Reboot the Defense Innovation Ecosystem

The venture capital model of investment is predicated on a high failure rate, justified by massive returns on a small number of successes. Yet prestigious, venture-capital-backed defense tech startups are failing more than even this model can tolerate. The overwhelming majority of defense tech startups are terminally stuck in the Valley of Death, and venture capital bets on defense tech startups aren’t paying off. Soon, the best venture capital firms will stop investing in the federal market, and the newly rebuilt bridges between Silicon Valley and DC will collapse.

There has been only one major initial public offering (IPO) in the defense market’s recent past — Palantir in 2020 — and that’s a hugely negative signal to venture capital firms about the value of the market. As the head of federal deployments at Scale, I’ve witnessed this dynamic from a front-row seat. Scale is an artificial intelligence startup with both market-leading commercial technologies and production-level federal government contracts. Unfortunately for the startup industry and the U.S. Department of Defense, that makes Scale the exception, not the rule.

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