The pendulum may be swinging back in the long-history of startup-defense collaboration. While the 20th century witnessed the influence of military technologies on civilian applications, the dominance of disruptive tech startups in the 21st century has outpaced government defense departments in crucial areas in research, development, and deployment.
However, as recent initiatives for startup-government collaborations gain traction and venture interest grows, we may be at a new inflection point for what we are now calling Dual-Use innovation.
How We Got Here (Briefly): 20th Century Dual-Use
Scholar Giulio Perani, in a research report for NATO, defined Dual Use technology as “fields of research and development that have potential application to both defense and commercial production. Some technologies are important for both DoD (Dept. of Defense) and commercial customers. Imaging-sensor technology, for example, has broad application in surveillance systems, video cameras, and robot vision systems that find both military and commercial uses. In fact, at the generic level, most of today’s important technologies can be considered dual use.”
What is remarkable about the present moment for Dual-Use development is how the catalyst for invention and innovation has flipped over the past 20 years.
During the 1950s, western countries, particularly the United States, experienced significant, positive impact of military technologies developed for WWII on everyday life through their civilian applications. This development prompted both public opinion and policymakers to recognize the close relationship between civilian and military technologies. This relationship was often viewed as a “spin-off effect,” characterized by the transfer of knowledge from advanced military research to comparatively less advanced commercial sectors.
This dynamic was largely maintained through the cold war. Defense Advanced Research Projects Agency (DARPA) was established in 1958 in response to the Soviet Union’s launch of the Sputnik satellite. While DARPA’s initial focus was on space-related technologies, it quickly expanded to include a wide range of areas such as computing, communications, and biotechnology. These initiatives created breakthrough technologies that were relayed into the commercial market, leading to the development of such things like the computer mouse and Global Positioning System (GPS).
One of DARPA’s most significant contributions to Dual-Use was the development of ARPANET for military digital information sharing, a precursor to the Internet.
Visualization of internet routing paths. Image source.
This is not to say there were no Dual-Use private-government collaborations in the 20th century; there were big ones. Corporations like Raytheon, Boeing, and the then Lockheed Corporation (now Lockheed Martin), were major developers in high and hard tech, particularly in aerial innovation, and they worked very closely with U.S. defense departments.
Crucially, however, much like other huge commercial corporations at the end of the 20th century, the scale of these companies, and their firm market stability as providers to U.S. departments left them fallible to slow invention and adoption of powerful and novel technologies.
Now in 2023, the disruptive tech startups, like Amazon, Alphabet, and Meta that grew exponentially in the 21st century, have significantly outpaced government defense departments in R&D, innovation, and deployment.
The “spin off effect” has not been nearly as smooth in the opposite direction.
The Impact of Silicon Valley, Digitalization, and VC Funding on Dual-Use
The boom of Silicon Valley in the 1990s through the 2000s, marked a period of decline in private-public technology collaboration. The result has impacted Dual-Use innovation in two significant ways:
- the lagging behind of the U.S.’s perceived leadership in critical technologies (e.g. biotech, quantum, advanced materials, hypersonics, microelectronics)
- the ability of startup-led innovation to be “defense-ready” for collaboration.
As the venture capital market took off around 2003, the profitability of software over hardware had a significant impact on the focus of both founders and funders. Venture capital investment over the past two decades shifted from 45% toward hardware solutions and 55% to software in 2006 to 8% toward hardware and 92% to software in 2017. As Jason Rathje, newly appointed Head of the Office of Strategic Capital summarizes “Software’s relatively lower barriers to entry, lower perceived risk, and higher profit margins have drawn the focus of private capital away from longer-term, lower-margin critical technologies.”
At the same time, a growing distance began between Silicon Valley and the federal government as employees vocally expressed concerns around working on tech that could be used for military purposes, i.e. a concern over developing weapons and questioned the growth and funding of the so-called “military industrial complex” (among other areas of political concern). One of the more visible examples was Google employees protesting the company’s work with the Pentagon.
