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Team Acquistion - 2022 Technology, Innovation & Great Power Competition

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Team Acquistion - 2022 Technology, Innovation & Great Power Competition

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Technology Innovation and Great Power Competition,TIGPC, Gordian knot Center, DIME-FIL, department of defense, dod, intlpol 340, joe felter, ms&e296, raj shah, stanford, Steve blank, AI, ML, AI/ML, china, Acquistion

Technology Innovation and Great Power Competition,TIGPC, Gordian knot Center, DIME-FIL, department of defense, dod, intlpol 340, joe felter, ms&e296, raj shah, stanford, Steve blank, AI, ML, AI/ML, china, Acquistion

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Team Acquistion - 2022 Technology, Innovation & Great Power Competition

  1. Fall 2022 | Technology, Innovation, and Great Power Competition Fall 2022 | Technology, Innovation, and Great Power Competition Lessons Learned - Final Presentation 1 Team 3: Technology, Innovation and Great Power Competition
  2. Fall 2022 | Technology, Innovation, and Great Power Competition We Refined Our Problem Statement from Contracting to Broader Capital Vehicles Over The Course of 32 Interviews… 2 Jonah Cader Iris Fu Sophie Fujiwara Spencer Gore Grant Gordon 32 Interviews Initial Problem Statement How can the U.S. DoD match or beat the speed of great power competitors in acquiring and integrating critical technologies? Current Problem Statement How can the U.S. DoD deploy alternative funding mechanisms in parallel to traditional procurement vehicles to enable and incentivize the delivery of critical next- generation technology in under 5 years? SOURCE: Company Websites
  3. Fall 2022 | Technology, Innovation, and Great Power Competition 3 …Testing And Iterating With Stakeholders Across Government And Private Industry Along The Way NOT EXHAUSTIVE Example Organizations Interviewed NOT EXHAUSTIVE Government Private Industry & Academia SOURCE: Company & Organization Websites
  4. Fall 2022 | Technology, Innovation, and Great Power Competition 4 Our Research Journey Had Four Main Phases, Full of Foundational Learnings, Pivotal Moments, and Key Insights Original Problem Formation Private Capital As A Solution Splintered Hypotheses Creative Capital Pools Pivotal Moment Foundational Learning Key Insight Phase I Phase II Phase III Phase IV Team 3 Learning Journey Project Start Final Presentation
  5. Fall 2022 | Technology, Innovation, and Great Power Competition 5 Phase I: Original Problem Formation Original Problem Formation Private Capital As A Solution Creative Capital Pools Phase I Phase II Phase III Phase IV Team 3 Learning Journey Splintered Hypotheses Pivotal Moment Foundational Learning Key Insight Project Start Final Presentation
  6. Fall 2022 | Technology, Innovation, and Great Power Competition 6 Where Clear, Troubling Themes Emerged About U.S. Tech Acquisition SOURCE: Wikipedia, Defense Investor Network Recurring Themes Across Sessions ● As the U.S. and China compete for technological supremacy, the ability to translate commercial and academic innovation to national security is key ● China is currently able to absorb technologies faster (e.g., via SOEs) and bring large pools of capital to bear against priority pillars (e.g., the Big Fund). 2022 Defense Investor Network (DIN) Conference at SRI
  7. Fall 2022 | Technology, Innovation, and Great Power Competition 7 We Pulled Together A Diverse Team That Was Personally Motivated To Tackle These Problems SOURCE: Company Websites Impossible Aerospace | 2016-2020 ● Manufactured drones with leading flight time ● Commercial market too small to matter ● Hired a SBIR firm for 10% of contract value to land a DoD deal ● Won AFWERX SBIR - $1.5 million ● Did not lead to a customer, and could not find dollars allocated for STRATFI This Struck A Chord With A Classmate’s Personal Experience Going Through A Broken SBIR Process… …And Other Team Members Who’d Seen Similar Problems From Vantage Points in Venture Capital Venture Capital ● Defense traditionally considered uninvestable in mainstream VC ● Capital-intensive products, long lead-times, and fickle DoD customers hamper companies ● Rapid expansion of venture industry and over-concentration in software ● Emerging VC interest but bleak landscape
  8. Fall 2022 | Technology, Innovation, and Great Power Competition 8 Statement, Focused on Technology Contracting & Acquisition Initial Problem Statement How can the U.S. DoD match or beat the speed of great power competitors in acquiring and integrating critical technologies?
