Legacy defense contractors have been plugged into academic talent pipelines for decades, and now students have a model for what it looks like to disrupt the Pentagon’s tech profile with entrepreneurship and venture capital.
College classes that culminate with business pitches benefit the Defense Department by adding tools to its arsenal for fighting 21st century wars, like continuous surveillance and flexible lithium batteries.
“There is no doctrine for what we’re trying to do and we need one,” Pete Newell, a retired colonel in the Army’s former Rapid Equipping Force, said about defense innovation.
Students specializing in areas like AI, machine learning, drones, and biotech are likely to choose startups over working for an established defense contractor, according to Joe Felter, former deputy assistant secretary of defense for South and Southeast Asia. Without a conduit to the startups, DOD is at a disadvantage in acquiring the latest technology compared to its near-peer competitors.
Capella Space began in a Stanford University course called Hacking for Defense, known as H4D, which Newell co-teaches with Felter and professor Steve Blank.
By week 10 of his stint in the class, Capella founder Payam Banazadeh had secured $200,000 in funding from a venture capital firm that would eventually lead to a prototyping contract with the Defense Innovation Unit. DIU is the Defense Department office for bringing commercial technology to the military faster than using traditional procurement methods.
H4D grew out of Blank’s Lean LaunchPad course designed to “teach entrepreneurship like you teach artists”—by combining theory with hands-on practice. It’s now taught at more than 60 universities in the US and a handful in the UK and Australia. There are plans to expand to other allied nations including Singapore and India.
Banazadeh’s initial concept was to monitor illegal commercial fishing ships in the South China Sea and around Africa. He noticed that the US was behind in the signature aperture radar commercial sector, in part due to National Oceanic and Atmospheric Administration restrictions.
“We convinced the government that they should loosen up some of the restrictions, and we were successful in that,” Banazadeh said.
The radar technology also fills a known satellite imaging capability gap—seen in Ukraine—where nighttime and poor-weather conditions limit the usefulness of standard optical satellites.
The company announced Tuesday morning the creation of a subsidiary, Capella Federal, for increased focus on its contracting business as well as additions to its government advisory board. New members include former Defense Intelligence Agency director Robert P. Ashley Jr. and former Special Operations Command operations director Clayton Hutmacher.
Changing Culture
Slowly, parts of the Pentagon are coming around to the idea that the federal buying system is out of sync with the speed needed to get tech into the hands of soldiers and stay competitive with other global powers.
DOD undersecretary for acquisition and sustainment William LaPlante said last week that there’s more political will and money being put towards the problem since the end of the Cold War.
One of the major criticisms of federal innovation is the need for a departmentwide culture change to integrate the newest tools into the defense department’s strategy and missions.
DOD has stood up offices and programs to connect startups and small businesses innovating in cutting-edge fields like artificial intelligence, quantum computing, and autonomous vehicles. But many have been quietly stood down, overshadowed by newer efforts or folded into other parts of the bureaucracy.
Part of the failure, the H4D team believes is also a symptom of status quo leadership.
“We’ve always been really good at investing in the battlefield commander,” Newell said. “Building an entrepreneur has got to be very similar.”
From the Classroom to Ukraine
In the 10-week H4D class, students identify a problem, iterate solutions, meet with potential government customers, and pitch their ideas in the form of a company by the end.
“Almost always on day one, you believe that’s the problem and by week 10 you discovered, oh no, it’s usually a symptom of a much more interesting problem, or it’s more complex, or there are multiple stake stakeholders, or there’s always a saboteur,” Blank said.
The class is an attempt to connect with students who would never consider joining or working with the military to appreciate national security issues, Felter said. “The more we can expand everything we do in the great power competition, the more we can empower allies and partners, the more we’re going to stack the deck in our favor.”
The professors of H4D believe they are doing just that. Students talk to people inside the Pentagon, DOD contractors and others in the defense ecosystem to figure out what the problem is.
It’s “an anthropology problem,” according to Newell, another H4D instructor.
For Capella, what began as idea in a Silicon Valley classroom is “bringing a level of transparency to the world that just didn’t exist,” Banazadeh said.
The Defense Department and the public can access Capella’s satellite imagery of Ukraine. Banazadeh said one of the most important impacts of their technology and the war in Ukraine is being able to share their data with the media. “Prior to Capella and some of the other capabilities, you wouldn’t really be able to talk about what’s happening on the ground,” he said.
Capella has received more than $16 million in unclassified contracts with the DOD, NASA, and the Environmental Protection Agency. The company’s SAR satellite is also being used to monitor ice melting in the Arctic and Amazon deforestation.
Universities have been part of the US research and development of national security projects since World War II. In fiscal 2022, the DOD spent billions on contracts with universities, colleges and professional schools for weapons R&D. In 1945, higher ed institutions like MIT, Caltech, Harvard, and Columbia received $450 million (not adjusted for inflation) in the sector, according to Blank’s research.
To contact the reporter on this story: Patty Nieberg in Washington at pnieberg@bloombergindustry.com
To contact the editors responsible for this story: Amanda H. Allen at aallen@bloombergindustry.com; Fawn Johnson at fjohnson@bloombergindustry.com
