Horacio Rozanski

We spent a lot of time looking at the dual-use AI/ML market and wanted to share some salient insights. Some markets, particularly the AI/ML dual-use market within the DoD, are disproportionately comprised of non-recurring revenue opportunities (which we generously define as any non-SBIR/STTR revenue).  Consider the visualization below, which shows overall obligations on AI/ML-related technologies grouped by Service.  If we examined this graph in isolation, a naive reader would assume that opportunities, particularly within the Air Force, are increasing.  After all, the total obligations grew by 46% between FY20 and FY23. Unfortunately, the outlook isn't quite that rosy.  The bottom graph shows the proportion of total obligations that are Phase I or Phase II SBIR/STTR.  While the total obligations increased, the proportion of recurring revenue opportunities decreased by 20% between FY20 and FY23. What does this mean?  It's unclear.  Some will look at this chart and find proof of an "AI bubble," others will see yet another reason to deride the SBIR program, and a slim few will do the math to realize that there was still a $5M gain in recurring revenue opportunities between FY 20 and FY23. What is our view?  The data shows that the number of new entrants into the DoD AI/ML market is outpacing the recurring revenue opportunities.  At current spending levels, the market cannot support all the AI/ML dual-use companies currently selling or intending to sell into the DoD. We would welcome other interpretations of the data. #sbir #defenseventures

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A fascinating new report from Silicon Valley Defense Group tracks the latest figures regarding private raised and federal awards to the 100 leading venture-funded, national security focused (and dual-use) startups. The headline figures of $52.9B in private capital raised to date versus $21.8B in federal awards serve to illustrate the very real gap between the surge in venture capital funding for defense technology and the U.S. government's spending on substantial contracts to startups. Further analysis paints an even starker picture. SpaceX, the number one finisher, accounted to fully 81% of the $22B in federal awards, or almost $18B, while accounting for some $9.8B in funding. I would go one step further, and subtract the figures for the other company founded by a very high net worth individual, Anduril Industries (SpaceX was, or course, founded by Elon Musk, and Anduril by Palmer Luckey - both deep pocketed visionaries). That paints an even starker picture, taking us from $22B in contracts for $53B in investment (42 cents on the dollar) to approximately $3.5B in contracts for $41B in investment (only 9 cents on the dollar). The lesson here, if there is one, is that is pays to be well provisioned when attempting to cross the defense technology "valley of death."

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In a move to streamline technology transitions, Heidi Shyu, Under Secretary of Defense for Research and Engineering, has inaugurated the Transition Tracking Action Group (TTAG). This advisory body, established March 13, is set to harness advanced data analytics to track how the Department of Defense (DoD) delivers capabilities to the field. Chaired by the R&E's chief data officer, Cyrus Jabbari, and comprising senior representatives from the military services and offices under the Secretary of Defense, TTAG aims to improve the visibility and management of the DoD's technology transition processes. The goal of this initiative seeks to ensure the timely and cost-effective delivery of state-of-the-art systems and equipment to military personnel. To do this, the department will seek understand what the primary obstacles to transition are and if the measures it undertakes to improve outcomes are yielding desired effects. The TTAG will create a department-wide method to track technology transition and determine the reasons capability-enhancing technologies do or do not transition, to enable the Joint Force to deter and, if necessary, prevail in contested environments.

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America is facing the most challenging national security environment in half a century, and we need to move faster to address these challenges. Deterring our adversaries requires change—starting with activating a whole-of-nation approach that accelerates results, pushes boundaries, and disrupts long-standing barriers. We have seen the positive results of embracing this type of change already. By working together, Booz Allen Hamilton and Palantir Technologies are creating new mission capabilities that leverage both of our unique technologies and expertise to close mission gaps at the speed of now. https://lnkd.in/ee9EAAXx