  9. Fall 2022 | Technology, Innovation, and Great Power Competition 9 Phase II: Private Capital As A Solution Original Problem Formation Private Capital As A Solution Splintered Hypotheses Creative Capital Pools Pivotal Moment Foundational Learning Key Insight Phase I Phase II Phase III Phase IV Team 3 Learning Journey Project Start Final Presentation
  10. Fall 2022 | Technology, Innovation, and Great Power Competition 10 Reminder: Venture Capitalists Are Often Looking for 10-15x Returns Over A 7-10 Year Fund Life SOURCE: Stakeholder Interviews Defense Tech Rarely Fits This Mold ● Many companies get SBIRs early on but this is not indicative of future contracts (“Valley of Death”) ● The tech is often hardware which is harder to scale due to higher fixed costs and lower margins ● Process from first application to deployment can be years, especially if R&D is necessary What VCs Want From An Investment ● 10-15x return profile because they expect 90% of companies to fail and a few to return the fund (Power Law) ● Preference towards software which is more scalable and generates exponential returns ● 7-10 years to exit (fund life)
  11. Fall 2022 | Technology, Innovation, and Great Power Competition 11 We Looked Into Breakout Successes to Understand If They Provide A Replicable Playbook for Success SOURCE: Crunchbase, Company Websites, Press Search Founders: Palmer Luckey, Exited Founder (Oculus VR) Business: UAV & AUV Manufacturer With Integrative OS Valuation: $8.5B Valuation (2022) Founders: Includes Peter Thiel, Exited Founder (PayPal) Business: Big Data Analytics for Public & Private Sector Valuation: PLTR (NYSE): $16B market cap Founders: Includes Elon Musk, Exited Founder (PayPal) Business: Spacecraft Manufacturer & Launcher Valuation: $127B valuation (2022)
  12. Fall 2022 | Technology, Innovation, and Great Power Competition 12 Key Insight #1 The breakout success of Anduril, SpaceX, Palantir is likely hard to repeat and most defense tech is not currently VC fundable SOURCE: Stakeholder Interviews
  13. Fall 2022 | Technology, Innovation, and Great Power Competition 13 Phase III: Splintered Hypotheses Original Problem Formation Private Capital As A Solution Splintered Hypotheses Creative Capital Pools Pivotal Moment Foundational Learning Key Insight Phase I Phase II Phase III Phase IV Team 3 Learning Journey Project Start Final Presentation
  14. Fall 2022 | Technology, Innovation, and Great Power Competition 14 First, We Realized That There Was A Coordination Problem DoD Customer Startup Funding When all three ingredients—funding, problem, and solution—are present, contracting can be fast (e.g., OTAs). But the main onramps to the DoD only bring two: ● SBIRs bring startup and funding, but not DoD customers ● Administrative onboarding processes (e.g., Blue UAS 2.0) bring DoD customers and startups, but not funding SOURCE: Stakeholder Interviews
  15. Fall 2022 | Technology, Innovation, and Great Power Competition 15 Finding Technical Champions In The DoD Is Hard… SOURCE: Air Force Tech Connect
  16. Fall 2022 | Technology, Innovation, and Great Power Competition 16 …Even With New Gateways Intended to Streamline Access SOURCE: Spencer Gore
  17. Fall 2022 | Technology, Innovation, and Great Power Competition 17 In The Midst of Digesting Our Initial Findings, The Team Split Out Across Three Directions, Which Each Yielded Insights Program managers face misaligned incentives to prioritize legacy systems over new, higher potential bets from startups. Primes are an essential actor in the integration of new tech, but DoD requirements incentivize limited, short-term allocations to startups. We need a concrete case study: Irregular force integration will be key to respond to a possible Taiwan crisis. INDOPACOM needs enhanced ability to coordinate, arm, and motivate combatants via tech. Hypothesis 1 Hypothesis 2 Hypothesis 3
  18. Fall 2022 | Technology, Innovation, and Great Power Competition 18 Key Insight #2 The United States tends to reactively deliver critical new technology in times of crisis SOURCE: Stakeholder Interviews
  19. Fall 2022 | Technology, Innovation, and Great Power Competition 19 Key Insight #3 While defense primes could help accelerate tech, their economics come from sustainment and maintenance SOURCE: Stakeholder Interviews
