Over the course of eight years, an obedient fleet of vibrant orange, unmanned sailboats floated in the Bering Sea near Alaska, documenting pollock counts and transmitting data to the US government's oceanic exploration agency. By amassing an unparalleled ocean map database, which could then be analyzed by machine learning algorithms, Saildrone, a start-up created in 2013 by young British engineer Richard Jenkins, made substantial contributions to scientific research on climate change. However, as geopolitical tensions between the US and China escalated, Saildrone secured an even more significant opportunity: collaboration with the US Department of Defense. And by 2021, the San Francisco-based company had become a crucial contractor aiding the US Navy in the development of an array of artificial intelligence systems for surveillance in international waters, including the Arctic Ocean surrounding Russia and the South China Sea. This transition attracted substantial investment from Silicon Valley venture capitalists, who poured $100 million into the small company in 2021 alone, compared to a total of $90 million prior to that. Subsequently, Saildrone embarked on the development of the "Saildrone Surveyor" for the US Navy—a 65-foot autonomous vessel, as long as two whale sharks, designed for deep ocean intelligence, such as surveillance and reconnaissance. Jenkins, the start-up's CEO, confidently asserts, "We were 10 years ahead, " making a case for his company as a "prime example of where commercial technology is so much more advanced and agile" compared to the military's systems under development. This article offers a glimpse into an interactive graphic. If you are offline or have JavaScript disabled in your browser, you may be unable to view it. This blueprint could prove indispensable to the US in its pursuit of evolving defense strategies, shifting from reliance on heavy hardware—like tanks, ships, and aircraft—to more nimble investments in disruptive systems such as artificial intelligence, which has the potential to transform modern warfare. Three key factors are driving this shift: China's rapid advancement of advanced weapons systems that counter US defenses, the war in Ukraine—which highlighted the benefits of incorporating commercial technology in a nation's military—and the impressive progress made in the field of AI. Consequently, the US government has become a highly motivated customer, while a decline in deals and valuations in Silicon Valley has made the public defense sector appear as a stable and reliable option for start-ups. This perception of opportunity has triggered a gold rush among California investors, who have poured billions of dollars into defense and weapons technology start-ups. Venture capital in this sector has doubled from approximately $16 billion in 2019 to $33 billion in 2022, as per PitchBook data. However, redirecting a portion of the immense $886 billion defense budget from the five primary prime contractors—Lockheed Martin and Boeing among them—to the thousands of entrepreneurs producing cutting-edge systems has proven to be a challenge. Tech entrepreneurs and investors have accused military leaders of engaging in "innovation theater, " merely paying lip service to the benefits of disruptive technology while withholding lucrative contracts. Steve Blank, a tech veteran and founding member of the Gordian Knot Center at Stanford—established to train innovators in national security—states, "For the first time ever, the US military is dependent on commercial tech to win a war, but they're not organized to deal with commercial tech. " In reference to the tech sector's innovation speed and agility, he adds, "China operates like Silicon Valley, " highlighting the disparity by saying, "On a good day, the DoD operates like Detroit, " alluding to the decline of the automotive industry in that city. Cherissa Tamayori, director of acquisition at the Defense Innovation Unit (DIU)—a DoD arm established in 2015 to promote commercial technology and assist companies in navigating military procurement bureaucracy—acknowledges the significant importance of Silicon Valley to national security. She asserts, "We need to ensure our military has access to the best tech available, regardless of its origins, " emphasizing the fact that adversaries are already leveraging commercial technologies, thereby increasing the urgency and necessity for the US to address this issue. Until recently, the Pentagon's attempts to harness the innovation machine in Silicon Valley for national defense have been underwhelming. While a select few start-ups have enjoyed some success, with six of them—ShieldAI, Hawkeye 360, Anduril, Rebellion Defense, Palantir Technologies, and Epirus—achieving valuations exceeding $1 billion, securing large government contracts necessary for manufacturing complex systems has proven rare. Instead, early backing largely came from venture capital firms like Andreessen Horowitz, Lux Capital, and 8VC, while a slow and frustrating public procurement process forced many early winners to rely on billionaire founders to survive their early stages. For instance, data analytics group Palantir, created by tech entrepreneur Peter Thiel, and Anduril, founded by Palmer Luckey after selling his virtual reality start-up Oculus to Facebook, both fall into this category. ShieldAI's founder, Brandon Tseng, whose company was launched in 2015 and is now valued at $2. 3 billion, laments, "I have faced this problem every day for eight years. " He acknowledges their scaling success but also acknowledges that their ability to capture opportunities remains minute in comparison to prime contractors. Jenkins, founder of Saildrone, shares his frustration, believing that better contracting could have accelerated the process: "Could we have gotten there sooner with better contracting?Absolutely. " The source of their frustration lies in the rigidity of the Planning, Programming, Budgeting, and Execution (PPBE) framework used by the military to allocate resources. Established in the 1960s to mitigate conflicts of interest, this framework has become notoriously slow and difficult to navigate due to layers of bureaucracy. Competition waned due to consolidation in the defense market, leading to lawsuits brought against the Pentagon by companies such as Palantir and SpaceX to compete for business. Critics argue that the framework, designed for acquiring physical assets like aircraft parts and tanks, does not suit the nature of software that is poised to revolutionize future warfare. Landing a significant contract typically takes around two years, a timeline that has forced many inventors into the "Valley of Death" where promising prototypes are lost as companies wither away waiting for work. This framework is also ill-suited to the rapid pace of technological innovation. Thomas Tull, a billionaire investor and chair of the US Innovative Technology Fund, explains, "By the time you get through the slog, it is two years later and the technology is obsolete. " Initiatives like the DIU and Afwerx, established in 2017 to assist young companies in selling to the US Air Force, have faced limitations due to their relatively small budgets. Despite being founded as early as 1999, In-Q-Tel, the CIA's venture arm, has maintained relatively modest funding. It makes investments ranging from $500, 000 to $3 million, and companies backed by the DIU have only been awarded around $5 billion in contracts from defense agencies, a small fraction of the trillions spent on defense procurement since its inception. Hypersonic missile tests by China followed by Russia's invasion of Ukraine in 2022 forced the Pentagon to confront the need for reform. Ukraine's deployment of dual-use technology, which possesses both civilian and military applications, demonstrated the potential benefits of integrating commercial tech and spurred efforts to bridge the gap between Washington and California. When SpaceX provided the Starlink internet service, resistant to Russian interference, it marked the first time a commercial company served as the backbone of a country's military capabilities during wartime. Mike Brown, a venture capitalist at Shield Capital and former director of the DIU, explains, "What's happened in Ukraine has been a game-changer. More commercial technology is being used than during any other conflict. That has got the wheels turning for the US military, which is saying, 'We need to adopt far more of this'. " Additionally, there is increasing pressure to tap into the brilliant minds and deep pockets of Silicon Valley if the US wants to catch up with China's advanced technology. Beijing's testing of anti-ship ballistic missiles and long-range hypersonic missiles capable of evading US defense systems highlighted the criticality of innovation as a form of deterrence.

Blank of Stanford likened the situation to a puzzle for the Pentagon: "The question is, what else should we be deploying in the air or water to make the situation so complicated for China that they have to think about peace instead of conflict?" AI development, considered the most significant invention for the future of warfare since the development of the atomic bomb in the 1940s, has further intensified the need for reform. The introduction of AI could potentially render the existing military "kill chain" obsolete, as kills could be carried out rapidly and autonomously without human involvement. This advancement could enable the mass firing of long-range anti-ship missiles, capable of destroying hardware like aircraft carriers on day one of a conflict with China—a component on which the US spends tens of billions annually. The infrastructure of 20th and 21st-century battlefields would prove inadequate against swarms of autonomous drones, unmanned attack submersibles, and synthetic aperture radar capable of monitoring nearly any movement on the globe. Tull of the ITF declares, "The advancement [of AI] over the past six months has changed everything, " emphasizing that the technology is still relatively nascent. He characterizes this period as the equivalent of the Wright Brothers' initial flight, stating, "This is 'Wright Brothers take flight' kind of stuff. " You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser. Several defense tech start-ups utilizing AI have already altered the way the US military gathers and utilizes intelligence. A significant portion of Palantir's revenues, which totaled $1. 