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A potential DoD venture fellowship program would be wonderful news for the world of defence tech 🚀 We need more defence-minded VCs. Current defence investment usually happens under some sort of dual use, resilience or dynamism banner. But building for both defence and civilian worlds is a distraction. Defence alone is a massive enough market with a massive hunger for technology to justify a pure defence or defence-first focus. Not many "civilian" VCs get it. We also need more investment into "applied" defence technology. Something that can show early results within a year. All the deep tech investment (materials, quantum, bio etc.) under a "maybe it could have application in defence" should not be named defence tech. There are very urgent and clear needs to be solved for right now, around technologies that have a rather clear trajectory. https://lnkd.in/d2bS8-QV

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An honor to moderate an outstanding discussion with the Military Service leads on plans/opportunities/partnerships for the nuclear reactor industry to offer DOD capabilities for clean, resilient, reliable, and secure power for critical national missions on military bases. All 3 services are underway or wanting to engage with the reactor developers. With the commercial power grid at risk nationally from physical and cyber attacks, including China’s #volttyphoon, UCAN Power - United Coalition for Advanced Nuclear Power will continue to support DOD in their quest. Brian McCormack Jim Howe Jeffrey "Jeff" C. Crater L. David Cherington Kimberly VanWyhe Ted J. Garrish Michael Kappaz Dominique Cooper Jason Craig Richard G Kidd IV Grace Stanke Andrew Richards Christopher Ploch, Esq. Jess Gehin Michael B. R. Smith Steve Mitnick #nuclear #advancednuclearpower #nuclearenergy #nuclearpower #cleanenergy #renewables #renewableenergy #Advancednuclearreactor #environment #UCANpower #energy #power https://lnkd.in/e9MVbu9b

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AoD Podcast | Balancing Drones, Carriers, and the Future of Defense Tech (feat. Raj Shah) Hudson Institute 24 JULY 2024 Arsenal of Democracy How can the Department of Defense build a strategy and budget around the increasing scenario of using $3,000,000 missiles to shoot down $15,000 drones? Host Marshall Kosloff talks with former Defense Innovation Unit (DIU) Director, Raj Shah, about how to find innovation at the intersection of the government and private sectors to ensure that U.S. servicemembers never find themselves in a fair fight.   Explore Shah's upcoming book titled, "Unit X: How the Pentagon and Silicon Valley Are Transforming the Future of War:" 

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#ObsessivelyEnthusiasticInvestor #UnreasonablyEnthusiasticInvestor #IrrationallyEnthusiasticInvestor at REFASHIOND Ventures: The Industrial Transformation Fund. We look for the people we believe are doing the best work in Industrial Transformation & Supply Chain Technology; Attempting the impossible. Then we go all-in on them. With obsessive and unreasonable enthusiasm. Join us. #IndustrialTransformation #SupplyChain #Innovation #Technology #Startups #VentureCapital #DemandTheImpossible #UnreasonableEnthusiasm #ObsessiveEnthusiasm #IrrationalEnthusiasm

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Excellent article with my colleagues Rob Breakiron, Yash Acharya, PMP, CSM and Bharat Gorantla GenAI is here, and state and local governments are often finding themselves at the forefront of deployment. What are the issues agency leaders should be focused on to ensure successful GenAI adoption within their organizations? https://dy.si/qPWSb9

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I never thought I would have a passionate opinion of DoD acquisition policies and practices - until I did. I just read Dan Ward's paper, "Buy the Way We Fight: Policies, Practices, and Partnerships" (link in post below) on why the US DoD must rethink it's acquisition thesis to fit within the context of the world in which is operates. I am sharing this paper because: 1) The information we didn't know that we needed: Always follow the money. "Buy the Way We Fight..." not only opens our eyes to new ways in which the US government can deploy precious DoD dollars to build stronger international alliances, drive efficiencies by lessening cost and time overruns significantly, and drive much needed innovation that can only come at the intersection of differing areas of expertise, experiences, and perspectives. And, all of this can be done by enhancing national security versus at the risk of it. 2) The paper was so good that the editor of the National Defense Magazine cited Dan's paper for his argument on updating antiquated acquisition policies around innovation: It's always interesting to me to see what industry experts see as game-changing - you might think that way too. Of course, this the defense industry - however, these take aways can be applied to any innovation-based culture. 3) The structure and tone of the paper to support Dan's point of view provide a master class on how to change deep seeded policies: The paper is an excellent example for my coaching clients, followers, and readers (and me) on how to craft a well-thought argument in a way that it becomes a roadmap to your vision by bringing the rest of us along and engaging us with new facts and expert insights and perspectives. Enjoy!