  20. Fall 2022 | Technology, Innovation, and Great Power Competition 20 Key Insight #4 DoD Program Manager and Acquisition Officer incentives contribute to this issue SOURCE: Stakeholder Interviews
  21. Fall 2022 | Technology, Innovation, and Great Power Competition 21 Phase IV: Creative Capital Pools Original Problem Formation Private Capital As A Solution Splintered Hypotheses Creative Capital Pools Pivotal Moment Foundational Learning Key Insight Phase I Phase II Phase III Phase IV Team 3 Learning Journey Project Start Final Presentation
  22. Fall 2022 | Technology, Innovation, and Great Power Competition 22 Key Insight #5 Existing processes are broken and would likely require an act of Congress to change (Congress controls key bottlenecks) SOURCE: Stakeholder Interviews
  23. Fall 2022 | Technology, Innovation, and Great Power Competition OCO 23 Multiple Tools Exist for Rapid Procurement DPA Title III The Defense Production Act, Title III allows the President to make or delegate loans, loan guarantees, subsidies, purchases, or purchase commitments. Other Transaction Authority provides a flexible vehicle to acquire research and development from non- traditional contractors in support of a prototype. OTA Overseas Contingency Operations funds provide flexible pools of capital for time sensitive, unpredictable expenses. SOURCE: NDIA, CRS, AcqNotes
  24. Fall 2022 | Technology, Innovation, and Great Power Competition 24 Key Insight #6 A variety of tools exist (e.g., DPA, OTAs, OCOs) but require creative leaders to deploy them effectively SOURCE: Stakeholder Interviews
  25. Fall 2022 | Technology, Innovation, and Great Power Competition 25 Key Learnings: Six Insights From This Journey Helped Shape Our Ultimate Recommendation 1 2 4 3 5 6 A variety of tools exist (e.g., DPA, OTAs, OCOs) but require creative leaders to deploy them effectively Recommendation Appropriate a separate capital pool (e.g., via Defense Production Act Title III) for the time-bound delivery of novel technology systems in parallel to--and outside of--the existing acquisition and sustainment process. Collateralize the short-term debt of working with the DoD through financial backstops. Key Learnings The breakout success of Anduril and others is likely hard to repeat and most defense tech isn’t VC fundable The United States tends to reactively deliver critical new technology in times of crisis While defense primes could help accelerate tech, their economics come from sustainment & maintenance DoD Program Manager and Acquisition Officer incentives contribute to this issue Existing acquisition processes are broken and would likely require an act of Congress to change
  26. Fall 2022 | Technology, Innovation, and Great Power Competition 26 Recommendation: A Vision of A Parallel Capital Pool For Near-Term Delivery of Critical Technology Creative Funding Appropriation ● Leverage Defense Production Act (DPA) Title III for separate capital pool ● Target 5-year delivery of novel technology systems ● Award venture-scale, recurring contracts Alternative Growth Financing ● Offer investment backstops for growth-stage companies ● Use Treasury to guarantee loans to established companies via DPA Title III ● Push legislative allocations into public or private funds for critical technologies Improved Early-Stage Focus ● Concentrate SBIR funding into fewer, larger awards ($10M+) ● Help companies find their technical points of contact ● Rethink VC ownership threshold for SBIR eligibility
  27. Fall 2022 | Technology, Innovation, and Great Power Competition 27 Great Minds Think Alike SOURCE: U.S. Department of Defense
  28. Fall 2022 | Technology, Innovation, and Great Power Competition 28 Next Steps: We Aspire to Brief The DoD Office of Strategic Capital on Our Research and Findings Potential Future Direction ● Logistics: Dig into the details of how such a capital pool could be established and administered ● Capital: Understand private sector perspectives on potential partnerships and effective financing tools (debt and equity) ● Case Study: Map out how this could work for an example technology or set of technologies to bring the idea to life Target Output Brief the newly created DoD Office of Strategic Capital on our findings and understand how our recommendations could dovetail with open questions they are tackling and aspects of the organization they are still finalizing.
