Pilot to Production, Leaping the Valley of Death in Defense Contracting
Part of a series of posts on the challenges of scaling a startup whose primary customer is the Department of Defense (DOD). See first post on clearance and access challenges (post 1) and the third post on contracting for excellence (post 3). These are meant to be conversation starters and are based on my personal experiences bringing new technologies to the defense and intelligence communities. I am interested in comments on these posts — particularly if you’ve worked these challenges and have insights into actionable solutions.
The Department of Defense (DOD) often begins engagements with small companies in the form of a pilot. These pilots allow for a test of the company’s capability at a limited scale and preserve the government’s flexibility instead of locking them into a long-term relationship with an unknown partner. They also allow the company to understand whether the government’s requirements are a good fit for their product and their company. My company, Anduril Industries, has benefited from participating in several pilots, which always prove helpful for understanding the government’s needs and for building relationships with government clients.
But signing a contract for a pilot is not challenging. It’s what comes next.
The problem comes at the end of the pilot. After a successful demonstration, we are often left unclear on the next steps — what to do after the pilot is over. The unfortunate part of this is that our government partners are left equally lost about how to push forward progress within a reasonable timeline. Both sides feel defeated by the repeated refrain, “Let’s try and get this into the next budget process so we get the money in the next 3–5 years?”
If the feeling of defeat is mutual, how do we come together to fix it?
This phenomenon is commonly known as the ‘valley of death’ and refers specifically to that dead space that companies and their government partners struggle to cross between initial pilot and a sustainable, long-term contract. I assume many readers will be familiar with the lack of agility in government budgeting, but for small companies, the fact that many government dollars are pre-allocated years in advance means that there can be a frustrating lag between a successful product demonstration and real money for a contract. This lag dramatically favors large defense primes who can sustain through these long waiting periods.
Whatever the cause (and there are many), this lack of clear progression between pilot and long-term relationship can lead to private sector frustration with the government and the public sector missing out on the most innovative technology (which it has just spent valuable time and resources vetting!).
Anduril has not solved this problem (there is no magic bullet), but in the course of our work trying to traverse this valley after well-received pilots, we’ve found several principles that guide our efforts to cross it successfully.
I would like to hear from you in the comments section if you have additional principles you can recommend to other startups in the defense community for how to cross the chasm.
1) Your government champion matters the most. Anduril has been most successful when we’ve found a day-to-day champion and principal and worked with them to cross this valley. Bonus points, of course, if you find someone who has done this before! Champions are those people who believe in your product and are your internal advocates even when you’re not around — not necessarily your most enthusiastic user.
2) Get your products fielded. When you’re trying to cross the valley, don’t ever consider pilots or chances to share your product in action as wasted time. Instead, field your technology at every opportunity, get wins (or learn things in order to get wins the next time!), and get word of those wins back to the appropriate decision-makers. This principle applies even to no or low-cost trials.
3) Understand your customer’s budget cycle. Instead of resigning yourself to confusion over the arcane timelines that they’re facing, work with them to construct a roadmap to cross the valley in 24 months. If they don’t know how to do this, ask them to find those who do — these people exist. Once constructed, check in on that roadmap with your champions once a month to make sure that progress is tracking. In general, seek to avoid burdening them with questions and instead demonstrate your ability to help them navigate these challenges.
4) Don’t blame the FAR or acquisitions. Finally, a lot has been said of the failure of the FAR and other defense acquisitions constructs. I’m not here to say the FAR is perfect — far from it — but it has never been a blocker to our success if we are following the first three principles above. Acquisitions offices have numerous tools in their “bat kit” that can be used to move fast. It’s part of your job to learn what these tools are and to convince them to select a more novel approach rather than going back to the traditional well of options.
Though these principles have worked for us, I believe that ultimately, they are a stopgap. Over the longer term, I hope that the government will add more mechanisms to adjust funding quickly for priorities or capabilities that have emerged since the end of the last budget cycle. The government should have many in-year options to move $1–10 million to new starts, several in-year options to move $10–100 million for scaling successful small programs, and select $100+ million options to move quickly against urgent capabilities that need to be fielded immediately. If the government can develop a toolset around the in-year movement of dollars of these scales and generally enable more agile and predictable flows of dollars, it will see a surge in small, innovative companies participating in national defense.
