On the global stage, geopolitical tumult is rising as innovation is pushing forward. As the United States seeks to confront these challenges and stay a step ahead of adversaries, national security leaders have accelerated efforts to adopt and scale emerging technology. Startups, investors, and DoD stakeholders have a critical role in the development and fielding of this technology, and are meeting the mission with increased entrepreneurial activity and capital. As attention on this tech sector grows, this momentum must be balanced with a deliberative eye. This requires recognizing the difference between technology and capability. In the end, the goal is to ensure that innovation addresses operational needs for the warfighter by translating products into a legitimate ability to exercise advantage.
Technologies of interest have been clearly defined by USD(R&E). Now, stakeholders across the ecosystem must collaborate to define how these products will address gaps in our national security posture. It is not enough for innovators to define what a technology is. They must also ask how the technology enables a more effective operational capability.
At Squadra, we frame this translation of technology to capability within the lens of the joint warfighting functions and “Jobs to Be Done” frameworks. By asking how a given startup enhances the DoD’s ability to command intelligence, maneuver, sustainment, and beyond, we’ve applied an end-user focused mindset to our diligence of companies. This extends to our evaluation of companies that may not serve a warfighting end-user, as the same capabilities that enhance our security can provide advantage for our industrial base and broader national interest.
Technology to capability. Government to commercial market. These are intricate translations, and startups benefit when additional strategic guidance and tactical execution is applied following investment. Through our team of seasoned operators and national security experts, network of DoD partners, and ecosystem relationships, Squadra provides support beyond the check. This alignment of innovation, capital, national security priorities and expertise is positioned to deliver sustained capability-driven advantage to our warfighters at times of increased threat.
Source: National Defense Science & Technology Strategy 2023
The United States faces heightened competition with near-peer adversaries, global crises on health and energy security, and other threats such as digital authoritarianism and malign influence. Better technology in the hands of warfighters and operators can enhance our ability to confront these problems. For the U.S. Department of Defense (DoD), the imperative is clear: our national security establishment must rapidly adopt and integrate emerging technology at scale to combat these challenges. To support this, a growing demand signal, led by a critical mass of funding for innovative technologies, policy priorities designed to field capabilities at scale, and a race for tech talent has been met by burgeoning private capital interest in defense technology.
In order to drive American competitiveness, Squadra believes it is necessary to build sustained technological advantage by investing in early-stage companies and creating value beyond capital infusion. As a team of seasoned operators with experience in military combat operations, DoD strategy & policy, legislative affairs, entrepreneurship, and organizing broader innovation ecosystems, we leverage our unique position to support innovators in navigating the valley of death.
Our investment philosophy focuses on the premise that technology must be translated into an operational capability with a clear value proposition for operators. The technology must fill an operational need, and must be able to be fielded by the end-user. Investors cannot define the capabilities required for modern military operations. However, we can sense, respond, and evaluate with an eye toward the end-user. And in this way, we can support the development of a defense technology ecosystem to deliver impact at scale. The following will outline the relationships between technology and capability, illustrating how investors can reconcile operational need with emerging technologies to develop successful ventures.
Technological Advantage
The term “technology” is often thrown around without careful consideration for what it means. Fundamentally, a technology is just an application, process, or development that uses knowledge-based thinking. It is distinct from a product, which is a tangible asset that is produced when one or many technologies are integrated. And it is certainly different than a capability, which is the legitimate ability to execute a mission or required task, often using a set of products or technologies.
Within the umbrella of “technology," the Undersecretary of Defense for Research & Engineering has already defined 14 critical areas where advancement of technology can address national security challenges and provide America an advantage. Several of these technology areas have been pillars for commercial innovators to organize around — driving the growth of massive defense tech companies across autonomous systems, systems-of-systems, and space.
These 14 critical technologies, spanning areas for seed investment, adoption, and defense-led efforts, are effective beacons to commercial industry in defining the themes of innovation that are relevant to the future fight. Advanced computing systems, AI-enabled decision-engines, and high-strength alloys will be part and parcel of our future warfighting platforms (products).
At Squadra, we agree with our national security leaders about the relevance of these technologies to broader national security imperatives. Our team actively maps dealflow against these areas, and monitors developments across these spaces through our ecosystem connections and venture partners. Several of our previous national security investments have accelerated the development of products across data software, human-machine interfaces, and microelectronics that leverage novel innovations in USD(R&E)-designated critical technology areas.