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here's a great episode on transforming data and AI!

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Read #BoozAllen Civil Sector President Rich Crowe's perspective on how federal agencies can fully leverage their #data to advance mission outcomes. https://lnkd.in/ejdpcDbG

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Are You Prepared for Emerging AI Threats? Artificial Intelligence powers federal missions, but it also opens doors to sophisticated threats. Booz Allen's "Securing AI" report reveals the risks that enterprise AI faces—and how federal agencies can build resilience in 2025 and beyond. This is a must-read for leaders navigating the intersection of AI innovation and national security, and I am delighted to coauthor it. From technical safeguards to strategic countermeasures, explore what it takes to protect federal AI systems in an era of accelerating change. Discover our latest insights: https://lnkd.in/exeaBpUq #SecuringAI #FederalAI #AISecurity #AIResilience #BoozAllenAI

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"This implementation plan offers industry, global allies, and partners clear direction on the Department's priorities for industrial capacity building." said Assistant Secretary of Defense for Industrial Base Policy, Dr. Laura Taylor-Kale. "Implementing these initiatives will require coordinated efforts across the DoD, and support and cooperation from our interagency, industry, and international stakeholders, as well as our champions in Congress." #NationalSecurity #DefenseTech

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Stepping into the future with #DISANext - a comprehensive 5-year blueprint from the Defense Information Systems Agency. Spearheading industry change through its 4 fundamentals: Secure Capabilities, Strategic C3, Modernization, and Data. Hear from the visionary himself, Lt. Gen. Robert Skinner about the strategic imperatives of this plan: https://bit.ly/3WcCrb2. Paving the way for advanced #Cybersecurity and #strategy!

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Excellent analysis. I can attest from my own and portfolio companies’ experience that IQT (In-Q-Tel) and Defense Innovation Unit (DIU) are extraordinarily effective at commercial efforts, DARPA on advancing great research, and there are another 3-5 units that do solid work. H/t Nicholas S. for surfacing this great post

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An EXCEPTIONAL piece that is well worth the time to read (truth in advertising, I'm NOT a Palantir fan). If and when DOD and the larger Federal government get serious about defense acquisition reform -- start here. #DOD, #Acquisition, #Modernization, Palantir Technologies, Army Futures Command, United States Department of Defense, Office of the Under Secretary of Defense for Research and Engineering If you're short on time (you have less than 10 minutes), Read the intro, and jump to items 4 and 17 -- from my experience, limited as it may be, those are the key (and easily fixable) issues. https://lnkd.in/eFaGVbhZ

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VC investors are more interested than ever in the defense industry and defense technology. It could mark a proper sea change moment for investing in global security. Jason Rathje from Office of Strategic Capital leads the DoD's focus "on strategic capital needs where public support is required to attract private investment..." and "we hope to license our first funds ... where we provide loans to investors to increase early-stage investment in these very difficult technology areas." Katherine Boyle general partner at Andreessen Horowitz has said, "I don't think I've ever seen such excitement, enthusiasm for investing in defense tech across a wide variety of investment firms. I think it's something that pretty much every serious … traditional Silicon Valley investment firm has at least one partner who's focused on aerospace or defense." Not that there aren't challenges. Nick Beim , partner at Venrock: "You'll have to deal with an existing set of economic players who kind of don't want a lot of competition and may be more interested in doing something themselves and partnering with a company that's got a ready solution. So, there are a lot of risks." #defensindustry #defensetech Tholus Capital Ajax Defense https://lnkd.in/eqN68VKV 

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