You Can't Cross the Valley of Death Alone

It’s a long road from the test site to the battlefield.

A defense tech startup’s product may show early promise in the R&D phase, as users eager to test new tools provide positive feedback and a company wins funding from the U.S. Department of Defense (DoD) to keep developing it.

But in order to be sustainable, the technology has to be integrated into a program of record, which provides a long-term contract.

The journey is treacherous, and it is littered with technologies that were abandoned after initial funding. It takes considerable time, resources and relationships to make the transition, and there’s no guarantee that a startup will make it.

That’s why this chasm is called the Valley of Death.

“Overcoming the Valley of Death is not just about crossing a standard bureaucratic hurdle,” said Matthew Reichman, Director of Emerging Technology at Dcode, an emerging tech and innovation advisory firm focused on the federal government. “It’s about doing everything we can from the industry and the government side to ensure the right groundbreaking technologies get to the right programs and the right warfighters at the right time, and bringing the best we have as a nation to support our national security, especially in this is era that is marked by great power competition and rapidly evolving technology.”

Reichman recently led a Defense Acquisition University webinar for the national security innovation community to break down bridging the Valley of Death, and offer insights on navigating the DoD. Below are the top takeaways for policymakers, startup founders, investors, and Program Executive Officers (PEO), as reflected through key quotes from the panelists.

"The Opportunity Cost of the Valley of Death."

The stakes of crossing the Valley of Death are high. For startups, it can be the difference between growth and shutting down. For DoD officials and policymakers, the damage of failure includes wasted funding, effort, and unrealized potential for technology that could make a difference to the mission.

To be sure, many startups fail. It's a feature of a capitalist system, not a bug. So it is perhaps expected that not all technologies will survive the journey to the other side. Yet many can benefit from assistance along the way. They need wayfinders, and companions to walk alongside them from time-to-time to help share the load. For the national interest, could be major strategic benefits to helping early-stage companies bridge the Valley of Death.

In recent years, there has been a massive upswing in venture capital going toward defense tech companies. This has created an asymmetry between the levels of funding coming from the public sector and the private sector, said Dan Madden, Principal for National Security at Squadra, a venture capital firm that invests in cyber and national security startups. The U.S. can leverage a $32 trillion capital market in addition to the $2-4 trillion invested by DoD, providing a notable advantage over China.

But there is work to be done to connect the fast-growing innovation community to the government. Private capital often follows DoD priorities. Follow-through is required to turn the technology that is developed by startups as a result into reality.

Take the example of Project Maven. The DoD announced in 2017 that it was developing technology in the field of AI known as computer vision, which leverages algorithms to identify objects and people in images and videos. This was followed by a wave of computer vision startups that saw an opportunity to develop new tools for warfighters.

“When I look around the room, I don’t see the massive computer vision company that’s life was changed by doing business with the DoD,” Madden said.

The DoD can signal intention to use a new and advanced technology, but if it doesn’t adopt the capabilities being produced, or resulting contracts are awarded to existing defense primes, then the intention that the government signaled is ultimately lost. Further, repeated cycles of this pattern could stifle innovation.

“I Don’t Have a Requirement for That.”

These are dreaded words for any startup founder in the defense tech space. Technology can generate interest at the R&D stage, and create a groundswell of enthusiasm, but it’s just as crucial to build relationships with the downstream decisionmakers, including PEOs, who own a program or portfolio of programs. Without this early focus downstream, there’s a high likelihood of getting stuck in the Valley, said Lee Ritholtz, founder & CEO of human-machine teaming startup Primordial Labs.

It takes people to move technology forward. To cross the Valley of Death, startups need to assemble a “coalition of the willing,” Ritholtz said, to get behind a technology and build support, as well as another team to get it funded. This means they need tech scouts who get excited about the product, end user advocates, requirement owners, PEOs, and acquisition officers, as well as support at the department and Congressional level to make it a priority. Meanwhile, they have to continue to develop their product to the specifications of end users by undergoing multiple cycles of testing and feedback with warfighters.

Clockwise from Left: Primordial Labs' Lee Ritholtz, Pixxel's Matthew Harrison, Dcode's Matthew Reichman, Squadra's Dan Madden.

It’s a long and complex road. When a founder finds a champion, it’s critical to make the time to sit down with them, map out the path to enduring funding, and understand where there are gaps.

There’s also a role for venture capital to support along the way. VC can provide funding that helps to sustain momentum for hiring and technology development, while helping to nurture the business so that it is positioned to accelerate once funding arrives. VCs can also act as intermediaries. By building relationships with PEOs and R&D centers, investors can help startups navigate the DoD.

Ultimately, the ability to build such a coalition is what makes the difference in crossing the Valley of Death.