To strengthen the private sector’s role in the development of these priorities, private capital can support by sensing commercial market trends, evaluating technology readiness, building with an eye toward commercial viability, and infusing capital to jumpstart growth. Alongside founders, accelerators, universities, and corporate innovators, private capital can rapidly seed the development of innovative technologies aligned with the national interest with talent, speed, and point-of-new exogenous to government. The clear definition of technologies of interest has eased the process of sensing priorities for the private sector.
Operational Capability
However, only taking consideration of the stated technology interests of the Department is not enough to build a viable defense-tech startup. Squadra believes the development of technology is incomplete without consideration of operational capability. As with the technology priority areas, Squadra is aligned with US Government stakeholders on this approach.
In its February 2022 memo defining the technology areas, OUSD(R&E) states, “The OUSD(R&E) will engage a community of stakeholders to work to develop appropriate pathways to field relevant technologies supporting required joint warfighting capabilities.” The most important function is the relevance of the technologies in supporting warfighting capabilities.
At Squadra, we view all technologies through the lens of the ultimate warfighting capability to frame and evaluate our investments. These capability requirements, derived from the underlying gaps and operational needs identified by the warfighter, are the anchors that should orient technologists. It is not enough to ask only what the technological advantage of a product is. Instead, investors and entrepreneurs must ask how the technology enables a more effective operational capability. Through this, our national security thesis is centered around the development of technologies that can be rapidly developed into fielded capabilities.
To translate this to startup language, Clayton Christensen’s “Job to Be Done” framework teaches us that innovation is incomplete without consideration of the customer’s need. To evaluate any national security investment, we must first ask ourselves what is the first principle operational need that remains to be served. This will inform the required product and technology to fill that gap.
To support innovators in assessing the alignment between technology and operational capability, other DoD-established frameworks can be used as a guide. Doctrinally, the seven joint warfighting functions serve as an organizing paradigm for operational needs in military operations contexts. We believe these functions, which include intelligence, movement & maneuver, fires, information, protection, sustainment, and command & control, can also be used to define how technology fits into the broader capability requirement.
To enhance the warfighter’s command & control, capabilities that heighten decision support can shorten the kill-chain through more intelligent and responsive decision-making. Operations at the scale and speed of modern conflict place enormous cognitive burdens on decision makers. Reducing this cognitive burden is the operational need and a C2 capability that reduces this burden would enhance the effectiveness of the mission. Tracing this need back to the technologies that USD(R&E) deems critical, such as advances in microelectronics, machine learning, data science, spatial computing, and communications, can make critical contributions to our leaders’ ability to make better decisions, faster than our adversaries. Squadra’s investment in Primordial Labs, a human-machine teaming startup, addresses this exact operational need. By enabling warfighters to control platforms via a voice-based human-machine interface technology, Primordial supports operators to more quickly and effectively respond to dynamic threats in theater.
On intelligence & information, a similar decision-making paradigm exists. Making good decisions is contingent on good data. To meet this need for good data and enhance the information management capability, there are opportunities to better integrate advanced and remote sensors through systems of systems, extended IoT, cyber, PAI/CAI, and unmanned systems that support the warfighter to better understand and predict our environment. Our investment in Overwatch Imaging tackles this challenge by automating the processing of geospatial intelligence and deriving relevant insight from abstract data.
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Source: Overwatch Imaging
Even in protection and fires, areas that have traditionally been reserved for defense primes and military-first capabilities, commercial innovation from startups have an ability to support operational capability enhancement. Improvements in commercially available sensing, analytics, microelectronics, manufacturing & materials, and unmanned systems have dramatically driven down the costs of major assets within major weapons systems. The electromagnetic environment in particular is having a massive impact on how performant traditional effectors and platforms are deployed in DoD missions. Even hypersonics, an area that USD(R&E) has designated to be led by the defense sector, are seeing commercial-led innovation. We see significant opportunities for disruption here.
To drive capability enhancement in mobility and maneuver, innovations in electric vehicles, autonomous systems, urban air mobility, and wing-in-ground effect vessels have dramatically opened up the solution space for operators in austere or contested environments. These spaces have strong synergies with the commercial sector where advances in AI or energy storage and generation can address operational needs for better maneuver.
