Palantir Technologies’ Post

The U.S. defense industrial base is experiencing its most historic transformation in at least two generations. There is a new ecosystem of defense industrial partners like True Anomaly that are bringing consumer product development practices and financial engineering to bear on the most pressing national security challenges, offering unprecedented speed and scale in the service of national competitiveness. For the sake of global stability and prosperity, this transformation is not optional. The average time our adversaries take to develop countermeasures to new weapon systems is shrinking (and fast). The good news is there is a way out: leverage the tenacity, creativity, and capital efficiency of U.S. industry. Top line DoD budget growth does have a limit, but the DoD can increase the efficiency of its resources by partnering smartly with the right companies through the right contracting mechanisms. As Heather Somerville points out in this Wall Street Journal article, the result is massive financial leverage to make defense programs faster, more cost effective, and more operationally relevant. Quantity of capital availability is not the problem. But capital market interest needs to be nurtured. Below are four basic questions capital allocators--funds, boards, and executive leadership--ask when assessing whether to invest in defense products. DoD partners, if you help industry answer these questions, you’ll unlock a tidal wave of innovation. Mission needs: Do I have sufficient clarity about the customer’s mission requirements to create a product roadmap? Note, it’s actually better for industry not to have decomposed government requirements. To unlock innovation, you want to articulate a problem but not specify a solution. Return on invested capital: Can I unequivocally point to large current, future, sustainable, and growing government funds specifically dedicated to these mission requirements and set aside for commercial transactions? Indemnification, protection, and/or compensation: How does the USG intend to contend with the realities of dual-use systems providing capabilities in what is effectively a perpetual state of low grade conflict? This is particularly important for space systems. Market access: What are the streamlined mechanisms for ensuring industry partners have access to key stakeholders at the appropriate levels of bureaucracy and security classifications? What transaction methods is the DoD prioritizing and why? What are the goals and expectations for transaction timelines? The team at True Anomaly and I know what we signed up for. We're glad to be part of this critical conversation and we're thrilled to have the privilege to be an industrial partner to our U.S. colleagues in arms and our Allies to develop critical technologies for space security, sustainability, and stability. As a Nation, we have no time to lose.

This piece caused a lot of heartburn. Rightfully so. We’re coming off of the peak of inflated expectations in Gartner’s famous hype cycle. But there is an important piece missing in this article. What about money that went through primes to venture-backed startups? That money wouldn’t show up in this analysis. Primes are really good at two things: compliance and go-to-market. They’re not great at building incredible capabilities that leverage emerging technologies. Invert those statements and you have a good description of defense tech startups. Why can’t these groups work better together? Because there is a “not invented here” response to incredible products from non-traditionals. There is also crowding out effect with capture teams who have been shaping conversations for years based on the known product roadmap. But these challenges can be overcome. Brian T MacCarthy wraps Booz Allen services around these products, providing them with contract vehicles and market intelligence. Chris Moran invests in companies that can win contracts then sub out some of the compliance work to Lockheed Martin. We’re now in the trough of disillusionment. It will take several years to strike the right balance of incumbents, non-traditionals, contracts, funding models, authorities, and other aspects of integration. That’s the hard work of the slope of enlightenment. Don’t miss out on what’s coming because of some turbulence. Don’t bet against America’s military, America’s investors, or America’s entrepreneurs. #defenseinnovation #defenseindustry #venturecapital #vcs #dualuse #corporateventurecapital

🚨Security at Stake: Are We Ignoring the Power of Defense Innovation? 🚀 We have now long-acknowledged that innovating startups play a pivotal role in shaping Defense and National Security landscapes but it looks like we’re still missing the mark. As we navigate rapidly evolving threats, it's crucial to redouble efforts in fostering defense-related technology startups. According to a recent WSJ article, Venture capitalists are leading the charge, investing over $100 billion into U.S. defense-technology startups since 2021. However, the Defense Department's reluctance to fully engage remains a challenge. I recommend giving this a read: “Investors Are Betting on Defense Startups. The Pentagon Isn’t” from the Wall Street Journal to get a valuable perspectiveat on the dynamics at play. https://lnkd.in/ejDm2hjU We need to move faster and lean into - and learn from - the due diligence vetting conducted by venture capital investors to drive impactful innovations in defense technology. This is why the great work of Shift and #DefenseVentures is so vital. #DefenseInnovation #NationalSecurity #VentureCapital #Startups

