Expert insights on building mission-critical capabilities
May 26, 2023
When cutting-edge technology and world-class talent come together, the most mission-critical capabilities come to light. In the Defense sectors across major allied nations including the U.S., Australia and the U.K, this hasn’t been an easy or accessible goal for a number of reasons, but we are at a point of momentous change and advancement for the free world, and it’s a great time to be a part of the effort.
This was the topic of discussion in Australia recently, where I joined Linda Lourie, Senior Advisor with WestExec Advisors; and John Leslie, Director of Trade and Investment and Lead for Space & Defence at Austrade; for Sydney Dialogue Summit Sessions, one in a series of conversations on the ASPI podcast, “Policy, Guns and Money.” We discussed defining a future that includes better collaboration across the private and public sectors; better partnerships across borders; and how the government can make changes to enable both. Here are some highlights from our conversation:
In the years since World War II, the U.S. Defense Department has not prioritized rapid innovation and speedy efficacy, yet in that same period, America’s private innovators backed by private capital have soared, leading the global tech race. Linda, John and I looked at this disparity and what it means for national security. In Silicon Valley, startup founders and investors work closely to rapidly commercialize cutting-edge technology with proven market traction. The Government approach is to either build solutions internally – a lengthy, cumbersome process; or purchase existing, commercially available technology “off-the-shelf” – a process that can be hampered by bureaucratic processes and timelines. Changing the approach, by connecting the greatest thinkers and their solutions with the most serious defense challenges, will help us arrive at game-changing solutions, regardless of where they began or who funded them. Those of us striving to help make that connection aim to translate industry’s model of rapid innovation at scale to the DoD. Meanwhile, we encourage world-class talent and game-changing capabilities (and the venture capitalists funding them) to build the capabilities that all of our countries and militaries need.
During our chat, we also discussed how private investment in defense capabilities is changing. Traditionally, venture capitalists and their portfolio companies avoided working with the government because they saw government as a frustrating partner, with slow contractual processes, unreliable budget cycles and little transparency about what problems needed to be solved and why. As Linda reminded us, a priority today may be forgotten tomorrow, and Congress can either slash or add depending on the whims of the people. This is almost impossible for startups and their private investors seeking long-term, reliable support and predictable customers. In the wake of the COVID-19 pandemic, war in Ukraine, threats in the South China Sea, etc., innovators and investors have awakened to the reality that economic security is national security. Investors are beginning to look at national security capabilities and are willing to get much more involved than they have been in the past. We are now seeing a mindset shift within the DoD as the face of war has dramatically changed, demanding reliance on entities and partners beyond the Pentagon’s walls. What was once kinetic and hardware-based has become everything from biotechnologies to cyber to AI, and a lot of software. As a result, the U.S. and its allies must look to the private sector for solutions. At the same time, in the U.S., organizations such as the Defense Innovation Unit, AFWERX, NavalX, SOFWERX and SpaceWERX, are making it easier for early-stage companies to get a foot in the door to work with the government.
It’s going to take an allied approach to gain the upper hand on the world stage, and our allies have world-class talent and game-changing capabilities. Recently, AUKUS defined directly applicable priorities in its Pillar II, focusing on expediting cooperation in critical technologies, including cyber capabilities, AI, quantum technologies, undersea capabilities, hypersonic and counter-hypersonic and more. And while this is a major step in the right direction, we can't stop at high-level government meetings, we all agreed. Global partnerships need to filter down into the private capital arena enabling top entrepreneurs and innovators. Our ambition is to build a cadre of world-class talent and world-class teams who can connect across national borders and build a stronger base of solutions and capabilities together.
Listen to more from our chat in the full conversation here, or skip to the following time stamps:
3:04: Primer on venture capital and private equity
5:00: Private investment’s role in national security
12:23: How government interest can signal further growth and investment
16:44: Opportunities for Australia, US and UK private sectors to respond to public sector needs
19:48: International cooperation and global leaders’ paradigm shift
20:43: Improving incentives in the Government to help engender an innovative mindset
21:47: Investment challenges for private/public and allied sectors
Opportunity to help shape the next-generation of problem-solvers, contribute to meaningful solutions for the nation
A look at how the DoD is enabling dual-use startups