In an era of heightened geopolitical tensions and rapid technological advancements, the United States continues to prioritize defense innovation to maintain its global leadership and national security. With a proposed $850 billion defense budget for 2025, including a significant allocation for research and development, the Department of Defense is leveraging cutting-edge technologies and fostering public-private partnerships to stay ahead. By examining the landscape of defense tech investment and the DOD’s efforts to bridge the gap between innovation and production, we provide a look at how the U.S. is using the power of innovators to address the latest national security challenges.
In 2023, the DOD released the National Defense Science and Technology Strategy (NDSTS), which articulated the department’s priorities and the importance of “leveraging critical emerging technologies … to bolster our competitive advantages … that will help ensure our national security over the long term.” This builds on the DOD’s technology vision established in 2022 by Undersecretary of Defense for Research and Engineering Heidi Shyu, which outlines 14 critical technology areas, including quantum science, AI and autonomy, and space technology as part of the greater national-defense strategy.
From large defense incumbents to small startups, the DOD works with a variety of partners to fulfill its needs. However, for startups with tight resources and less familiarity with how the DOD operates, procuring a government contract can be a very challenging process to navigate. This is a problem, as startups are often the ones developing the latest technological innovations. Many startups encounter the “Valley of Death,” the difficult period between receiving initial government funding and achieving commercialization. To solve this problem, the DOD has been redefining how it collaborates with private companies. This, combined with the ample amounts of private capital, means the success rate of defense tech startups could greatly improve.
To support startups in overcoming these funding challenges, the DOD leverages the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs through the Defense Advanced Research Projects Agency (DARPA). These DARPA programs provide funding to founders who apply to conduct research and develop prototypes based on defense agencies’ needs. The demands on a startup’s time and capital can be significant as they move from concept (Phase I) and prototype (Phase II) to commercialization (Phase III). Over the last decade, only 16% of DOD SBIR-funded companies received Phase III contracts.
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