Moreover, the migration of funding in the 21st century has greatly disrupted research and development. According to the Defense Innovation Unit, a DoD department created in 2015 to address this gulf in innovation, major tech companies Amazon, Alphabet, Microsoft, Apple, Meta spent $173.3B in R&D, versus $5.7B spent Lockheed Martin, Raytheon, Boeing, Northrop Gumman, General Dynamics during the same 2021 period.
Startup and Government Dual-Use Collaboration In Our Present Moment
The creation of the Defense Innovation Unit is one of several examples over the past five years to re-establish connectivity between the U.S’s globally renowned startup sector, its national security priorities, and the defense community.
One key step has been investment in transforming its approach to technology acquisition and “non-traditional” industry collaboration to create more harmonious ecosystems. In particular, the National Security Innovation Network, the United States Air Force, the International Space Station National Lab, and NASA have been actively advocating for and investing in government-startup collaboration.
“Startups and small businesses are moving faster than the government is typically used to,” said Capt. Steve Lauver, AFWERX director of technology accelerators. “Before they would consider working with us, we needed to simplify and accelerate our process to meet them halfway.”
To improve and scale the kinds of collaborations Lauver is talking about, new programs have been deployed and/ or leveraged by different government departments. Additionally, recent acquisition reforms in the Department of Defense have made significant progress in the speed with which they can contract and collaborate with startups. Adopting VC and private industry approaches like agile development, accelerator engagements, pitch days, creating early-stage programs and outreach efforts to better educate entrepreneurs about the opportunities available to them with the federal government.
In March 2023, NATO announced the Defence Innovation Accelerator for the North Atlantic (DIANA) Programme. The innovation initiative “has now grown to more than 100 sites, spread across almost all Allied countries…and two additional start-up accelerator sites in North America.”
Additionally, in the past two years, the U.S federal government has allocated significant funding towards in basic research, commercialization, and ultimately manufacturing in critical technology areas.
For example, the Advanced Research Projects Agency for Health (ARPA-H), was proposed by the National Institutes of Health (NIH) in 2021. ARPA-H is modeled after the Defense Advanced Research Projects Agency (DARPA), which has a long history of supporting breakthrough technologies for the military. ARPA-H is intended to support research and development in the healthcare industry, with a particular focus on areas such as cancer, Alzheimer’s disease, and pandemic preparedness.
In March 2023, the Biden Administration announced its National Standards Strategy for Critical and Emerging Technology (Strategy), which “will strengthen both the United States’ foundation to safeguard American consumers’ technology and U.S. leadership and competitiveness in international standards development.”
The Challenges for Startups and Government Collaborators
While there are opportunities for startups to support defense aims, there are also significant obstacles they face in working with the Department of Defense (DOD) or other like entities within government. Here are some of the main challenges:
Regulatory compliance: The defense industry is heavily regulated, and startups must navigate a complex web of regulations to do business with the DOD. The regulations can be time-consuming and expensive to comply with, at times “over-classifying” items, making it difficult for startups to meet requirements.
Difficult access to funding: The US SBIR Program is the largest VC in the world at $3.2B annually, but each of the eleven agencies have their own solicitations and run programs their own way. Funding for startups is available but it can be difficult and time consuming to learn the different stipulations. In addition to the longer sales cycles, it can be challenging endeavor for startups with small teams and limited funds.
Long sales cycles: Sales cycles in the defense industry are often longer than those in other industries, as contracts must be awarded through a competitive bidding process. This can be frustrating for startups, who may not have the resources to wait for extended periods.
Lack of experience: Startups may lack experience working with the DOD, which can make it challenging to understand the unique needs of the defense industry. The DOD also tends to prefer working with established contractors with proven track records, which can make it difficult for startups to break into the market.
Intellectual property issues: The DOD often requires extensive intellectual property rights for products developed for the defense industry. Startups may be hesitant to give up their intellectual property, making it difficult to do business with the DOD.