  29. Fall 2022 | Technology, Innovation, and Great Power Competition 29 Q&A Questions?
  30. Fall 2022 | Technology, Innovation, and Great Power Competition APPENDIX
  31. Fall 2022 | Technology, Innovation, and Great Power Competition 31 Jonah Cader Iris Fu Sophie Fujiwara Spencer Gore Grant Gordon Biographies: Team 3 Brings a Diverse Set of Backgrounds Jonah is pursuing a joint MBA and Masters in Computer Science. He is a VP at Valor Equity Partners, where he helps lead investments in AI and and other strategic technologies (defense, security focus). Prior to Valor, Jonah was a Manager at McKinsey & Company in the Tech, Media, and Telecom Practice, where he worked across the AI value chain. (Semiconductors, telecom/fiber, big tech.) He has also worked in strategy at Google[x], Alphabet's "moonshot factory.” Jonah holds a degree in Computational Neuroscience from Brown University, where he researched brain-inspired approaches to computer vision. Iris is a Junior studying Computer Science. In the past, she spearheaded growth at a YC- backed startup, built AR learning tools at the Stanford HCI lab, and led growth at Bumble from pre- to post-IPO. She has software engineering experience at Meta and Benchling and currently serves as a Venture Partner at Contrary Capital. She also previously created a YouTube channel with 2M views, published an introductory economics book, and performed a flute solo at Carnegie Hall. Grant Gordon is a Senior studying International Relations and Management Science & Engineering. He has worked at Sequoia Capital for the past two years on early-stage programs and company building. Previously, Grant worked for the Research Director of Rebuild by Design, a HUD initiative to build climate infrastructure in New York. Sophie is a Junior studying Symbolic Systems. She works at TCG Crypto, an early-stage consumer web3 fund and previously worked at GGV Capital, JourneyOne Ventures, Hustle Fund and Draper Associates on investment teams. She is an angel investor and runs syndicates in 10+ companies and is an advisor to 25+. She has software engineering, design, sales and marketing experience at various early stage companies in fintech, fashion and crypto. She has also started a fashion brand, a social enterprise and two nonprofits. Spencer is pursuing a Masters in Materials Science. He started his early career at NASA Goddard and SpaceX doing thermal, avionics, mechanical, and optical design. He then worked as a design engineer in the battery module team at Tesla. He founded Impossible Aerospace, which specialized in long duration electric aircraft enabled by structural battery technology. Impossible’s first product, a small unmanned system called US-1, found a market in defense and law enforcement, but struggled to compete with Chinese firms. Spencer works full time at Enovix as the Head of EV products. He advises and invests in startups..