Dual-Use-DefenseTech -> The Great, Unfulfilled Potential 💫 Why it matters: The world is moving and transforming fast. Startups are opened and are closed, technology evolves in highest ever pace and AI is embedded in every aspect of our lives. 💫The keyword is Startup 💫 Bottom lines: 💥Startups are flexible 💥Innovation =Startup 💥Huge potential = Startup 💥Speed =Startup 💫 DDR&D (MAFAT) - Directorate of Defense Research & Development collaborates with startups for a few years and the results you can see in the current war. 💫Dive Deeper and understand the great potential : The Wall Street Journal, https://lnkd.in/dXXBTW-V, by Heather Somerville #innovation #startup #defensetechnology

📢 C5 Capital Announces Strategic Partnership with BRAVE1 to Support Ukraine’s Defense Tech Startups C5 Capital is proud to announce our strategic partnership with BRAVE1, Ukraine’s premier defense technology accelerator. This collaboration will support Ukraine’s innovative tech startups, accelerating the development of critical technologies for the defense of Ukraine against Russian aggression. 🇺🇦 “C5 Capital’s strategic partnership with Brave1 is focused on empowering Ukraine’s courageous founders, who are building innovative companies in defense of Ukraine and all of us. Today there is nothing more important than fighting with allies,” said Andre Pienaar, the Founder of #C5Capital. 🔗 Check out the full press release below:   #Ukraine #UkraineDefenceTech #DefenceStartup #Allies

Little Place Labs, a satellite tech startup, is making waves in the defense-tech industry by securing its third contract this year despite the challenges of military procurement. 📡 Won its third defense contract this year, showcasing resilience in the competitive defense-tech sector. 💼 Co-founded by Gaurav Bajaj and Bosco Lai, both alumni of Oxford’s business school, bringing top-tier expertise to the startup. 🚀 Navigating the complex military procurement process, which often stifles nascent defense startups, is a significant achievement. 🌐 Positioned to attract further venture funding, leveraging its growing reputation in the industry. 📈 Mature defense-tech companies like Anduril and Palantir set the stage, but Little Place Labs is proving that newer startups can also thrive. #DefenseTech #StartupSuccess #VentureCapital 🔧 Persistence in a slow and bureaucratic procurement process is key for emerging defense-tech startups. 💰 Successful contract wins can be a critical factor in securing venture funding, ensuring the company’s growth. 🌍 The defense industry is tough, but strategic expertise and resilience can pave the way for significant opportunities. https://lnkd.in/gj6DTc2K

