Technologies of national interest can come in many forms, including not just satellites and weapons, but also data analytics and cybersecurity. Many dual-use application startups are increasingly looking to the government as an attractive customer due to the wide range of use cases and available federal funding.
There are also several grant programs (such as those provided by the Inflation Control Act) that provide non-dilutive funding to startups, said Rebecca Gewald, managing partner at Dcode Capital, who formerly worked at the CIA. says it is advising companies to pursue contracts instead.
“The real key is how do we find replicable ways to keep government revenue at the core of our business,” Gewald said on stage at TechCrunch Disrupt 2024 this week.
Gewald will be joined by Topher Haddad, founder and CEO of satellite imaging startup Albedo, and Kai Kloepfer, founder and CEO of biometric weapons startup Biofire. He and others talked about the boom in national interest startups and how startups can get a foot in the government's doors.
The Pentagon is 'rich with money'
The goal for startups working with the government should be to earn repeatable revenue, not just grants or other non-dilutive funding. For startups with use cases that serve the national interest, is there one likely target? The Department of Defense (DOD) is “well-funded,” according to Gewald.
The Department of Defense's 2025 budget request is nearly $850 billion, with $143.2 billion set aside for research, development, test, and evaluation, and an additional $167.5 billion for acquisition. The agency is actively exploring cooperation with startups developing AI, autonomous systems, quantum computing, and space technology.
There are many entry points for startups, including the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs through DARPA. And while startups can get in through these programs, Gewald recommends startups have a partner who can guide them from the concept and prototyping stage through to commercial contracts.
“From the very beginning, there is a strategy to turn R&D dollars into more programmatic returns, and that's where our advisory firm helps companies, but DC has a strategy to help companies do that. There are a lot of companies,” she said.
And what Gewald says is also true. According to a 2023 Defense Innovation Board report, only 16% of companies that received funding from the Department of Defense's SBIR over the past 10 years resulted in commercialization contracts.
But that's not all defense
“I think people often get into the idea that if you want to sell to the government, you have to be related to defense technology, you have to be involved in drones and missiles and things like that. And that's fundamentally not true. ” Gewald said.
She said Dcode focuses on investing in startups that process and analyze data, as well as startups that provide cybersecurity solutions.
“By law, governments cannot delete data, so the challenge for governments to control data and derive insights from it will continue to grow,” Gewald said. “And from a cybersecurity perspective, they get hacked quite often, so we're trying to give them access to the best tools.”
turn a blind eye to politics
Topher Haddad, Albedo, TechCrunch Disrupt 2024 Image credit: TechCrunch
Should startups have contingency plans for the various presidential candidates in the lead-up to the U.S. election? Gewald and Albedo's Haddad say that's not necessarily necessary.
“It will bring together people from across the administration who are interested in data, tools, cybersecurity and modern AI,” Gewald said. “If the flow of dollars changes, the size of government may change. But I fundamentally believe that whether the government grows or gets smaller, we need to upgrade the system from 2000. ”
Haddad noted that Albedo is in “wait-and-see” mode as it hopes for some results. But having a Plan A and a Plan B for different candidates is not enough.
“Space in general is a big priority and I don't think that will change,” Haddad said. “It will probably change the way we do business a little bit in terms of how we focus on different agencies and sectors.”
Gewald said the best way to avoid being affected by a change of government is to seek connections with non-political appointments.
“When you're running a federal market access campaign, you usually don't want to talk to politicians,” she says. “No matter who is in the administration, you want to talk to the people who go to work every day, because those are the people who are going to buy your product.”
Made in America
Biofire CEO Kai Kloepfer at TechCrunch Disrupt 2024. Image credit: TechCrunch
Gewald said it would be preferable for the government to contract with a U.S.-based startup that produces products in the U.S., but said software is more desirable than hardware.
“If you have certain people on your team from certain countries doing certain jobs, it becomes very difficult to sell to the government, at least the Department of Defense and some intelligence community agencies.” she stated.
Albedo and Biofire are both based in the United States, with manufacturing facilities in Colorado. Kloepfer noted that construction in the United States is important to Biofire because of the nature of the business.
“Our company is very heavily regulated by the Department of Commerce regarding export controls.… [T]”The United States is excited about keeping weapons technology in the United States,” he said, noting that Biofire would likely need special approval to contract with a foreign manufacturer.
He added that investors also want domestic manufacturing because it helps with quality control and scaling.
“At the early stage we're in, it's about how fast we can iterate. How quickly can we improve?” Kloepfer said. “And doing that in your current headquarters facility is much easier than repeating it with some type of overseas vendor, if possible.”
Finding product-market fit within government
TechCrunch's Rebecca Bellan (left) and DCode Capital's Rebecca Gevalt (right) on stage at TechCrunch Disrupt 2024. Discuss the boom in national interest startups. Image credit: TechCrunch
Gewald said her company often hires salespeople and lobbyists out of the blue when early-stage companies try to secure federal contracts. Instead, she advises startups to first use data available from sites like Bloomberg Government (BGov), GovTribe, and GovWin IQ to understand which government agencies need their technology. I am.
“When the government says they want to go buy something, unless it's classified, they have to make it public,” she says. “So…you can scrutinize that data. And if you know that whoever your competitors are, they're pitching to the government, you know what kind of contracts they've won. What firms have they acquired? Are they working with partners like Deloitte or Booz Allen?
This also applies to AI startups looking to work with governments.
The key mindset is to be both strategic and tactical, Gewald said, adding that startups should consider the government's comprehensive strategy document on AI and then tactically identify offices that are actively using AI technology. It points out that it is necessary to search for
“There are a lot of people who have been working in government for a very long time, so they know conceptually what AI is, but a lot of the data architecture that they have doesn't actually support the use of AI products. It doesn't promote whatever dataset they're working on anyway,” Gewald said. “So…strategically, we see that the Biden administration wants to leverage AI in this way now. But tactically, how are agencies actually doing it? …How do they buy? Are they buying through a partner?”