  32. Fall 2022 | Technology, Innovation, and Great Power Competition 32 We Quickly Realized That Our First Problem Statement Had A Number of Implicit Assumptions That Required Testing Prior Problem Statement How can the U.S. DoD reimagine contracting and and acquisition vehicles that match both the speed and liquidity of great power competitors? PRELIMINARY Hypothesis Tree Details on following page Assumptions ● DoD needs new tech from new sources ● DoD’s existing mechanisms are insufficient ● Private firms and capital will be essential ● U.S. defense industrial base is underutilized but sufficient for DoD needs
  33. Fall 2022 | Technology, Innovation, and Great Power Competition 33 To Interrogate These Assumptions, We Took a Step Back From Our Initial Problem Statement to Identify Root Causes Initial Problem Statement How can the U.S. DoD match or beat the speed of great power competitors in acquiring and integrating critical technologies? PRELIMINARY Is This a Technology Issue? Is This an Identification Issue? Is This an Acquisition Issue? Is this a technology availability issue? (E.g., the tech simply isn’t out there) ● Is there enough capital out there to justify tech development? ○ Are the public incentives sufficient? ○ Are the private capital incentives sufficient? ○ Is there enough patient capital? ● Is there enough demand for these technologies? Is this a product management issue? (E.g., are products designed for U.S. Government uses cases) ● Are companies aware of pressing mission needs? ● Is this a requirements issues? (E.g., the DoD doesn’t telegraph needs with enough time) ● Is this a design issue? (E.g., companies don’t understand USG needs and how to design for them) Is this a reach issue? (E.g., the DoD doesn’t have the necessary commercial or academic contacts) Is this a planning issue? (E.g., the DoD isn’t identifying the right technology) Is this a funnel issue? (E.g., the right companies aren’t trying to work with the government) ● Is this a process issue? (E.g., onerous requirements such as getting an O-6 letter of support, slow process) ○ Is the process attractive to the companies? ○ Is this process attractive to investors? Is this a capital/liquidity issue? (E.g., the government doesn’t have the necessary allocated capital) NOT EXHAUSTIVE Is this an organizational issue? (E.g., DoD isn’t set-up for it) ● Is this an internal org issue? (E.g., incentives) ● Is this an external org issue? Is this an acquisition vehicle issues? (E.g., nothing in between Phase II SBIR and POR) Or is the root problem something else entirely?
  34. Fall 2022 | Technology, Innovation, and Great Power Competition 34 Double Click: Example Problem Statement Revision During Iterative Fact Finding Process What Issue Is The DoD Worried About? Is There Time Pressure? What Tech Does The DoD Need to Acquire? Yes. The timeline is tied to likelihood of (maritime) conflict with China over South China Sea, East China Sea, Taiwan, etc. Competition with the PRC in the Indo-Pacific. Technology that can effectively counter China’s operational systems designed to blunt U.S. projection of power through large military platforms and “sanctuary” bases. It’s not about matching the speed of great power competitors, but meeting the timeline of the China challenge. The key stakeholder is likely INDOPACOM Innovation in (comparatively) inexpensive, automated systems which can address some of these issues are happening in real- time in Ukraine. Initial Problem Statement How can the U.S. DoD match or beat the speed of great power competitors in acquiring and integrating critical technologies? PRELIMINARY Next Iteration of Problem Statement How can INDOPACOM absorb innovation in autonomous systems from the European theater in time to meet the mission needs of tensions in Taiwan and the South/East China Seas? WIP
  35. Fall 2022 | Technology, Innovation, and Great Power Competition 35 Detailed View: Six Insights From This Journey Helped Shape Our Ultimate Recommendation The United States tends to reactively deliver critical new tech in times of crisis Existing acquisition processes are broken and would require an act of Congress to change DoD Program Manager and Acquisition Officer incentives contribute to this issue While defense primes could help accelerate tech, their economics come from sustainment The success of Anduril and others is hard to repeat and most defense tech isn’t VC fundable ● There is a disconnect between U.S. strategy (NDS, NSS) and execution outside of times of crisis ● The DoD tends to be reactive rather than proactive in translating the NDS and NSS into change ● Funding allocation mechanisms, esp. the PPBE process are ossified and cannot meet the needs of modern tech ● Continuing resolutions add additional volatility where delays in approved funding can endanger the business continuity of early stage technology during critical periods of technology/company development ● Misaligned incentives for PMs prioritizes legacy systems over new, higher-potential bets ● Exacerbated by limited ownership over