How to build a defence startup

There may be a regulatory hinterland to march through, but we must start building new defence startups, writes John Macdonald

After nine months, the Defence Investment Plan was finally released yesterday. Of particular interest was the prioritisation of autonomy and drones (£5bn, found from taking from other worthy causes), though it came without much mention of startups and young companies. They are only mentioned twice in the plan, yet they would be integral for success in both of those areas.

In other words, if you’re ‘looking for growth’ as a startup, defence is not a great place to start. There is ultimately one customer, which is both indecisive and extremely demanding, both willing to commit large investments without knowing where it’ll find the money, and both willing to simultaneously add ‘gold plate’ requirements to what it’s buying while remaining obsessed with ‘value for money’. I’m not sure where I heard it first, but our procurement system can sometimes be best described as ‘doing a bad job of buying broken equipment that we don’t really need’. The list of controversies is long; the ongoing Ajax calamity, Type 45 destroyers struggling in warm waters, and the Watchkeeper drone programme, which will take 15 years and £2 billion to become fully operational, only to become functionally obsolete within 2 years and officially so within 5.

A lot of blame often gets left with ‘primes’ – large companies that directly own a contract with the MOD. However, more than anything, they are just optimised for dealing with long, uncertain procurement cycles, with a focus on maintaining traditional capabilities over newer technologies. Combined with a political obsession with SMEs, this has incentivised an ecosystem dominated by these large players, with specialist companies fitting into their supply chain as mandated. There is little room for disruption, rapid iteration, and deployment of new technologies. As a result, young companies are few and far between, leaving us unprepared to deal with the rapid proliferation of ‘software defined, hardware enabled’ technologies, even if the urgency itself is acknowledged. In Watchkeeper’s case, this meant that the ecosystem was unable to keep pace with advances in drone technology – expensive to build, operate and iterate on where the advantage is now in quick manufacturing, ease of use and modularity.

Drone warfare has transformed the battles of today and tomorrow.

So what is to be done? Where LFG has seen success in pushing government to behave better, its greater strength is in building a network, and channeling talented, highly motivated people towards multi-decadal national challenges. New infrastructure, abundant energy, reviving British manufacturing, and cutting edge defence capabilities won’t just require better government, but also a new generation of companies willing to stick out a harsh and unpredictable business environment in the national interest. This is how I met my co-founders at Blackmoor Defence, born out of a desire to show that it is possible to start and succeed as a young company despite an inhospitable ecosystem.

Despite this, we’ve found in our first 6 months that potential competitors, Civil Servants, MOD and Armed Forces personnel have been overwhelmingly supportive. Introductions have been made, feedback on our deck and product development, and advice more generally has all been offered. Most seem genuinely excited, and maybe even slightly surprised that there are new people, with new ideas about new problems getting involved. This also means that most events even if billed for early stage companies actually end up with more SMEs present than young companies, simply because they are so rare. I am particularly grateful for the LFG x Valarian event earlier this year, which was an exception to this experience!

Universities have also been incredibly helpful, offering partnership opportunities, access to lab testing environments, demo facilities, and expertise. Sometimes, however, this can be held up by the politicisation of defence and national security on many university campuses, with projects stalled or cancelled as part of managing a difficult relationship with student unions.

Unfortunately, for all the good will, great people are held back by systemic dysfunction; opportunities will go cold due to shifting priorities, clearances will put up barriers, and people will be rotated out of their positions too fast to make any structural changes. Too often, potential partner organisations will keep a company in limbo because they don’t know what kind of commitments can be made. Having a potential customer or government partner tell us our idea is bad might hurt, but it would at least give a signal to start building something else.

Our most successful approach for getting around this has been to build solutions that we think are effective and exciting. Perhaps for all the complexity of defence as dominated by large suppliers and a monopsony buyer, the market approach of making something that solves a visible problem still works best. ‘Sea Sentinel’, our maritime asset monitoring software suite, originally came into existence because my co-founder wanted to learn about shadow fleet activity from open source intelligence.

Although starting a company is almost always fraught with uncertainty, the first 6 months of Blackmoor have made one thing very clear: defence needs more startups and young companies. There are huge gaps in the ecosystem’s ability to keep up in AI+ML, in autonomy and now counter-autonomy, in sensors, and in coordinating across all these areas and many more. There might not be VCs chomping at the bit to throw money at you, there might be a regulatory hinterland to march through, and even then, your primary customer might not even know what they want to buy from you, but if you’ve got ideas about how to solve problems for defence, I guarantee you that you’ll find people willing to do everything they can to help you succeed.

Notes:

I’ve been deliberately vague about what we’re working on at Blackmoor. If you’re interested, send me an email at john@blackmoordefence.com!

The relationship between the defence industry and growth is back in the spotlight. The Government’s predominant view is that defence should be treated as a ‘growth engine’, that investing in defence leads to good jobs all over the country, or what Andy Burnham has been calling ‘good growth’. The defence industry can certainly support this, and hope that Blackmoor can play its part in Leicester (where we’re currently based), but government investment in defence should have only one priority: increasing our ability to protect our country. Otherwise, there is a risk of creeping ‘everythingism’ at the expense of the efficacy of our Armed Forces.

John Macdonald is the co-founder of Blackmoor Defence, a new defence tech startup.

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