If venture capital and the Pentagon can come together, the results could be game changing. But – how do they get there?

WASHINGTON ― In recent years, Silicon Valley technology companies and the like have sounded off about the challenges involved in working with the Pentagon ― from archaic approaches to software development to the snail’s pace of procurement.

But even if sweeping reform is not in the cards anytime soon, what can the Department of Defense do in the immediate future?

For the second year in a row, Defense News convened a roundtable with representatives from the DoD and the tech community to discuss the state of the cultural divide between them. Here are four key suggestions for the Pentagon from representatives of venture capital firms and small startups.

Click here for all the stories and videos from Culture Clash 2.0: An Economic Crossroads.

1. Scout venture-backed firms. The Pentagon should view venture capital-backed firms as pre-vetted, and there ought to be more VC-backed defense companies out there, said John Tenet, a partner at San Francisco-based 8VC.

“If you’re getting venture dollars ― we’re technology and talent guys at the end of the day ― we’ve vetted the technology, we’ve vetted the talent, or the people at these companies, and so that should be a clear market signal that there’s something special here, there’s special talent here and these people can build lots of different things,” Tenet said.

Venture capitalist will buy a stake in an entrepreneur’s idea and nurture it financially, but oftentimes they will in exchange set tough benchmarks that drive that entrepreneur’s company to perform, noted Ryan Tseng, founder of tech company Shield AI.

“If you look at any venture-backed company, and it’s a high-performing one, you go in there, the standards are incredibly high, the work ethic is outrageous because the investors are kind of day in, day out demanding excellence,” Tseng said. “And also once you make the choice to be a venture-backed company, you’re signing up for a commitment to be excellent because to get to that next round, you have to show outstanding performance time after time after time.”

2. Enable out-of-cycle funding. Take the case of Brooklyn-based goTenna, which makes mobile mesh networking gear: Outdated requirements, baked into existing acquisition programs, have been an obstacle for the military as it seeks to buy that gear, according to the company’s founder and CEO, Daniela Perdomo.

“Because the [requirements] were set so long ago — where for instance, our technology just did not exist, you could not have situational awareness with mobile mesh networking down to the single operator, like 12 months ago — we are not in the 2021 plan, the 2022 plan,” she said.

Anduril Industries co-founder and Founders Fund partner Trae Stephens argued that budget cycle is “biased toward the integrators who have been playing the game long-term.”

The Ronald Reagan Institute, which released a report in December with recommendations to strengthen America’s national security innovation base, found that the length of the budget cycle is hampering development of critical technologies.

“New program starts are generally not allowed ‘out of budget cycle’ to give Congress time to exercise its oversight responsibilities — but awaiting the completion of a full budget cycle might take 18 months or more, depending on when a new idea emerges,” the report read.

“Congress should redefine a ‘new start,’ with innovation in mind to ‘fast track’ exciting new technological opportunities within the congressional budget cycle. The authorizing committees should make a special effort to identify projects that must start on an expedited basis and flag the appropriations committees about the importance of permitting such programs out of cycle,” it continued.

3. Try the Stark Industries model. Rather than draft requirements to the nth degree — “over-requirement-ization,” as Stephens calls it — the Pentagon might do better to describe problems it’s facing and trust industry to present solutions.

“From Iron Man, Tony Stark didn’t go to the Pentagon and say: ‘Tell me your priorities for fixed-wing cargo delivery,’ ” Stephens said. “No. You’re just like: ‘I’m just going to build stuff, and if it’s good enough that you want it, you’ll buy it.’ I think that’s where innovation really comes from.

“Especially as technology changes so rapidly, there can easily be a difference between how the requirements are written and what the actual gap is, and how you solve that gap.”

4. Leverage existing technology. Since the 1990s, defense acquisition regulations have stated that preference should be given to commercial products, but it hasn’t caught on widely within the DoD’s acquisition community.

The Department of Veterans Affairs is separate from the DoD, but Stephens blasted the VA for awarding a five-year, $624 million contract for custom-built patient scheduling software, when commercial options exist. (A year ago, the VA scrapped this contract with a Lockheed Martin subsidiary, instead awarding it to a competitor with existing software.)

“That is the riskiest, dumbest thing you could possibly do to schedule appointments, but because it’s a contract with Lockheed Martin ... people say this is risk aversion,” Stephens said. “ ‘We’re doing things the way we’ve always done.’ No, you’re doing things the wrong way. You’re lying to yourself about the risks that you’re taking on in this program.”

Joe Gould was the senior Pentagon reporter for Defense News, covering the intersection of national security policy, politics and the defense industry. He had previously served as Congress reporter.

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