requirements, budgeting and deployment, tenure in role, and little sense of calculated operational risk ● By virtue of holding existing contracts, primes provide a fascinating route to market for new tech on subcontracts ● That said, the majority of their economics come from maintenance and sustainment over 20-30 years, so their incentives are not necessarily aligned with the rapid delivery of newer (and especially attritable) systems ● A unique combination of capital, connections, and geopolitical events contributed to the rise of these companies ● It is unlikely that they offer a sustainable example of how to innovate outside of the traditional defense ecosystem ● Most defense tech companies are unlikely to generate the required returns (IRR or MOIC) over a VC fund life A variety of tools exist (e.g., DPA, OTAs, OCOs) but require creative leaders to deploy them ● The allocation of funds is often more complex and problematic than getting new technology on contract ● SBIRs are a stopgap mechanism, but a true solution probable requires the use of separately allocated funds
  36. Fall 2022 | Technology, Innovation, and Great Power Competition 36 Detailed View: A Vision of A Parallel Capital Pool For Near- Term Delivery of Critical Technology Creative Funding Appropriation Leverage Defense Production Act (DPA) Title III to allocate a separate pool of funds to be administered for the time bound (e.g., 5 year) delivery of novel technology systems in parallel to--and outside of--the existing acquisition and sustainment process. Use this to award venture-scale, recurring contracts to firms building key technologies. Alternative Growth Financing Vehicles For growth-stage companies, offer investment backstops (e.g., contingency at a certain loss). Use Treasury to guarantee loans to more established companies under DPA Title III to bring more private capital to bear. Push legislative allocations into public or private funds towards critical technologies. Consider leverage as a force multiplier for selective use. Improved Early-Stage Focus For earlier-stage companies, concentrate SBIR funding into fewer, larger awards ($10M+) for more promising technologies. Help companies find their technical points of contact. Rethink venture capital ownership requirements for SBIR eligibility to better align incentives for public-private investment in maturing technology.
  37. Fall 2022 | Technology, Innovation, and Great Power Competition 37 Double Click: Week 3 Project Evolution What We Thought What We Found How Our Understanding Changed ● Grant: Venture capital is an underutilized method of funding in defense tech ● Spencer: Existing methods of contracting are slower than the pace of innovation ● Sophie: The technology exists, but the DoD and entrepreneurs are not communicating ● Iris: Lack of capital and domain-specific knowledge is the greatest barrier for entrepreneurs ● Jonah: The root problem lies in either technology, identification or acquisition 1. All routes to getting past the valley of death are unique, meaning know-how and pace are not industry-wide blockers 1. Connecting founders with champions inside the DoD is an ad-hoc, nonexistent and unscalable service 1. The problem with speed lies with individuals not the systems ● Government incentives are a greater barrier to this system than private capital, specifically the financial incentives of primes and program managers ● Existing acquisition vehicles have all the capabilities necessary, but the vehicles are manned by humans who do not always execute them in the same fashion What We Did About It A shift from focusing on acquisition speed to the underlying issue of what makes people act at speed Week 3
  38. Fall 2022 | Technology, Innovation, and Great Power Competition 38 Double Click: Week 4 Project Evolution What We Thought What We Found How Our Understanding Changed ● Spencer: Slow/outdated acquisition vehicles are the core reason behind lethargic startup interaction. ● Sophie: There are commonalities between startups which survive DOD valley of death. ● Jonah: Pressing problem is how INDOPACOM can get right technology to Taiwan and South/East China seas 1. The higher-ups inside DOD do not feel that the acquisition vehicles are broken. The stress they are government-wide. 1. The lack of transparency in the DOD makes it hard for the right technology to find the right place. 1. There are not many good mechanisms to integrate new technology after early stage SBIR’s. What We Did About It Refocus from acquisition vehicles to the capabilities / knowledge on the startup side Week 4 ● There seems to be an asymmetry between the startups and government. Gov side thinks that acquisition vehicles can be fast and flexible; startups do not. ● We need to think not just about acquisition but also about integration of new technology. ● It’s not the combatant commands that dictate technologies
