The U.S. Navy's Open Call: Why Startups Are Finally Finding a Path to Partnership

While headlines often spotlight Silicon Valley executives trading their corporate attire for military uniforms, signaling a renewed interest in defense and national service among tech leaders, a less visible but potentially more profound transformation has been unfolding within the U.S. Navy. This isn't about symbolic gestures; it's about fundamentally altering the mechanics of how the military branch acquires and integrates cutting-edge technology, specifically from the agile world of startups.

At the heart of this quiet revolution is Justin Fanelli, the Navy's Chief Technology Officer. For the past two and a half years, Fanelli has been on a mission to dismantle the notorious bureaucratic barriers and protracted procurement cycles that have historically made working with the U.S. government a daunting, often insurmountable, challenge for young technology companies. His efforts represent a strategic pivot, aiming to make the Navy faster, smarter, and more efficient in how it identifies, evaluates, and invests in external innovation.

"We're more open for business and partnerships than we've ever been before," Fanelli stated in a recent interview. This isn't just rhetoric; it reflects a conscious effort to shift the Navy's posture from a rigid, top-down acquisition model to one that is more receptive, humble, and actively listening to external capabilities. "We're humble and listening more than before, and we recognize that if an organization shows us how we can do business differently, we want that to be a partnership."

Bridging the 'Valley of Death'

One of the most significant challenges in government technology adoption is the so-called "Valley of Death." This refers to the critical phase where promising prototypes or pilot projects, often developed with initial government funding or interest, fail to transition into large-scale, funded programs of record. The chasm is typically caused by complex budgeting cycles, stringent requirements, risk aversion, and the sheer inertia of large government organizations. For startups, which operate on venture timelines and require predictable revenue streams to scale, this Valley of Death is a fatal trap.

Fanelli and his team are tackling this head-on through what he describes as the Navy's "innovation adoption kit." This isn't a physical kit, but rather a suite of frameworks, tools, and streamlined processes designed to guide external companies, particularly startups, through the labyrinthine path from initial contact to enterprise-wide deployment. The goal is to create a clearer, faster, and more predictable funnel for promising technologies.

"Your granddaddy's government had a spaghetti chart for how to get in," Fanelli explained, painting a vivid picture of the old, convoluted system. "Now it's a funnel, and we are saying, if you can show that you have outsized outcomes, then we want to designate you as an enterprise service." This shift from a complex, opaque network of entry points to a structured, performance-driven funnel is central to the Navy's new approach.

The core of this new process is a "horizon" model, adapted from McKinsey's widely recognized innovation framework. This model structures the engagement into three distinct phases:

1. **Evaluation:** An initial phase where the Navy assesses the potential of a technology or solution against specific problem sets.
2. **Structured Piloting:** Promising solutions move into controlled pilot programs designed to test their effectiveness in real-world Navy environments and measure tangible outcomes.
3. **Scaling to Enterprise Services:** Successful pilots are then positioned for broader adoption across the relevant parts of the Navy, moving towards becoming integrated, funded programs.

A critical difference in this new model, according to Fanelli, is the Navy's willingness to lead with problems rather than predetermined solutions. Traditionally, government RFPs (Requests for Proposal) were highly prescriptive, detailing not only the problem but often the specific technical approach or architecture required. This approach often stifled innovation and favored large, established contractors familiar with the exact specifications.

"Instead of specifying, 'Hey, we'd like this problem solved in a way that we've always had it,' we just say, 'We have a problem, who wants to solve this, and how will you solve it?'" Fanelli elaborated. This open-ended, problem-centric approach invites a wider range of potential solutions and encourages companies to propose novel, potentially more effective, methods based on their commercial experience.

Early Successes and Tangible Outcomes

The Navy's reformed approach is already yielding concrete results, demonstrating that faster, more effective partnerships with startups are possible. Fanelli's team has documented numerous success stories, highlighting the tangible benefits of cutting through red tape.

One notable example involves Via, a Somerville, Mass.-based cybersecurity startup specializing in protecting sensitive data through decentralization. In a process that would have historically taken years, the Navy moved from issuing a Request for Proposal to deploying a pilot program with Via in under six months. Via's technology helps organizations like the Navy and the U.S. Air Force protect digital identities and sensitive information by avoiding the single points of failure inherent in centralized data storage, a critical capability in an era of persistent cyber threats.

Another success story involved a venture-backed startup utilizing robotic process automation (RPA). This technology was deployed to tackle a massive backlog of invoices that had accumulated over two years. What would have required countless hours of manual work was completed in a matter of weeks by the automated system, freeing up personnel for higher-value tasks.

A third example cited by Fanelli involved network improvements rolled out to an aircraft carrier. These improvements were not just technical upgrades; they had a direct, positive impact on the lives of the sailors. In the first month alone, the network enhancements saved an estimated 5,000 sailor hours. This time, previously spent grappling with slow or unreliable connectivity, could now be dedicated to training, operational readiness, or even personal time.

Fanelli emphasized that these outcomes are not just anecdotal. The Navy is implementing clear metrics to measure the success of pilot programs and new technology adoptions. Time saved, as demonstrated by the aircraft carrier example, is one key metric. The other four crucial indicators are:

• **Operational Resilience:** How much does the technology improve the Navy's ability to operate effectively in contested or degraded environments?
• **Cost Per User:** Is the solution cost-effective when deployed at scale?
• **Adaptability:** How easily can the technology be modified or integrated with other systems as requirements evolve?
• **User Experience:** Is the technology intuitive and effective for the sailors and personnel who use it daily?

These metrics provide a data-driven basis for evaluating whether a pilot program should advance through the "horizon" model to enterprise-level adoption, offering startups clear goalposts for demonstrating value.

High-Priority Tech Areas for Navy Partnerships

For startups and investors wondering what specific problems the Navy is most eager to solve, Fanelli outlined several high-priority technology areas:

• Artificial Intelligence (AI): The Navy is keenly interested in moving beyond basic generative AI applications. The focus is on more "agentic" AI systems capable of performing complex tasks, assisting with decision-making, and automating processes. Potential applications range from streamlining administrative functions like onboarding and personnel management to sophisticated data processing and analysis directly on ships and other platforms. The goal is to leverage AI to improve efficiency, enhance situational awareness, and reduce the cognitive load on personnel.

• Alternative GPS: Given the increasing threat to traditional GPS satellite systems, the Navy is prioritizing alternative precision navigation and timing (PNT) solutions. This is particularly critical for the growing fleet of unmanned systems, which rely heavily on accurate navigation data. Startups offering resilient PNT technologies that can function in GPS-denied environments are of significant interest.

• Legacy System Modernization: Like many large, long-standing organizations, the Navy operates a significant amount of aging infrastructure and technology. Modernizing these legacy systems is a constant challenge and a major area for potential external partnership. Examples include updating air traffic control systems on carriers or modernizing ship-based combat and communication systems. Startups with expertise in migrating legacy data, developing middleware, or providing modern interfaces for older systems can find significant opportunities here.

While Fanelli was unable to provide specific budget figures, he indicated that the current allocation for emerging and commercial technology, as opposed to traditional defense contractors, is in the single-digit percentages. However, he expects this balance to shift significantly in the coming years, particularly as the potential of AI and other advanced technologies becomes more apparent and the new procurement pathways prove their effectiveness.

Navigating the Funding Challenge

Despite the streamlined processes and clear metrics, challenges remain. Fanelli highlighted that the most common reason promising technologies fail to achieve widespread adoption isn't necessarily technical deficiency, but rather challenges related to funding and integration within the Navy's long budget cycles.

The ideal scenario for adopting a new technology is when it can directly replace or "turn off" an existing, often outdated, system. This creates a clear funding path, as the budget previously allocated to the old system can be redirected to the new one. However, if a new solution provides a significant benefit but doesn't directly replace an existing funded program, securing long-term funding can become problematic.