“The discriminator for what makes it to production is not the best capability, it's those people who are resilient enough and patient enough…to keep going through the process to get to the end goal,” said Matthew Harrison, Director of Government Operations for hyperspectral imagery and space data company Pixxel Space Technologies.

“Prototypes are Not Products.”

Startups should be aggressive in getting out in front of teams that own requirements and portfolios of programs, in addition to end users and technology scouts, in order to show them the art of the possible. Make use of any available opportunity to demonstrate technology, Ritholtz said. That’s why you’ll find Primordial Labs and its voice-controlled autonomy software to command and control uncrewed systems, called Anura, at demo events that DoD organizes as often as twice a month.

“If you say you are doing it, then show up tomorrow and fly,” Ritholtz said.

This isn’t just about showing off. When working to gain support, startups are often working with individuals that are briefed on many different types of technologies. Sometimes, a product that’s pitched at a meeting isn’t actually yet ready to be fielded or integrated into a larger program. This may lead to false expectations about the product, or the core technology underlying the product, and can result in distrust in the team, as well as confusion about the readiness level of the product, resulting in delays in adoption.

“If I can’t buy it now, if I can’t pick it up and use it tomorrow, it’s not done,” Ritholtz said.

“The Ultimate Product-Market Fit is a Tailored Requirement Based on What You’ve Built.”

On the other side of the Valley of Death is product-market fit. That’s when a startup has aligned its product with the needs of a specific market, reached a wide segment of that market, and ultimately demonstrated value that inspires others to adopt it. In other words, it is when a product has become not just a want, but a need.

The concept of product-market fit was developed and clarified by numerous B2C and B2B startups that measured demand in users and software subscriptions. For B2G companies, the landscape looks different, Rithotlz said. Wide adoption runs through a very narrow number of “customers,” generally meaning programs of record. 

Still, the ultimate goal is alignment between the product and a capability gap that the customer has prioritized and funded. Requirements defining what a product must do to address that need are the vehicle to get there. Reaching this milestone is a long process, and must be prioritized well before the cycle of a Small Business Innovation Research (SBIR) effort is complete.

There are plenty of nuances on the way to achieving product-market fit. SBIRs can be tailored to very narrow requirements that don’t translate to scale. The sales process can also be fragile. A general or senior leader may become a champion of a product, providing a startup with important internal support at the DoD. But during the long development timeframe, this champion may also move onto a new role. It is not a guarantee that their replacement has the same set of priorities.

Achieving product-market fit requires startups to proffer influence in both directions. There must be bottom-up passion for a technology, and top-down enthusiasm for how it helps to advance the mission and strategic aims of the DoD.

“The Value of a Dollar Isn’t A Dollar. The Value of a Dollar is What it Tells Me About the Future.”

For startups, funding is life. After all, a business can’t run without capital. But when it comes to the DoD, there are different kinds of dollars, and it’s important to know why they provide different levels of value.

“If you gave me a choice between $10 million in R&D funding and $1 million in PEO funding, I would take the $1 million in PEO funding any day of the week,” Squadra’s Madden said, adding that the $1 million is, “coming from somebody who actually knows how to buy things at scale, has the authority and funding to buy things at scale, has the contract vehicles to buy things at scale. Then I can sit down, do the math, and say, this is the use case that we spent the $1 million for, and this is how broadly that scales.”

With that funding and insight in hand, a startup will then be in position to raise additional funding from the private sector that is mapped to the requirements that the PEO has already set out. It not only clarifies the strategy, but enables the startup to make a case to investors that it has a plan that will succeed.

“Build Your Business and Focus Your Efforts on the Industry That Exists, Not on the Industry That You Hope Exists.”

Say “startups” and “DoD” to someone who has experience inside the process, and you’ll hear plenty about what needs to change. The system is built around a program development and acquisition process that is geared toward defense primes. There have been many positive strides made towards making the environment more friendly towards small businesses and startups, but there are still plenty of points for improvement. Panelists identified several. For instance, the SBIR program could benefit from early involvement of PEOs so they can work with the startups solving the most pressing capability gaps in order to increase the probability of transition. It’s also incumbent upon the startup to ensure the product is ready for prime time in order to justify time and attention from the PEOs. These are fair and insightful observations. 

However, for a startup to move forward today and push ahead quickly, Ritholtz cautioned that it’s necessary to understand and work within the structure that exists right now, and not the process one wishes existed.

If there is going to be change, one major contributor will be new entrants and outsiders finding a way to have real success inside the system, building trust through transitioning products along the way.

“You shouldn’t expect to avoid the Valley of Death,” Ritholtz said. “You just don’t want to die in the Valley of Death.”

Watch the full panel below: