Innovation Center Defence ministries’ partnership with startups to maintain technological leadership

The relationship between the technological and military sectors is profound in many countries‭, ‬in the United States for instance‭, ‬this relationship has been established through collaboration between the U.S‭. ‬Army and private defence companies like Lockheed‭ ‬Martin‭, ‬Boeing‭, ‬General Dynamics‭, ‬and Raytheon‭, ‬which provide various advanced weapons and technologically advanced systems used by the U.S‭. ‬military‭. ‬Recently‭, ‬it has become clear to the United States that there are thousands of other technology companies‭, ‬ranging from large to very small‭, ‬with substantial ideas and capabilities that could contribute to providing technologies that enhance the defence of the United States‭. ‬This trend is also evident in many other countries‭, ‬including Russia and Israel‭.‬

Many countries are now relying on innovations from the private sector‭, ‬particularly startups‭, ‬to develop technologically more efficient products for the battlefield‭. ‬This can be detailed as follows‭:‬

Washington’s Reliance on Startups to Develop Artificial Intelligence‭:‬

The United States has utilized numerous artificial intelligence algorithms produced by companies such as‭ “‬Primer‭”. ‬This American‭ ‬company offers artificial intelligence services to intelligence analysts‭, ‬managing to automatically record‭, ‬transcribe‭, ‬translate‭, ‬and analyze conversations conducted by Russian military personnel over unencrypted channels‭.‬

Companies marketing military artificial intelligence products make bold claims about their product capabilities‭, ‬suggesting they‭ ‬can aid in satellite data analysis‭, ‬identify patterns in data to enable soldiers to act more rapidly on the battlefield and assist in target identification through image recognition software‭, ‬and other capabilities‭. ‬As a result‭, ‬on June 30‭, ‬2022‭, ‬NATO established a‭ $‬1‭ ‬billion innovation fund‭, ‬aimed at investing in startup and private companies working on‭ “‬priority‭” ‬technologies for the alliance‭, ‬such as automation‭, ‬big data processing‭, ‬and artificial intelligence‭. ‬Various tech startups have sought to capitalize on the Russian-Ukrainian conflict to market their innovative products with military applications‭. ‬For instance‭, “‬Capella Space‭,” ‬a startup company based in San Francisco‭, ‬is constructing a fleet of low-cost small satellites‭, ‬which‭, ‬unlike traditional‭ ‬satellites‭, ‬can track enemy forces‭’ ‬movement at night or under cloud cover‭. ‬On the other hand‭, “‬Fortem Technologies‭,” ‬a small aviation firm based in Utah‭, ‬aims to supply the Pentagon with a new type of drone capable of disabling enemy drones‭.‬

Russian Startups Develop Cheaper Drones‭:‬

It was evident at the outset of the Russian-Ukrainian conflict that Moscow hadn’t invested adequately in developing drones‭. ‬However‭, ‬starting from the beginning of 2023‭, ‬Russia managed to partially overcome this issue through the‭ “‬Lancet‭” ‬drone‭, ‬developed‭ ‬by the Kalashnikov Group‭, ‬a Russian government-owned military company‭. ‬

This Russian drone successfully destroyed a significant number of Western armoured vehicles‭, ‬including Bradley armoured vehicles‭ ‬and German Leopard tanks‭.‬

Despite this success‭, ‬some point out that the production cost of the‭ “‬Lancet‭” ‬drone is high‭. ‬As a result‭, ‬some private companies‭ ‬have begun to develop new drones such as the‭ “‬Privet-82‭,” ‬produced by‭ ‬“Oko”‭, ‬a startup in the field of information technology‭, ‬headquartered in St‭. ‬Petersburg‭, ‬Russia and specialising in producing low-cost military drones‭.‬

‭”‬Privet-82‭” ‬is a direct competitor to the‭ “‬Lancet 3‭” ‬drone‭. ‬It uses an electric engine‭, ‬has a flight range of up to twenty miles‭, ‬can carry a warhead weighing 12‭ ‬lbs and has a speed of 55‭ ‬to 100‭ ‬miles per hour‭. ‬The new drone shares many advantages with‭ “‬Lancet‭,” ‬particularly its ability to resist jamming‭. ‬It employs a combination of satellite navigation and remote control by a pilot in a control room‭. ‬

In the final stage of an attack‭, ‬the‭ “‬Privet-82‭” ‬uses computer vision to automatically identify targets‭. ‬The company is capable‭ ‬of producing up to one hundred drones per month‭, ‬exceeding the number of‭ “‬Lancet‭” ‬drones that can be produced‭.‬

Some Western defence analysts note that Russia benefits from its ongoing conflict in Ukraine‭, ‬rapidly learning from its mistakes‭ ‬and swiftly introducing new technologies‭. ‬Undoubtedly‭, ‬startups will play a significant role in introducing these types of technologies‭, ‬especially if they manage to deliver new weapons to the Russian military that prove their efficiency on the battlefield‭.‬

Israel’s Institutionalized Collaboration with Startups‭:‬

The Israeli army aims to leverage technologies developed by startups‭, ‬especially those with potential military applications‭.‬

Thus the Research and Development Division at the Israeli Ministry of Defence initiated a program called‭ “‬InnoFense‭” ‬in 2019‭, ‬with the aim of serving as an innovation hub that assists partner startups with funding‭. ‬

The program reaches out to these companies and provides funding of‭ $‬50,000‭ ‬for around 4‭ ‬months‭, ‬to develop an innovative and applicable technological model‭. ‬If a startup successfully surpasses this stage‭, ‬it progresses to the second stage‭, ‬qualifying for a‭ ‬purchase contract for its product‭, ‬project development funding‭, ‬or financing from major military companies working with the Israeli army‭, ‬similar to the three major companies‭: ‬Elbit‭, ‬Rafael‭, ‬and Israel Aerospace Industries‭ (‬IAI‭).‬

For example‭, ‬Israel Aerospace Industries selected five startup companies to collaborate with its engineers and experts in creating products for the company‭, ‬including sensor devices‭, ‬artificial intelligence systems‭, ‬and more‭.‬

Factors Driving the Adoption of Startup Technologies‭:‬

Several significant factors have driven governments worldwide to rely on startup technologies‭. ‬These can be detailed as follows‭:‬

Shift in International Security Environment‭:‬‭ ‬The international security environment increasingly relies on innovations developed by academic institutions‭, ‬the technology sector‭, ‬and military research‭. ‬These entities offer innovative ideas‭, ‬cost-effective weapons‭, ‬and dual-use technologies that directly impact international security‭. ‬

Innovations and dual-use technologies are now being employed by hostile states and non-state armed groups alike to undermine stability and peace‭. ‬For instance‭, ‬terrorist groups have employed drones to threaten critical infrastructure‭.  ‬Faced with these new‭ ‬technological challenges‭, ‬governments need to quickly develop innovative ideas‭, ‬a role that startups can contribute to‭.‬

Change in the Innovation Landscape‭:‬‭ ‬National armies were undeniably the leaders in technological innovation throughout most of the 20th century‭. ‬

Technologies developed in defence laboratories often found their way into civilian sectors‭. ‬Examples include the Internet‭, ‬developed in 1969‭ ‬by scientists working for the U.S‭. ‬Department of Defence to create a decentralized communication network connecting‭ ‬universities‭, ‬government agencies‭, ‬and defence contractors‭. ‬

Originally targeted for defence communication‭, ‬the Internet began civilian use in the early 1990s‭.‬

Moreover‭, ‬global satellite navigation systems‭, ‬initially developed by the U.S‭. ‬Department of Defence in the 1970s using the Global Positioning System‭ (‬GPS‭), ‬now assist navigation from point to point‭. ‬Limited civilian use of GPS started in 1983‭ ‬before being‭ ‬expanded by 1993‭.‬

