What J.P. Morgan thinks about Defense Tech and Startups

Sep 21, 2024

Defense Tech Innovation and the Role of Startups in the US, from this linked report.

Overview

- The US is prioritizing defense innovation to maintain global leadership and national security.

- A proposed $850 billion defense budget for 2025 includes significant allocation for research and development.

- The Department of Defense (DOD) is leveraging cutting-edge technologies and fostering public-private partnerships.

1. National Defense Science and Technology Strategy (NDSTS) released in 2023.

2. DOD's technology vision outlines 14 critical technology areas.

3. Multiple innovation-focused organizations launched, including:

- Defense Innovation Unit (DIU)

- Office of Strategic Capital (OSC)

- National Security Innovation Capital (NSIC)

- AFWERX, NAVALX, Army Applications Lab

- Startups face difficulties in procuring government contracts, known as the "Valley of Death."

- DOD is redefining collaboration with private companies to address this issue.

- Programs like Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) provide funding support.

## Defense Innovation Unit (DIU)

- Created in 2015 to accelerate DOD adoption of commercial technology.

- DIU 3.0 strategy launched in 2024 with a significantly increased budget of $983 million.

- Aims to improve relationships with startups and investors.

- Venture investment in defense tech has grown considerably since 2017.

- $70 billion deployed in 2022 and 2023.

- 2024 investment on track to surpass pre-pandemic levels at around $25 billion.

1. Advanced computing and software

2. Sensing, connectivity, and security

3. Biotechnology

4. Autonomous systems

- Continued emphasis on technology in DOD's mission.

- Rising number of startups working on defense-oriented technologies.

- DOD's efforts to support startups likely to result in more successes, fueling interest in defense tech.