  39. Fall 2022 | Technology, Innovation, and Great Power Competition 39 Double Click: Week 5 Project Evolution What We Thought What We Found How Our Understanding Changed ● Grant: AFWERX has started to shift landscape for defense tech startups ● Spencer: Entrepreneurs without extensive defense networks find it challenging to navigate procurement ● Sophie: Outdated acquisition vehicles are partly responsible for startup death ● Iris: Significant unexplored role for VC in funding defense startups ● Jonah: Most pressing issue is how INDOPACOM can get right technology to meet mission needs. 1. Trying to optimize for dual use for gov money can distract or kill companies. 1. Contracting officers are inexperienced. 1. SBIR is not selective enough to matter. 1. DOD points of contact think that finding a tech point of contact is a straightforward process, and feel that SBIR’s are . ● There is definitely a problem on the startup side - startups distract themselves trying to win small, non-recurring contracts and are unsure about how to grow into sizeable defense business ● Entrepreneurs struggle to find DOD points of contact ● The US responds reactively to pressing challenges, but incentives are not aligned for responding proactively to long term potential challenges What We Did About It Dig in deeper on problems with PPBE, understanding motivations of contracting officers, and understanding the success of the few successful American defense tech startups Week 5
  40. Fall 2022 | Technology, Innovation, and Great Power Competition 40 Double Click: Week 6 Project Evolution What We Thought What We Found How Our Understanding Changed ● Grant: There are adverse incentives for Program Managers to back risky projects. ● Spencer: We are investing in the wrong weapons systems for indopacom. ● Sophie: It is hard to predict what the DoD wants and when it wants it. ● Iris: Defense tech unicorns like Palantir or Anduril are not repeatable. ● Jonah: There is a disconnect between American strategy (e.g., NDS, NSS) and proactive execution on that strategy. 1. Misaligned incentives for Program Managers prioritizes legacy systems over new, higher- potential bets. 2. Primes are an essential actor in the integration of new technologies, but DoD requirements disincentivize cooperation. 3. Irregular forces integration has played a significant role in Ukraine. INDOPACOM needs enhanced ability to integrate irregular forces, improvize weapons, and motivate combatants. ● Three key hypotheses emerged around PMs, Primes, and Irregular Forces ● Neither the private development nor the DoD integration mechanism functions effectively ● Shifts in paradigm of warfighting create new opportunities for change What We Did About It Team used Office Hours, further interviews, and research to choose between the three hypotheses. Week 6
  41. Fall 2022 | Technology, Innovation, and Great Power Competition 41 Double Click: Week 7 Project Evolution What We Thought What We Found How Our Understanding Changed ● Grant: There is a repeatable model for private defense incubation. ● Spencer: The DIU has found how to work around the FAR’s to issue contracts to commercial companies quickly. ● Sophie: Alternative funding methods are needed for defense startups who need additional capital on top of DoD contracts. ● Iris: VCs are excited about defense tech and believe in their ability to scale ● Jonah: Tested all three hypotheses from Week 6 1. Funding is the hard part - but there are “ghost programs” which were appropriated years ago and need to be used or lost. 2. There is a huge lag in when an engineering idea is drawn up, contracted, and then deployed for use. 3. True defense acquisition reform would require a Congressional act on the scale of Goldwater-Nichols ● Systemic change of internal DoD or Prime incentives unlikely ● How can we leverage the existing system? ● How can we align incentives? What We Did About It Team returned to a hypothesis around new acquisition vehicles and funding structures. Week 7
  42. Fall 2022 | Technology, Innovation, and Great Power Competition 42 Double Click: Week 8 Project Evolution What We Thought What We Found How Our Understanding Changed ● Grant: Not all innovative defense technologies have venture-fundable profiles ● Spencer: Alternative funding mechanisms are needed to promote speed of acquisition ● Sophie: Current acquisition vehicles may not be sufficient to combat the looming China threat ● Iris: Innovative debt and equity mechanisms are necessary to encourage the delivery of critical technology ● Jonah: The highest potential area lies in alternative funding mechanisms 1. We need funding vehicles (beyond VCs) that are willing to take on hardware risks 2. We need to fund fewer things (e.g. 100) at SIEPR stage and diversify the types of technologies 3. DoD right now relies heavily on venture funding, even though many innovations in defense technology are not venture scalable ● Defense acquisition vehicles need to move away from venture capital or expand into other funding mechanisms, such as debt funding What We Did About It Began to synthesize insights and translate learnings into our final recommendations and deliverables Week 8

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