However‭, ‬in the 1990s‭, ‬due to significant reductions in defence budgets‭, ‬the budget allocated for research and development in civilian sectors became four times larger than the military equivalent‭.‬

Consequently‭, ‬civilian companies became the primary drivers of innovation globally‭. ‬As a result‭, ‬the defence sector adopted a flexible approach that leveraged new technologies developed in the civilian sector‭.‬

Major technology companies in Silicon Valley‭, ‬such as Intel‭, ‬Google‭, ‬Planet‭, ‬and i3‭, ‬began working in defence‭. ‬Intel acquired Ascending Technologies‭, ‬a company developing artificial intelligence for drones‭; ‬Movidius‭, ‬a company developing chips for drones‭; ‬and MAVinci GmBH‭, ‬a company developing flight path planning software for these types of drones‭.‬

Thus‭, ‬cooperative relationships between the U.S‭. ‬Department of Defence and these companies became natural‭, ‬especially if the latter could develop successful technological products with defence applications that could be marketed to the U.S‭. ‬military‭.‬

Therefore‭, ‬the pursuit of defence ministries around the world to develop relationships with startup companies is entirely logical‭, ‬especially since these startups are a major force in developing disruptive technologies‭, ‬which are the technologies that challenge prevailing concepts in military fields and drive changes in thinking and operational mechanisms in an effort to maintain a‭ ‬military advantage in the future against adversaries‭. ‬

Thus‭, ‬defence ministries strive to develop disruptive technologies that enable military superiority‭, ‬possessing a new generation‭ ‬of weapons that could reduce the relevance of older armaments and open doors to new weaponry‭. ‬One of the prime examples of this‭ ‬is drones‭, ‬with most world armies expanding their development of advanced and diverse drone generations‭.‬

Return of Great Power Conflicts‭:‬‭ ‬The resurgence of conflicts between major powers in the international system‭, ‬specifically between Russia and the United States‭ ‬regarding Ukraine‭, ‬or between Washington and Beijing over Taiwan‭, ‬has led to increased military spending and a search for technological innovations‭. ‬

These innovations contribute to addressing current shortcomings in military performance during combat and developing innovative‭ ‬technological solutions for challenges faced by armed forces on the battlefield‭. ‬Indicators of this include U.S‭. ‬investors approving more than 200‭ ‬defence deals in the first five months of 2023‭, ‬totalling around‭ $‬17‭ ‬billion‭, ‬surpassing the entire funds raised by this sector in 2019‭. ‬

Investments directed towards emerging defence companies grew from just under‭ $‬16‭ ‬billion in 2019‭ ‬to around‭ $‬33‭ ‬billion in 2022‭. ‬Given the anticipated increase in the U.S‭. ‬military budget to around‭ $‬886‭ ‬billion by 2024‭, ‬emerging companies are expected to secure a significant portion of this budget‭. ‬This encouraged major U.S‭. ‬technology companies to allocate part of their investments‭ ‬to acquire emerging defence companies‭.‬

Companies like Andreessen Horowitz and Sequoia Capital have begun investing in companies manufacturing defence products‭, ‬introducing‭ “‬kinetic‭” ‬weapons systems for the first time‭.‬

Dual-Use Technology‭:‬‭ ‬Many technological applications are now dual-use‭, ‬and the Russian-Ukrainian conflict underscores this fact‭. ‬For example‭, ‬the U‭.‬S‭. ‬company SpaceX provided internet communication services to the Ukrainian army‭, ‬successfully bypassing Russian interference‭. ‬Additionally‭, ‬Hawk Eye 360‭ ‬supplied radar imaging services to the Ukrainian military through satellites to detect the movements of Russian military convoys‭.‬

Current Challenges‭: ‬Despite the significant opportunities offered by startup companies to defence ministries in various countries‭, ‬it’s evident that they still face immense challenges‭. ‬These challenges can be detailed as follows‭:‬

