Commercial Accelerators and the Defense Department: A Blueprint for Collaboration

January 13, 2019 | Source: War on the Rocks, warontherocks.com, 14 Mar 2018

Three thousand two hundred and sixty-nine. This was the number of companies to graduate from more than 170 different accelerators across the United States and Canada in 2016. Since 2005, these short-duration programs, designed to expedite a company’s maturation, have helped their graduates secure over $19.5 billion in seed and early Series round funds.

Zero. This was the number of commercial accelerators the Department of Defense partnered with between 2005 and 2015. By last year, a few groups within the department had started to explore how these programs could be useful to national security innovation, but the interest remained limited. While private industry embraced accelerators, the department watched idly as its technological advantages eroded. The early failure to partner with commercial accelerators has resulted in a lost opportunity to shape future technologies today. Partnering with accelerators will give the Department of Defense access to emerging technologies and ideas, both early enough in their growth cycles and at a low-cost entry point. This will enable the department to connect with non-traditional defense companies and entrepreneurs, embrace risk as a means to long-term success, establish innovative resourcing avenues such as a loan program office, and mitigate foreign adversaries’ ability to secure next-generation technologies before U.S. warfighters do.

Why the Department Needs Accelerators    

The accelerator experience is an “intense, rapid, and immersive education aimed at accelerating the life cycle of young innovative companies, compressing years’ worth of learning-by-doing into just a few months.” An accelerator’s structure and technology portfolio can vary, but traditionally revolve around nurturing a selected group of companies known as a “cohort” for a fixed period. At a cohort’s initiation, accelerators traditionally provide a small amount of capital in exchange for equity. Even after a company graduates from the accelerator cohort program, the staff continues to provide direct support and guidance. A startup traditionally raises venture capital funds after graduating from the accelerator to further drive technology infusion and exponentially increase profitability. Three top accelerators alone — Y Combinator, TechStars and 500 Startups have 1,060 companies actively producing solutions within the commercial space.

Herein lies the benefit for the Department of Defense. Relationships with accelerators provide a sweet spot to enter the process late enough that a technology has moved toward commercial maturity, yet not so late that an adversary such as China would have already acquired this innovation by investing in the startup. As venture capital flows into the technology after graduating from the accelerator to expedite commercial usage, the department would have a time advantage relative to others, by already being aware of the technology’s application. For truly promising technologies, the department could provide funds to guarantee the technology’s continued maturation under the department’s oversight.

The considerably diverse technologies within accelerator portfolios can help solve national security problems. Accelerators can provide the department with technologies in the enterprise software and cyber domains; biomedical products by design; healthcare applications for the warfighter; autonomous systems and artificial intelligence for intelligence, surveillance, and reconnaissance; and myriad other applications. The accelerator community has the technology the department needs to solve current and future defense challenges. All that’s missing is the relationship.