"If we're getting benefit and we're measuring that benefit, but there's no money [getting to the startup] in a year and a half — that's a really bad story for their investors and our users," Fanelli explained. This disconnect between demonstrating value in a pilot and securing sustained funding for scaling is a version of the Valley of Death that still needs to be fully addressed. He acknowledged that sometimes it's a zero-sum game within the budget, and the Navy needs to be more aggressive in retiring "technical debt" – outdated systems that are costly to maintain and hinder modernization.

Alignment with National Priorities and Shifting Sentiment in Silicon Valley

The Navy's push for faster tech adoption also aligns with broader national priorities. When asked about the impact of policies like "America first," Fanelli noted that the focus on domestic manufacturing and supply chain resilience resonates strongly with the Navy's own goals. Initiatives like digital twins, additive manufacturing (3D printing), and developing on-site production capabilities are all aimed at reducing dependence on potentially vulnerable global supply chains, enhancing the Navy's ability to repair and sustain operations independently.

Perhaps equally important as the internal reforms is the changing sentiment in Silicon Valley itself. For years, there was a degree of skepticism, even resistance, among some tech companies and employees towards working with the U.S. military and government. However, recent geopolitical events and a growing awareness of the importance of technological leadership for national security have begun to shift this perspective.

As Meta CTO Andrew Bosworth commented at a recent event, "There's a much stronger patriotic underpinning than I think people give Silicon Valley credit for." This sentiment, coupled with the sheer scale and complexity of the challenges the military faces, presents a compelling opportunity for startups looking to apply their innovative solutions to high-impact problems.

Fanelli has been actively engaging with the tech community, speaking with business media and participating in podcasts, to spread the word about the Navy's new openness. The message is clear: the U.S. Navy is a genuine, viable alternative market for innovative technology companies, offering not only potential business opportunities but also the chance to contribute to a critical national mission.

The Defense Innovation Unit (DIU), a DoD organization focused on accelerating the adoption of commercial technology, serves as another important pathway for startups. Fanelli pointed to a recent DIU competition for a niche cybersecurity challenge where the Navy expected only a handful of bids but received nearly 100 responses. Many of these came from companies that had never worked with the DoD before but were already solving similar problems in the private sector, illustrating the vast, untapped potential of the commercial tech base.

The Path Forward

The transformation underway in the U.S. Navy is not a simple flick of a switch; it's a continuous process of reform, cultural change, and relationship building. Fanelli and his team are working to embed the new, agile procurement mindset deeper within the organization, ensuring that the "innovation adoption kit" and "horizon" model become standard operating procedure rather than temporary initiatives.

The success stories, from rapid pilot deployments to significant time savings for sailors, provide crucial evidence that the new approach works. They also serve as powerful examples to encourage other parts of the Navy and the broader Department of Defense to adopt similar reforms.

For startups, engaging with the Navy still requires patience and a willingness to navigate a unique environment. However, the message from the top is unequivocally one of welcome. The Navy is actively signaling that it understands the need to adapt its processes to the speed and culture of the commercial tech world.

The potential benefits of successful partnerships are immense, not just for the startups gaining a powerful new customer, but more importantly, for the Navy's ability to maintain its technological edge and ensure national security in an increasingly complex global landscape. By opening its doors and streamlining its processes, the U.S. Navy is making a compelling pitch to the innovators of Silicon Valley and beyond: "We want you."

This evolving relationship between the military and the tech sector is a critical development to watch. As AI, quantum computing, advanced materials, and other frontier technologies continue to emerge, the ability of defense organizations to rapidly identify, acquire, and integrate these innovations will be paramount. The U.S. Navy's proactive steps, championed by leaders like Justin Fanelli, offer a promising model for how this essential collaboration can be fostered, bridging the historical divide between the fast-paced world of commercial tech and the vital mission of national defense.

For those interested in a deeper dive into this topic, the full conversation with Justin Fanelli provides further insights into the challenges and opportunities of this transformative effort. You can listen to the podcast interview here.

Additional relevant insights into the intersection of tech and defense can be found in various publications covering the sector. For instance, reports on the activities of key figures like Justin Fanelli or broader analyses of government and policy impacts on technology provide valuable context. Furthermore, exploring how startups are navigating the defense market offers perspectives from the entrepreneurial side.