Defense tech has been fairly resilient given challenging market conditions for startups as well as the significant hurdles that exist for firms that aim to disrupt the industry's juggernauts. Bessemer Venture Partners has an interesting new report about the topic that I wrote about for Aviation Week Network. Excerpts below: The defense tech ecosystem is coming into its own as the Pentagon works to overcome the so-called “valley of death”—the long gap between when a technology is first developed and tested to the time it can be funded—and enhance its collaboration with emerging startups, Bessemer Venture Partners says in a new report. The Pentagon’s renewed sense of urgency comes amid the most fraught geopolitical environment since the Cold War. Last year saw Russia’s invasion of Ukraine drift toward stalemate, while conflict erupted in the Gaza Strip in October. Simmering tensions with Iran and its proxies threaten to involve Washington in a broader Middle East conflict. At the same time, U.S. Secretary of Defense Lloyd Austin has described China as the “pacing threat” that America faces. In the report, Bessemer Partners references the Thucydides Trap theory that explains why conflict is likely between an established and rising power—a paradigm often used to describe the risks inherent in the tense U.S.-China relationship. Noting the difficulty of challenging entrenched defense primes, the venture capital (VC) firm offers a road map for success as a startup that draws heavily on harnessing the potential of emerging technologies like artificial intelligence (AI). “Internal DOD champions acknowledge that startups are not only driving the best innovations in the space, but are also the ones with the willingness and courage to disrupt the status quo in order to drive meaningful improvement,” the report says, adding that there are several successful use cases for AI and machine-learning applications within the Pentagon. These include Vannevar Labs for foreign text workflows, Dextral.ai for government procurement and sales automation, Axion Ray for automation of engineering and quality analytics, and Yurts.ai for enterprise AI in search and documentation. #aerospace #defense #venturecapital #startups #military #nationalsecurity #artificialintelligence #china #technology #supplychain #geopolitics https://lnkd.in/g-GerKKy

Funderlyst's latest blog post delves into the increasing interest of VC giants in Israeli defense tech startups. Highlighting insights from Lior Handelsman, partner at Grove Ventures and a key thought leader in the defense tech space, the article emphasizes significant investments by funds like Sequoia Capital and Lux Capital in companies founded by combat veterans, such as Kela. With over 160 defense tech companies now operating in Israel, the sector is poised for explosive growth, drawing attention from international investors. https://lnkd.in/dJSbkarb #defensetechnology #defensetech

Exciting news for Latvia's and Rigas's innovation scene! 🚀 NATO's Defence Innovation Accelerator for the North Atlantic (DIANA) program is expanding its network, and for the first time, Latvia will host one of its accelerator sites. UniLab Defence, based in #Riga, is set to kick off operations in 2025, collaborating with Accelerace, a Danish venture capital and acceleration fund. ▶ UniLab Defence will support startups developing dual-use technologies, offering training, funding, and commercial advice. This initiative aims to foster cooperation between startups, industry players, the National Armed Forces, Ministry of Defense, NATO, and other stakeholders, paving the way for a robust defense technology ecosystem in Latvia. UniLab is a Latvian university business incubator fostering science-intensive startups and high-value ventures. DIANA, NATO's Defence Innovation Accelerator for the North Atlantic, drives dual-use innovation within the Alliance, fostering collaboration and advancement in defense technology. 🔗 More information: https://lnkd.in/dM3CWZzU

"Venture capitalists have poured more than $100 billion into U.S. defense-technology startups since 2021, banking on government interest in upgrading the military. Persuading the Pentagon to buy from Silicon Valley has proven difficult. Washington and Silicon Valley have for years tried to forge a more lucrative partnership, and the rise of China and conflicts in Ukraine and Israel showcasing modern technology have made military leaders more anxious to modernize their arsenals. At the same time, many entrepreneurs in Silicon Valley, who historically have shunned military work, are increasingly enthusiastic about becoming a part of the country’s war infrastructure. Reflecting the new rhetoric of mutual benefit, there have been more venture-capital luncheons and salons in Washington, D.C., and Silicon Valley tours by defense officials. There is one problem: Defense Department dollars haven’t kept up.  Only a very small number of U.S. defense startups had more than $25 million in government orders last fiscal year, according to government data. Traditional defense contractors typically get billions of dollars from the Defense Department annually. “If there is not a shift in the concentration of contracts still going to the top defense primes toward these new vendors, this VC investment will dry up,” said Michael Brown, a venture investor with Shield Capital and the former director of the Defense Innovation Unit, the Silicon Valley outpost of the Defense Department.   Venture-backed companies were awarded less than 1% of the $411 billion Defense Department contracts awarded in the government’s fiscal year through September, according to data compiled by Govini, a defense software company. That is only a slightly larger share than in 2010 when venture-backed companies received a half percent of the $373 billion the department spent, when only a small number of startups were building military technology."