelf solutions produced by startups could increasingly fill a role with the U.S. military.
“Ukraine is a good example that low cost ordinance may be more performant than the wicked expensive stuff, but DoD bureaucracy pretty much assures that solutions like what Ukraine is using effectively in battle wouldn’t even be considered by the DoD, not because they don’t work, but because they couldn’t make it through the onerous process even to be considered,” Enderle added.
NavalX Marks the Spot for Innovation
In 2019, the Department of the Navy launched NavalX, an initiative focused on accelerating innovation and technological advancement by serving as a bridge between the U.S. Navy and external innovators, including startups, small businesses, and academia, to foster a culture of agility and problem-solving.
“We make it easier for startups, scaleups, and small businesses who have never worked with the Department of the Navy to deliver disruptive technology — all within 2-5 years,” NavalX explained on its website, noting that there are multiple steps in how startups can work with the service.
It begins with the business reaching out to the U.S. Navy or applying to open requests to see if the technology aligns with the current fleet and force needs. If the Navy determines the technology is a good fit, the startup will be brought into the product development process and guided by subject matter experts and end users. In the third step, the startup can collaborate with naval experts to get the product to the prototype stage, where it can be thoroughly tested. After that, it could be fielded and scaled up across the fleet and force.
The goal of NavalX was to encourage a more agile and collaborative approach to problem-solving, while it can providing new technologies that address critical naval needs.
NavalX has several “Tech Bridges,” physical locations that serve as hubs for collaboration and innovation, where startups and other innovators can connect with naval experts and resources.
