On Friday, the House passed the National Defense Authorization Act (NDAA), which sets policy for the United States Department of Defense (DOD) for the upcoming year. At SineWave, we are paying close attention to this legislation because the NDAA traditionally includes provisions intended to advance the Pentagon’s adoption of advanced tech. This often opens doors for Silicon Valley entrepreneurs who know how to navigate the public sector. What remains to be seen is if DOD can capitalize on congressional support to scale real capabilities.
Will the government feign interest in innovation, never actually integrate it into its operations, and insist on trying to do it on its own? Or will it adopt a posture that encourages partnership with the commercial startup world and facilitates investment in game-changing tech? The latter would require a meaningful culture shift at the Pentagon, as well as a commitment to becoming a reliable customer.
Historically, the government relegates innovation to the realm of research and development programs but rarely scales the capabilities that result from that research. What the government misses in this approach is that there are plenty of investors who are willing to put private capital behind R&D, if only the government would indicate what it is willing to actually buy.
Because the government is such a behemoth customer, if it sends actionable signals that it will buy a product, the innovation will take care of itself. With this market security, companies can properly invest in promising emerging technologies. This mechanism creates cycles of innovation with endless potential because the government has the funds to create a large impact. An effective government marketplace for innovation would essentially add another set of Fortune 500 customer opportunities for startups.
But there is a long way to go. In its first annual National Security Innovation Base (NSIB) Report Card, released earlier this year, the Reagan Institute gave the government a “D” grade for customer clarity, commenting:
“U.S. Government leaders consistently articulate a need to access diverse sources of innovation, but the follow through on that vision across the customer community (executive and legislative) has fallen short, blurring the demand signal for the NSIB.”
Part of our job at SineWave is to identify companies that have the potential to tap into these massive public sector opportunities. We are all about disruption, and in order to create disruption, you need to invest in companies that are nimble. Our portfolio companies produce software solutions that can drive return on investment for commercial customers while simultaneously solving significant government problems and securing the sticky revenue streams that come with landing such an important customer.
Earlier this year, SineWave fostered a partnership between Shabodi, a network-aware 5G company, and Booz Allen, a powerful public sector solutions provider, to collaborate on wireless communication systems and AR/VR systems to be utilized on military bases and even forward deployed on the battlefield – the same technology used by industrial customers to improve communications and application deployment across their commercial operations.
SineWave also helped Evolv, a physical security tech company, navigate a U.S. Department of Homeland Security certification process which expanded its commercial pipeline and opened up numerous public sector opportunities where high assurance and security is paramount.
SineWave and its portfolio companies have demonstrated that leading in innovation often means bridging the gap between the commercial startup ecosystem and the public sector market. Through this process, we’ve found that in order to drive the innovation it needs in a timely and cost-effective manner, the government must embrace its position as one of the most powerful, lucrative, and stable customers in our economy. This is the essential lens through which key decisions should be made during the upcoming NDAA process.