9 billion last year, came from US government contracts, including the provision of AI software for surveillance and data analytics used to track and monitor suspected terrorists. In April, Palantir demonstrated how its AI could be employed to rapidly analyze a battlefield situation, generate potential courses of action, and propose an operational plan to "neutralize" the threat. PrimerAI, based in San Francisco, scours thousands of sources of "open intelligence" and analyzes it using natural language processing. It provided intelligence to the US shortly before Russia invaded Ukraine, playing a critical role in determining Vladimir Putin's intentions. AI is also altering military hardware: in December 2022, ShieldAI successfully piloted the first unmanned F-16 fighter jet at an airfield north of Los Angeles, representing a breakthrough for the US Air Force, which has contracted ShieldAI to develop sophisticated unmanned aerial vehicles. American start-ups like BlackSky, Capella, and PlanetLabs—remote sensing companies that combine AI and satellite technology to provide real-time, detailed overhead images—have enabled Ukraine to pinpoint the precise location and status of advancing Russian convoys. These start-ups now hold prototype deals with the DIU. Tseng of ShieldAI asserts, "From 2001 to 2016, we took our eye off the ball, focusing on the war on terror. Russia and China built capabilities that countered what we have been using. We needed a plan to modernize [in order to deal with] these threats. " Despite considerable incentives, the numbers do not fully support this plan. The top 100 venture-funded defense start-ups have collectively raised $42 billion in funding. In contrast, the total revenue derived from government contracts ranges from $2 billion to $5 billion, according to the Silicon Valley Defense Group—an organization endeavoring to enhance collaboration between the region and politicians. Of these 100 companies, two-thirds are start-ups that have developed space or machine learning technologies. A July report by the SVDG accused the DoD of providing "door prizes but no sustained commitments" to include cutting-edge start-ups in major defense acquisition programs. This aligns with the sentiment expressed by founders and investors of Silicon Valley start-ups in a letter addressed to Defense Secretary Lloyd Austin. Weeks prior to the report's publication, the letter criticized the "antiquated" process of purchasing military technology and warned of the US's declining position on the "technological battlefield. " To address these concerns, last year's Defense Authorization Act established a Congressional commission to explore ways of modernizing military acquisition. In April, the DoD restructured the DIU, elevating its director, former Apple executive Doug Beck, to a position directly under Austin. Beck, who served in the US Navy for 26 years before joining Apple, where he reported directly to CEO Tim Cook, is viewed as instrumental in accelerating efforts to bring the military and Silicon Valley closer together. Congress allocated $111 million to fund the DIU's mission in 2023, about $45 million more than requested by the DoD. According to the former director of the DIU, Mike Brown, who saw the DIU bring 100 new vendors to the Pentagon during his tenure, a shift is evident, even if it is not yet occurring on a large scale. He adds, "If you analyze total spending, for now, it looks like we're buying the same large hardware we always have. But over the next couple of years, that will start to change. " With increasing incentives, the stage is set for the Pentagon and Silicon Valley to establish much stronger ties, aligning the technology used by warfighters with that used in commerce and industry and involving the private sector in a significantly broader capacity. The Pentagon faces the challenge of increasing digital fluency during an era of rapid technological innovation and incentivizing private capital to support the construction of an armed force capable of keeping pace with advancements made by China. The obstacles are not limited to the US military alone. Some Silicon Valley companies, such as Google, have relinquished defense work due to ethical concerns raised by their employees, particularly regarding software used in autonomous drones for target identification. Worries about appearing to support contentious US conflicts overseas, particularly in California, which traditionally leans against war, have deterred large venture capital funds from investing. However, as potential revenues become more apparent, these anxieties appear to be subsiding. Additionally, some start-ups have missed out on public contracts due to their failure to meet the rigorous tests and security clearance protocols set forth by the US military. These requirements include securing their own systems adequately and training AI models using military data. An experienced defense and AI investor cautions, "There's a lot of tourists in this space, " emphasizing the numerous opportunities for mishaps in conflict scenarios involving this technology. For figures like Blank, the stakes are too high for complacency from the US military, tech start-ups, or society as a whole. He warns, "We're still operating in the US as if we're in peacetime, " asserting that China now sets the pace, while the US is no longer a peer or near-peer competitor.