When U.S. software firms consider their primary markets, many largely avoid the defense sector. That’s true whether they are established tech companies or early-stage startups. The reasons are clear: Pentagon procurement has historically, and largely, focused only on the acquisition of physical supplies and equipment, yielding processes unsuited to software licensing. Bureaucratic challenges also frustrate companies because they lead to long sales cycles. And many tech employees have refused to work on defense projects, citing cultural and ethical concerns. With these challenges, funding through venture capital and other sources has been hard to come by for firms operating in or looking to expand into the defense market.
How Software Companies Can Enter the U.S. Defense Market
Cumbersome old Pentagon procurement processes are falling away, and VCs are paying attention.
July 14, 2023
Summary.
Pentagon procurement procedures have long complicated commercial software companies’ entrance into the defense market difficult, but the authors’ experience working with both tech startups and the defense industry leads them to believe that now is a good time for companies to enter the market. They recommend starting by using commercial success to prompt small, one-time defense contracts, partnering with existing defense channels, and building a dedicated sales team. These tactics will bring the company recurring revenue and venture funding more quickly.