The Startup's Guide to the Department of Defense (Part 1)

Disclaimer: When dealing with the Department of Defense, I recommend you conduct independent due diligence. These essays are background information at best. The opinions contained herein, and in subsequent essays on this topic represent views that are mine, and mine alone.

Bottom Line: This, and the subsequent essays are meant to give startup founders a basic grasp of the Department of Defense, including lingo, structure, and general business mores. Optimally, these essays will serve as an intellectual minimum effective dose if you are thinking of doing business with the DOD.

What exactly is the Department of Defense?

Government is the biggest single industry in the world, and within the United States Government, the military is the largest singular expenditure. Commonly referred to as the “DOD,” the Department of Defense is part of the Executive Branch. The Secretary of Defense oversees the Department, which it itself combination of three Departments (of the Army, the Navy, and the Air Force), and the Office of the Secretary of Defense (“OSD”), which itself is composed of a host of civilian agencies led by both civilians and uniformed personnel. Here’s a simple chart. Yes, that’s a joke. It’s not simple. Here’s a secondary chart for OSD. And here’s one for the Navy (to give you a sense of scale for each of the services).

Nested within an annual $500 billion budget, the DOD maintains, among other things, an entire medical system (including a functioning, degree-granting medical school), its own laws and courts (derivative of the Uniform Code of Military Justice), an integrated transportation and logistics infrastructure, cutting edge research and development labs, power plants, the list goes on. More than three million people work directly or indirectly for the DOD, from active duty and reserve service-members to government civilians, and contractors.

Departments of … or Office of the Secretary…?

The first thing you realize from looking at that chart is that the DOD isn’t simply the armed services. Within the Office of the Secretary of Defense are lots of strange “Activities” and “Agencies,” that do things like try to prevent nuclear war, invent revolutionary technology (perhaps you’ve heard of the ARPANET), and so on. OSD is separate from the Departments of the Army, the Air Force, and the Navy (which, FYI, contains both the Navy and the Marine Corps). The services, similar to the Department of Defense, are the “Department of the Navy” which contains both actual uniformed sea service (the Navy), and civilian structures like research labs. It is all quite complicated.

What does the actual military do? We’ll save that for another post.

Why should you care?

Lots of people talk about technical revolutions, but what often goes unsaid is that most of the modern ones came after MASSIVE government investment. Semiconductors. GPS. Packet switching. Satellites. Airplanes. Defense funding offers zero equity dilution, and an entity that is going to put your technology through its paces. The United States Department of Defense is legally obligated to spend over $2 billion every year funding small companies doing cutting-edge things that might help us defend the United States. There are numerous funding mechanisms, from the Small Business Innovation Research program, the Small Business Technology Transfer Program (STTR), to “Broad Agency Announcements” made by DOD agencies when they are looking for people who have ideas about how to overcome broad technical hurdles. That’s larger than the full portfolios of each of the top three venture capital firms.

Most of these opportunities are published on https://www.fbo.gov (referred to as “FedBizOpps”), and the slightly-more-modern-looking (and usable) https://sbir.defensebusiness.org (which is Defense-centric). Suffice it to say it’s not as easy as TaskRabbit. For whatever reason, much of the language used to publish these opportunities is Pentagon-ese. Acronyms, odd formulations that only make sense to insiders, etc.

Why Work With the Department of Defense?

Honestly it’s a good question. And having seen how hard it is from the inside (down below I’ve provided a bit of background for those interested), I can honestly say it’s not for every company. A few days ago, a partner at a major VC firm said to me “Why would I tell any of my companies to do business with the DOD for a million bucks? They can get that from an angel investor after an hour-long conversation over coffee!” And he is completely right. However, doing business with the Department of Defense isn’t always about pure profit. Here are a few things to think about:

1. The DOD seal of approval. If it works on an Aircraft Carrier, other people are probably going to be interested in it. Oil companies, airlines, automotive conglomerates, and more. The rigorous standards required to take something in to combat can translate into a powerful selling tool to the private sector.
2. DOD pays you to test your stuff. That’s right. With an SBIR (warning: simplification ahead), the DOD will pay your startup a few hundred thousand dollars to simply test your technology operationally. And they don’t take equity.
3. Non-traditional operational environments. From deserts, jungles, the depths the ocean, the furthest reaches of orbit, and everywhere in between, often the DOD is one of just a few entities capable of easily reaching the most austere or rare environments.
4. Duty/Honor/Country. It doesn’t translate onto a balance sheet but there’s something to be said for helping to protect the country.

Who Am I, and Why Am I Doing This?

My name is Josh. I joined the World’s Finest Navy after college, and spent just under eight years on active duty. I signed up for a challenge, and got one: the work was at times volatile, uncertain, complex, and ambiguous. But it was enjoyable, and involved things that one doesn’t get to do in the private sector.

During my last two years, I was asked by my friend Ben to join a small group of junior officers and enlisted to work for the Chief of Naval Operations(“CNO”?—?the senior officer in the Navy) to identify, procure, and test cutting-edge commercial technologies and processes for rapid integration into the Navy, and also, in his words, help to “change its culture” to better prepare us for the 21st century. We called ourselves the “CRIC”?—?the Chief of Naval Operations’ Rapid Innovation Cell (yes, it was a bit of a joke, with nested acronyms). We put 3D printers on ships, planned the future of augmented reality in the Navy, funded robots that swim like fish, and more. The CNO took to calling us his “maniacs”. Most importantly in my mind, back in October 2014 I proposed the creation of a “DOD Embassy” in Silicon Valley, speaking at the Defense Entrepreneur’s Forum in Chicago. The idea turned into a white paper that was widely circulated around the Pentagon, and made its way to Secretary of Defense Carter’s office, and was approved.

Apropos this, and the following posts, many of us on the CRIC came to realize how hard it is for revolutionary technology to find its way into the Department of Defense, even when it would save us money, time, or even lives. Not out of malice, but process. Some of us?—?myself included?—?have left active duty in search of new challenges (and other ways to contribute to the same mission, but perhaps with greater impact). Some have gone to business school, others to major research labs. I myself transitioned into the Naval Reserve in March of 2015, and am attending a summer program at Stanford, before figuring out what the future holds. In the meantime, I’ll be writing these pieces?—?alternating between short case studies and then background essays like this one. Short, digestible, and hopefully value added.

N.B.?—?A few friends and I are considering starting a small company to help startups engage with the Department of Defense, but frankly, we have no idea if there is any appetite for it. If you’re interested, just hit me up on Twitter or send me a message over LinkedIn and we can go from there.

Today’s Five Vocabulary Terms:

The Department of Defense: The executive department, overseen by a cabinet-level officer (the Secretary of Defense, currently Dr. Ashton Carter), that oversees “the military,” as well as the civilian entities that support it.

The Military: Broad term of reference for uniformed service-members in the Army, Air Force, Navy, and Marine Corps (and in time of war, the US Coast Guard, and a few other small quasi-military entities like the NOAA Commissioned Officer Corps, and the National Health Service Corps).

BLUF: “Bottom Line Up Front”. Military-ism for an executive summary.

SBIR and STTR: Two government programs designed to help small businesses work with the DOD. Small Business Innovation Research(SBIR’s) helps small businesses link up with DOD entities to test disruptive technologies, while paying them for their time and effort. The Small Business Technology Transfer Program (STTR) takes research done at DOD labs and helps transition it to the private sector.

BAA: Broad Agency Announcement. A DOD mechanism to contract cutting-edge research for hard-to-solve problems.