The Policy Trifecta That's Reshaping Defense Tech Deal Flow
25 June 2025 - A Weekly Publication by New North Ventures
The bureaucratic moat protecting defense contractors is drying up
The Pentagon just taken serious steps toward dismantling its own bureaucratic fortress. After decades of complex procurement processes that favored traditional contractors, three policy shifts have fundamentally altered defense acquisition and provided some ray of hope for smaller companies.
The current Administration eliminated AI regulatory barriers and mandated commercial-first acquisition. The FoRGED Act makes commercial contracting the Pentagon's default mode, ditching defense-specific requirements that created structural advantages for incumbents. Meanwhile, Congress allocated $150 billion in new defense spending—including $25 billion for space-based missile defense and $16 billion for AI capabilities. These aren't niche military technologies anymore. They're commercial battlegrounds where startups are already competing.
This fundamentally changes competitive dynamics. Companies that prove themselves in commercial markets first now hold advantages over defense incumbents. The founders closing deals understand this shift perfectly—they build for commercial success, then leverage that validation for defense contracts rather than reverse-engineering government requirements.
Implementation risk exists, naturally. Defense reforms historically stumble on bureaucratic inertia, and traditional contractors are shopping aggressively for commercial capabilities. But that creates opportunities too—both competitive pressure and and upswing in potential exit paths.
So what changes for you? Founders building AI, space tech, or cybersecurity solutions can access defense markets without abandoning commercial focus, reinforcing a dual-use strategy. Investors should reconsider companies with commercial traction in defense-relevant verticals. Government stakeholders can expect faster innovation and competitive pricing.
The tactical move involves exploring Other Transaction Authority consortiums now, with OTAs providing a strong opportunity for startups to bypass traditional procurement bottlenecks entirely. The 2025-2027 window offers optimal timing for companies positioned at this commercial-defense convergence.
a16z dropped a comprehensive "DoD Contracting 101" guide this week that perfectly captures and demystifies the current complexity of defense procurement. Three thousand words mapping every pathway from SBIR Phase I through Program of Record—essentially a field guide or playbook to navigating the bureaucratic maze that has defined the path for dual-use companies for decades.
The piece documents everything from "colors of money" funding categories to PEO relationship mapping, providing founders with the tactical knowledge needed to survive today's system. Their success case studies—Anduril's CBP-to-DoD progression, Palantir's multi-year TITAN win—demonstrate how commercial-first companies can eventually crack defense markets through persistence and strategic positioning.
What makes the timing fascinating is how their detailed process documentation arrives just as those same processes face fundamental restructuring. The guide explains why companies like Anduril chose non-traditional entry points and why Palantir spent years working around institutional barriers. Both strategies worked because they leveraged commercial validation to overcome defense-specific procurement complexity.
The policy changes we analyzed suggest this complexity is diminishing rapidly. When commercial contracting becomes the default rather than the exception, the intricate pathway mapping that defines their guide becomes less critical than commercial market validation itself.
Their core insight remains valuable though—successful dual-use companies prove themselves commercially first, then scale into government markets. That approach is shifting from strategic advantage to institutional requirement.
The bureaucratic navigation skills they document will still matter during the transition period, but commercial traction is becoming the primary qualification rather than secondary validation. Smart founders should read this guide while recognizing the landscape it describes is evolving quickly.
The incoming CENTCOM commander delivered a clear message to Congress this week that the military needs more technology targeting underground sites. Vice Admiral Brad Cooper's testimony highlighted how adversaries from Hamas to Iran are moving critical infrastructure below ground, creating urgent demand for advanced sensors and precision munitions.
Cooper's comments came days after the first combat use of "massive ordnance penetrator" bombs against Iranian nuclear facilities. His emphasis on leveraging "America's elite tech sector" for AI-enabled unmanned platforms and counter-drone systems signals immediate operational priorities.
Cooper's background commanding Task Force 59—the Navy's AI and unmanned systems initiative—suggests he understands commercial technology's potential. His testimony provides concrete evidence of market demand for technologies that can detect, track, and engage hardened underground targets.
More links to explore:
Hubble Network deployed four more satellites on SpaceX's Transporter-14 mission, bringing their constellation to seven operational satellites. The company enables any Bluetooth-enabled device on Earth to connect directly to their satellites—redefining global IoT connectivity possibilities.
The latest satellites, named Scooby + Shaggy and Lilo + Stitch, are undergoing commissioning procedures. As the team noted, "We've come a long way from our first weather balloon test and we've entered the realm of space hardware."
Hubble is now preparing production traffic for their first satellite customers, demonstrating execution velocity from proof-of-concept to revenue generation. Their approach leverages existing Bluetooth protocols rather than requiring specialized hardware, reducing deployment barriers and opening applications across commercial and government markets where traditional infrastructure fails. Congrats to the whole Hubble team!
Reality Defender earned significant recognition as a 2025 World Economic Forum Technology Pioneer, joining an elite group of 100 companies from 28 countries driving global innovation. The program's 25th anniversary cohort includes companies addressing humanity's most pressing challenges, with Reality Defender specifically recognized for securing communication channels against deepfake impersonations in real time.
The WEF selection validates the urgent need for multimodal detection technology as generative AI tools enable bad actors to impersonate and defraud at scale. Reality Defender's patented approach combines real-world accuracy with continuous resilience engineering, offering flexible deployment across existing enterprise tech stacks.
The Technology Pioneer program historically launches companies that transform industries—alumni include Google, PayPal, Dropbox, and SoundCloud. Reality Defender's inclusion highlights cybersecurity's critical importance in the AI age, particularly for protecting organizations from reputational damage, data breaches, and asset theft caused by deepfake attacks.
As a Technology Pioneer, the company will contribute insights to WEF initiatives over the next two years, helping shape global conversations around AI security and digital trust. Their participation provides a platform to accelerate development of advanced solutions protecting against digital impersonation across enterprise and government sectors.
The recognition positions Reality Defender among innovators working on quantum computing, clean energy, and other breakthrough technologies, all focused on enhancing rather than undermining trust in our interconnected world.
Founded: 2024
Key People: CEO Michael Lafferty
Elevator Pitch: Developer of ultra-efficient AI chips using superconducting materials and deep cooling technology—designed to slash electricity use in data centers by up to 25 times compared to current semiconductor chips. The technology addresses the growing energy demands of AI computing while potentially enabling high-performance processing in power-constrained environments.
Funding: Raised a $23 million seed round led by Playground Global, with support from Cambium Capital and Vsquared Ventures.
In this episode of the 'Securing Our Future' podcast, hosted by New North Ventures, Jeremy interviews Veronica Daigle about her journey from Wall Street to the federal government, including her roles at the Office of Management and Budget (OMB) and the Pentagon. Veronica now leads the Defense Ventures group at Red Cell Partners, a venture firm focused on building and incubating companies with dual-use applications.