May 16, 2024

Military Innovation Requires Diverse Funding Approaches


The United States requires a reimagining of the defense innovation ecosystem to deliver cutting-edge technology to the warfighter by utilizing effective financing strategies, enabling multi-partner collaboration, and empowering leaders to take risks that lead to the rapid adoption of new capabilities.

The panel “Strategies for Financing Defense Innovation,” moderated by Todd Lyons, Vice President at the Naval Postgraduate School Foundation & Alumni Association, brought together experts at the 21st Annual Acquisition Research Symposium on May 8 to discuss diverse approaches to both funding military innovation and measuring the success of government-funded innovation programs.

Lyons set the tone by defining innovation as "the adoption of a new practice in a community." He stressed that without getting new technology or practices into the hands of the warfighter, there's no true innovation. This sentiment underscores the importance of gatherings like the Acquisition Research Symposium at NPS, where leaders from across government, academia and industry convene to discuss the latest acquisition research and explore opportunities to deliver the latest technologies and capabilities to our service members.

Panelists Matthew MacGregor, a fellow at the Acquisition Innovation Research Center (AIRC), Amanda Bresler, Chief Strategy Officer at PW Communications, and Nicholas Velazquez, a research assistant at the Center for Strategic and International Studies, discussed their papers exploring a range of topics, from the role of venture capital firms in fostering defense startups to the impact of Department of Defense assistance programs on new warfighting capabilities.

There is an abundance of financial resources available for defense innovation that remain largely untapped. Despite the availability of these resources, there seems to be a gap in their effective utilization. The panelists underscored the potential for unlocking substantial funding by enacting appropriate policy reforms.

Together, the panel emphasized the collaborative nature of defense innovation, pointing out the intrinsic interdependence between the DOD and its external partners. “The DOD produces nothing on its own,” Lyons noted, underlining the critical roles that industry and academia play in the development, scaling and adoption of new technologies and posing the question of how to best bring the ecosystem together to leverage each components unique strengths.

"We need to broaden our perspective on where transition responsibility falls. While the DOD has its role, venture capital firms also play a crucial part in helping their portfolio companies succeed in the defense space," MacGregor said. He stressed that VCs are not just financiers, but partners that help bridge the gap between innovation and field ready military technologies. In addition to capital, VCs offer a network of expertise and advocacy that is crucial for navigating the Defense Acquisition System. Their support is vital for ensuring that startups can successfully bring innovations to the market as well as to our warfighters.  

Valasquez focused on broadening the DOD’s financial strategies to include nontraditional funding mechanisms such as direct loans, private equity and loan guarantees. Incorporating these tools, he suggested, would provide the DOD with more agile and responsive financial tools to speed up technological advancement and enhance strategic capabilities. Highlighting the inherent risks in innovation, he reminded the audience, "Risk is part of innovation. If you have a perfect score, you're not taking enough risk; you're not really having strategic impact."

Bresler, whose research focused on the impact that DOD-Funded assistance projects have on the availability of new warfighting capabilities, noted that although assistance funding represents a significant component of DOD resourcing for innovation, it's one of the many tools in the DOD toolkit to support and harness these efforts. She highlighted that it's essential for major lines of effort to tie back to a clear mission and relevant purpose as the DOD contends with budget constraints, personnel shortages, and dynamic threats around the world.

Bresler added that “a serious commitment to advancing warfighting capabilities depends on three pillars: attracting and engaging the disparate stakeholders from inside and outside of the government that are developing the best and brightest new technologies, reducing duplicative efforts, and ensuring that breakthroughs reach potential beneficiaries across the DOD as quickly as possible.”

Read more about the 21st Annual Acquisition Research Symposium:

Watch the recordings of the keynotes and some of the panels:

Read the symposium papers and presentations:!/page/558?c=66

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