MassChallenge Driving Dual-Use Innovation
Since 2018, MassChallenge has built a leading Safety and Security practice, enabled by critical partnerships with organizations such as the Center for the Advancement of Science in Space (CASIS), U.S. Department of Health and Human Services, the U.S. Air Force, the National Security Innovation Network (NSIN) and The MITRE Corporation as well as private firms such as BAE Systems, Raytheon Technologies, and Boeing that bridge the private-state innovation ecosystem.
From: MassChallenge Safety and Security Round Table talks
The Safety and Security practice today includes a portfolio of programs that educate, connect, and accelerate startups with potential for Dual-Use applications in order to grow the pipeline of high-potential startups, increase their success in working with government, and ultimately enable impact at scale.
Early-stage founders and startups benefit from the non-dilutive financial support and technology/platform validation that working with the government can provide. The continued support of those relationships drive collaboration for both industry and government.
For example, the MassChallenge Safety and Security Track enables founders to discover and validate their dual use application, network with key stakeholders and government customers, and on-ramp into the valuable SBIR process, which provides non-dilutive funding. The goal of the program is to help educate and support founders with the opportunities and resources that are available, while providing them the tools and best practices to succeed in making the government a customer, but also larger research and development corporations customers as well.
Another example is the partnership with Hanscom Air Force Base to deliver the Banshee Innovation Training Program and the Air Force Labs Program, together designed to train innovation and acquisition-focused Air Force personnel to scout novel technologies from small business and increase transition to phase two SBIR’s for startups.
“National security is economic security,” said Cait Brumme, CEO of MassChallenge. “It is food security. It is resiliency. Harnessing the innovation, velocity, and ambition of leading entrepreneurs to contribute to a safe and secure world has been and will continue to be absolutely critical. We will continue to work at the intersection of large and small players, at the intersection of dilutive and noon-dilutive capital sources, and with common and uncommon actors to support high-impact, high-potential innovation get to scale.”
Simple Sense (Graduate of AF Labs)
Simple Sense is a dual-use startup — an emergency response software that improves response times by 6+ minutes, reducing loss of life, serious injury, and downtime. SimpleSense is a 2019 MassChallenge Finalist. 40% of their market potential is in the commercial enterprise market, while around 5% is defense.
“SimpleSense had early success with our service in a small market, and we needed help growing in a bigger market with more customers, and this included an interest in government agencies. We won two Phase I SBIRs and attended several AF conferences during MassChallenge. At the conferences, SimpleSense met government stakeholders that validated the public safety interoperability opportunity, which was a pivotal step. MassChallenge also introduced us to government stakeholders that encouraged us to expand our market and pursue government opportunities.” – Alex Brickner, the CEO of SimpleSense
Pison (MC 2019, AF Labs 2020)
Pison develops wearable gesture control solutions for ATAK, robots, and night vision goggles.
Pison joined the MassChallenge Air Force Labs program to be exposed to the Air Force and larger DoD program offices. The program provided Pison with connections to multiple stakeholders in the commercial and government innovation ecosystems. MassChallenge specifically provided demo opportunities and events to meet the right people at Air Force and Army. Pison is now integrating to six programs of record with Federally funded departments.
Pison has raised $12M in private VC funding and is raising a Series B in 2023. It is a STRATFI SBIR awardee and is integrating to the Special Warfare and also Security Forces programs of record.
The ties between commercial startups and U.S. national security have a rich history that continue to evolve as technological advancements accelerate. Given government interest and investment, the re-emergence of big country tensions, and some early case studies of dual-use startups – there is momentum and interest in re-connecting U.S national security interests to the U.S’s globally renowned innovation economy. This will require changes to how government approach R&D and acquisition, increased willingness by innovators and funders to engage in dual-use pathways, and investment by organizations like MassChallenge in addressing the barriers.
Safety and Security at MassChallenge is a multi-year investment in enhancing the dual-use innovation ecosystems and creating bridges between the innovation and security sectors. As we look to the future, it is imperative to continue developing these symbiotic relationships and creating opportunities for innovation to flourish