“‬Valley of Death‭” ‬Challenge‭: ‬In military contexts‭, ‬this term refers to two main meanings‭. ‬First‭, ‬it signifies the financial resource depletion a company experiences during the development of its initial prototype due to its failure to secure a contract with the government for purchasing its product‭.‬

This ultimately leads to the company’s bankruptcy and exit from the market‭, ‬primarily affecting resource-constrained startup companies‭. ‬The term also refers to a second meaning‭, ‬which is the failure of defence companies to transition from initial prototypes to final products due to the bureaucratic processes of the U.S‭. ‬Department of Defence‭. ‬

The DoD often requires a significant amount of time to test initial prototypes and ensure their suitability for combat use‭. ‬This‭ ‬challenge can result in significant losses for startups‭, ‬forcing some of them to exit the market‭.‬

Critique of Defence Privatization‭: ‬Criticism has been mounting within the United States from certain circles‭, ‬arguing that excessive privatization of arms companies‭, ‬particularly in the aftermath of the Cold War‭, ‬has led to a decline in the production of certain American weapons‭, ‬such as ammunition and others‭, ‬which are crucial for supporting the Ukrainian army in its war against Russia‭. ‬In the early 1940s‭, ‬the United States held nearly 90%‭ ‬of the production capacity for aircraft‭, ‬ships‭, ‬artillery‭, ‬and ammunition‭, ‬which contrasts with the current situation‭. ‬More than 88%‭ ‬of the Pentagon’s new procurement contracts have been awarded to the private sector since 2011‭. ‬Furthermore‭, ‬over‭ $‬6‭ ‬billion of private capital is annually invested in the defence industry‭.‬

According to this viewpoint‭, ‬the United States lacks the necessary workforce to produce enough weaponry to support Ukraine‭. ‬The‭ ‬U.S‭. ‬was unable to provide Ukraine with the number of‭ “‬Javelin‭” ‬missiles it requested after depleting its stockpiles that were supposed to last for five years in the first six months of the war‭. ‬It also consumed a supply intended for six years of‭ “‬Stinger‭”‬‭ ‬missiles within just ten months‭. ‬

Furthermore‭, ‬when one of the few U.S‭. ‬military contractor-owned factories‭, ‬producing black powder for artillery shells‭, ‬exploded‭ ‬in 2021‭, ‬it wasn’t rebuilt due to projected unprofitability‭. ‬It’s also expected that disruptions in global supply chains will impact the defence industry in the foreseeable future‭. ‬Despite an anticipated increase in sales and profit margins‭, ‬production delays‭, ‬supply disruptions‭, ‬and actual production costs exceeding initial estimates are likely to affect the capability of private‭ ‬U.S‭. ‬defence industries to produce required weaponry‭.‬

According to this perspective‭, ‬the United States should increase its intervention in the military production process‭, ‬potentially by acquiring some defence companies‭. ‬This would facilitate the production of unprofitable weapon types‭, ‬enabling Washington to‭ ‬restore some types of weapons‭’ ‬inventories to their normal levels‭, ‬which have been depleted due to supplying Ukraine‭. ‬The U.S‭. ‬might adopt this approach‭, ‬which would in turn impact emerging technology companies‭, ‬as a significant portion of defence spending could be directed toward government military production or acquiring shares of private defence companies‭.‬


Despite the immense challenges facing startup companies worldwide‭, ‬particularly regarding their ability to provide innovative technology that can be successfully applied by various armies‭, ‬these startups will remain an integral part of the defence landscape in most countries‭. ‬This is due to their capacity to deliver advanced technologies that can contribute to the development of disruptive technology capable of achieving a military edge over adversaries‭.‬

‬‭By‭: ‬Dr‭. ‬Shadi Abdelwahab‭ ‬‭Military and Strategic Researcher‭

Al Jundi

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