Ask defence tech startups what big challenges they’re facing and you’re sure to hear one common answer: the difficulty of winning and working on government or military contracts. The government isn’t your typical enterprise customer — and long process times, preferences for larger companies and a frequent aversion to riskier projects have made it tricky for young upstarts to get their foot in the door.
But unlike many in the industry, Jon Williams says the aim shouldn’t be to fix or change governments too much: “You’re never going to change them,” he tells Sifted. “I talk about meeting the defence customer where they are, not expecting them to adapt their behaviours to be faster or take more risk.”
Williams — who spent more than 10 years in the UK Royal Marines — is launching defence procurement startup Allied Adaptive Industries, or A2I, which is backed by investors including London-based VC firm Notion Capital and British VC and accelerator 1991 VC (Williams declined to say how much the startup has raised so far).
On a high level, Williams says the company’s investors and others have described it as “Anduril for Europe”; he says it’s a mix of that and “Amazon for defence procurement”. The company will provide a platform and marketplace for startups, small and mid-sized companies and defence primes to bid for government contracts. It will work with companies in Europe and the US, focusing on Europe.
Instead of building products itself, he says A2I is trying to source the best technologies — be they pieces of software or whole systems like drones or air defence systems — and bring them together to address the government or military’s problems, with a focus on cheap and scalable products. The startup will take a transaction fee from any sales made using its marketplace, which companies and governments will be able to access for free when it goes live next year. A2I will also offer tiered subscriptions for support services and digital procurement tools, Williams says.
The startup will bundle defence products and services for contracts, and will take on the responsibility for “delivering the government a complete end-to-end solution.” Williams says it has early traction with several European governments and is in the process of bidding for a number of defence contracts.
There’s ample criticism that governments need to be taking more risks and moving faster.
“There are people in government that take a tonne of risk, more risk than you would believe with their lives and other people’s lives,” says Williams. “The reason they don’t take financial risk or bets on certain products often is because the risk of failure is too high, the cost is too high.”
It’s a contrarian view to many defence tech founders, like Florian Seibel, the founder of Munich-based unmanned drones startup Quantum Systems, who bemoaned “outdated” procurement processes in an interview with Sifted in July.
While Williams concedes that things could be better within the government, he believes it’s key for founders to understand the government’s or military’s underlying drivers and build products with that in mind.
Primes and startups: ‘chalk and cheese’
Some of the key challenges startups are facing? The arduous process of bidding on government contracts: “If you’re a small company, you just don’t have the capacity, you don’t have the money to buy the specialist people” to work on the bids. Williams also points out that startups may struggle with a lack of experience. “‘How do I convince the government that if they give me a £5m contract and my company’s valued at £5m […] that I’m not going to go pop tomorrow?'”
Other barriers for startups include the need for specialist knowledge or access to governments, which may be trickier if they’re coming from a commercial space into defence; startup funding cycles (often every 18 months or so) may also not always align with government procurement cycles, which could take two to three years, Williams says.
Meanwhile startups have to navigate the market full of embedded so-called defence primes — large companies like Airbus or Lockheed Martin which have established government contracts.
“It’s super easy to demonise the primes and see them as, like, these big, bad, greedy organisations,” says Williams. “Like any large organisation, I’m sure there’s stuff that justifies that view, but there’s a hell of a lot of stuff that doesn’t.”
Though primes don’t necessarily work at “21st century pace,” Williams says that he’s seen defence primes doing more to try and work with startups. “But fundamentally you’re talking about chalk and cheese,” he adds.
‘21st century Turings’
More founders are securing funding for their defence tech companies in recent years, as the once taboo space has become less controversial for entrepreneurs and VCs following Russia’s full-scale invasion of Ukraine in 2022.
But the numbers are still lacklustre — the 264 defence tech and dual-use deals last year were down on the 308 in 2022, according to Dealroom data.
Williams believes defence needs to attract more of the best and brightest minds currently in the tech world: “I call them 21st century Turings,” he says, referring to the famous mathematician Alan Turing who invented the machine that helped crack German secret codes during World War II. “Those people put uniforms on and turned up at Bletchley Park and volunteered to join the military,” Williams says. Today, “those people are building, you know, startups or working for DeepMind. They’re not going to join the British military, they’re not going to turn up at GCHQ [the UK’s intelligence agency]. So the challenge is, how do you co-opt them in the nicest possible way? Because we need them.”
For Williams part of the answer will be making procurement a smoother process with his startup. And with President-elect Donald Trump returning to office, war raging on in Ukraine and tensions escalating in the Middle East, he argues it’s time to prioritise defence.
Read the orginal article: https://sifted.eu/articles/defence-tech-startups-government-procurement-company/
