Silicon Valley tech startups have recently grown more interested in federal contracts, but despite significant investments from venture capitalists, many of these companies have struggled to break into the defense contracting ecosystem, the Wall Street Journal reported on Thursday.
In fiscal year 2023, startups represented only 1 percent of the $411 billion in contracts issued by the U.S. Department of Defense. This percentage is a modest increase from the year before, during which startups received just half a percent of the department’s total contract spending, according to Govini data.
To confront the barriers making it difficult for startups to do business with the DOD, interested companies have engaged in lobbying efforts and are working to forge relationships with defense officials.
While progress has been slow, the DOD has taken multiple steps designed to open up contract opportunities to nontraditional partners.
Replicator, a drone acquisition project, offers a potential entry point for startups seeking access to the defense market. The DOD has also increased its focus on the Defense Innovation Unit, which is dedicated to accelerating the department’s adoption of industry technologies.
Thomas Browning, who is performing the duties of the assistant secretary of defense for mission capabilities, acknowledged the challenges of penetrating the existing ecosystem and highlighted the department’s efforts to open it up.
DIU Director Doug Beck expressed a desire for these goals to advance more quickly but noted that the DOD is now “absolutely on the right track.”
Some startups, however, have successfully overcome the challenges of booking federal contracts. Drone startup Skydio secured a $100 million Army award and Epirus, a developer of technology intended to take down drone swarms, received a $66 million Army contract last year.