Dual-use technology can accelerate commercial industries and national security, but navigating the challenges of partnering with the U.S. government can be complex. Our own Austin Walne dug in with the leaders of three very unique ARTIS portfolio companies that have one thing in common - they have all forged multi-million-dollar government partnerships and have insightful information to share with any company considering a similar path.
The larger discussion, which can be watched here, featured:
Peter Dixon, founder and CEO of Second Front Systems, building the first digital prime defense contractor to bring commercial technology to the defense and national security communities in record time
Paul Garofolo, founder and CEO of Locus BioSciences, revolutionizing the treatment of bacteria across infectious disease, the microbiome, and beyond
Chris Kemp, founder and CEO of Astra, reshaping how the space industry works to enable a wave of innovation in low Earth orbit
The following condensed interview details just what makes it so difficult for private companies, especially startups, to partner with the government, and how to do it successfully, without losing sight of your mission
What follows are the highlights from Chris Kemp. Read Peter Dixon’s interview here, and Paul Garofolo’s here.
As a private company, you must decide whether you are building a company to serve commercial or government customers as these entities are very different buyers.
If you want to be in control of your destiny as a startup, you can't rely on the government as the main source of your revenue.
Why is it so difficult to transition technology from commercial to government applications?
Chris: The government is a very different kind of buyer for the kinds of products that most companies develop.They're not consuming the product the company has developed; rather, they are telling the company what they want.
As you build a private company that serves commercial customers, the paradigm there is that you compete on value. You build products that are typically consumed based on their commercial merits and competitive dynamics. When you serve the government, there is a very different way that you have to sell that is typically set up for large companies, which have very specialized organizations that are designed to respond to RFPs.
The government, for a lot of very expensive purchases, likes to have a tremendous amount of influence over the way that the product is designed, manufactured, and effectively de-risked for the taxpayers. This makes it a very foreign concept to most commercial companies being told how to do the engineering or how to do the operations.
What is important for a company to consider when deciding to pursue a commercial vs. government route?
Chris: I think the key is if you want to be in control of your destiny –and have the opportunity to operate and execute and make the risk trades that you need to make as a private company– don't have most of your revenue come from the government. If you do, you're probably going to be delivering what the government tells you to versus how you might approach it as a high-tech startup in Silicon Valley.
To some degree, you reach a chasm where you have to decide if you want to serve the private sector as a commercial company that has a commercial focus, and be really efficient and competitive with your commercial competitors, or whether you want to invest in a completely different set of optimizations as a business where you can compete and win these government contracts.
At Astra we were faced with this when our company was just a few months old and Boeing wanted us to partner with them to build a piece of a big program that they had won. They offered us $100 million to go do this, but ultimately we declined because I realized that going down that path was setting Astra up to be told how to run the company, how to do the engineering, exactly what the requirements were so that we could make one of something. Even for that amount of money, it wouldn’t have been worth it because it would have totally derailed what we are doing as a company, and we would have spent the next five years effectively being a subcontractor to Boeing on a large government project. No matter how much money they would have paid us, it wasn't the business we were building.
Can open source be assistive in solving some of these problems and challenges that we're talking about? Are government agencies like the DoD becoming more open to it?
Chris: There are issues around the way indemnification and liability works in open source software license agreements that have to be worked through, but open source is something I've said that if we did this right as a country, 100 percent of taxpayer money that went to develop software would be open sourced. If it's our money paying to develop the technology, why isn't it all open sourced unless it's national security classified? It’s an interesting way to think about it, that public money should go to develop technology for the public good. We spend tens of billions of dollars a year developing proprietary closed source technology that is used by these governments, or used by these government contractors to simply make more money. I actually have a philosophical moral problem with that.