On sustainment, Russia’s disastrous invasion of Ukraine reminded forces worldwide of the paramount importance of readiness to military operations. This has triggered a renewed focus on contested logistics, as well as the critical importance of the ability to manufacture capability at scale with secured and trustworthy supply chains. Reshoring domestic capabilities through advanced manufacturing techniques, AI and compute tools to drive heightened intelligence into logistics, and energy generation and transmission to power logistics operation all present an opportunity to enhance our sustainment resiliency.
Dual-Use Expands the Apeture
This framework of contextualizing technology within operational need is not exclusive to military combat capabilities. As a dual-use investor, Squadra believes that confronting the challenges of American competitiveness isn’t limited to the battlefield. Investing in the national interest requires meeting the operational needs of the defense industrial base and critical infrastructure sectors.
While not designed for the more broadly defined “national security” framing, the joint warfighting functions that define capability in military contexts often can also define capability in commercial contexts. Sustainment, through secure supply chains, capable manufacturing, and logistics management, is important to promote the flourishing of our industrial base, which in turn improves our national security posture. Effective intelligence and decision-support can enable commercial operators to exhibit command over increasingly dispersed data sources. Just as these capabilities are anchors for building defense-tech products, they are anchors outside the battlefield.
Investing in better decision-making and requirements management to support reshoring of critical manufacturing in both defense and commercial applications informed our investment in Prewitt Ridge. Prewitt’s Verve product can support engineers by providing digital engineering tools that streamline the design lifecycle. This capability for engineers to manage requirements effectively and collaboratively increases the ability for critical technologies to reach end-users with lower cost, lower product risk, and greater speed.
Similarly, an imperative to secure proliferating technology asset lists across commercial and defense applications informed our investment in NetRise. The platform can support enterprises in assessing the risks and vulnerabilities present in the firmware layer of their growing IoT infrastructure. As the array of devices connected to networks increases, the attack surface available to malign actors grows as well. Security of this infrastructure across the defense base and within critical industries is essential to our national interest.
In other areas, such as microelectronics, space, or energy, similar patterns exist. The ubiquitous presence of microelectronics across military and civilian assets requires investment in resilient semiconductor supply chains, domestic manufacturing, advanced architectures, and state-of-the-art products. Growing activity in commercial space necessitates investment in reliable systems, communications, terrestrial platforms, launch infrastructure, production facilities, and space-enabled information technology to fuel moonshots. And in energy, geopolitical tension and climate risk drive a need to invest in resilient supply chains, alternative generation, storage and transmission technologies, and energy-efficient platforms.
Just as these innovations increase American national security posture by driving operational capability, they enhance civilian capability and resilience. Put simply, these technologies are crucial to our modern world. Ensuring the survivability and performance of these assets in civilian spaces enhances our broader national interest.
Squadra’s Value Added
Squadra looks at opportunities at the intersection of defense and commercial interest to accelerate the translation of technology to capability across both spaces. Recognizing the challenge of building across two markets, the challenges of sales cycles in the defense market, and importantly the acceleration from technological innovation to proven capability, Squadra prioritizes taking an active role in supporting our portfolio companies.
Venture capital, when aligned with national security priorities, is positioned to cost-effectively and rapidly fund companies that can support technology to quickly develop into the mature capabilities required by end-users. However, we maintain that in the defense-tech ecosystem, the role of an investor cannot only be to infuse capital in companies. The development of robust capabilities requires capital partners to engage the ecosystem to sense priorities, facilitate connections, and promote adoption as best as possible. As more capital continues to flow into the defense-tech space, this ability to understand operational needs and navigate the inner-workings of the DoD will separate good capital from bad.
To that end, our seasoned team, augmented by our robust networks of venture partners and operating partners, filled with cadres of seasoned defense leaders and industry executives, leverage their connections with innovation components, Congressional and policy leaders, DoD stakeholders, and technology accelerators to support our portfolio companies. Through their connections, validation, and technical support, Squadra in turn supports our portfolio companies to execute the company’s vision. The diligence of our venture partners — as leaders living the challenges our companies are trying to solve — makes us smarter in tying technology to capability and makes our portfolio stronger.
As global stability becomes more threatened with every passing day, building technological advantage becomes more critical in enhancing America’s national security posture. But turning these technologies into fielded capability requires deep contextual awareness on how advantage can be maximized. As seasoned operators and leaders in this space for decades, Squadra’s experience can chart the path to sustained, capability-based advantage.
Featured image: Courtesy of Primordial Labs
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