by Eric Frahm, Gallium Solutions CEO

I recently had the opportunity to attend the Army Demand Signal event at Stanford, hosted by America’s Frontier Fund, Venrock, and Stanford’s Gordian Knot Center and facilitated by the Army SBIR Program. The event brought together Army leadership, six Army acquisitions program offices, venture capitalists, and innovators to discuss the challenges and opportunities in defense technology.

Hearing directly from Gen Rainey (Army Futures Command), Lt Gen Anderson (XVIII Airborne Corps) and the Army acquisitions offices (PEOs) provided valuable insight into the Army’s evolving needs. It was encouraging to see such transparent discussions, and it would be beneficial for the Air Force and Navy to adopt similar engagement models.

A Persistent Expectation Gap

While the event highlighted significant progress, it also underscored a fundamental disconnect between Army acquisition processes and venture-backed business models.

This gap manifests in three critical ways:

  1. Venture’s Understanding of Defense Acquisitions
    Many venture-backed firms and investors lack a comprehensive understanding of military acquisitions and their impact on opportunity size and deal structure. There is a tendency to demand bigger and faster deals without proposing feasible pathways to achieve them within the constraints of DoD acquisition regulations. The Army has demonstrated a willingness to adapt, but the venture ecosystem must also invest the time to understand how contracts, budgets, and timelines shape the market. Far too many funds, even very large ones, don’t have anyone on their team with actual defense acquisitions experience. The career path that takes people into venture doesn’t seem to value that expertise, but I’m watching it hinder companies left and right.
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  2. The Army’s Opportunity Sizing Problem
    Too often, the Army presents opportunities that are not venture-scalable. A prime example discussed at the event involved a sensor deployment opportunity that, if fully successful, would result in only a few hundred units deployed over five years—a scope too small to attract venture-backed companies. While this may be sufficient for certain needs, it does not align with the scale that VC-funded startups require to justify the investment of time, effort and capital to bring the service what it needs.
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  3. The Army is missing the opportunity to leverage outside capital.

A Few Takeaways

My unshakable takeaway from the event was that Army leaders are clearly articulating the need to innovate and acquire differently than was done in the past, but the institution remains mired in the old ways. Program managers aligned with program offices aren’t collaborating amongst projects to tackle persistent challenges spanning multiple programs, much less multiple PEO’s. They have huge potential budgets, but no real plan to move it meaningfully toward innovative technologies.

Meanwhile, the Army’s best innovators (in particular their AI programs such as AI2C and Project Lynchpin) seem largely unaligned with any program office – no one is poised to throw gasoline on the fire if they find success, and the investment level seems far too low given the opportunity the service’s most senior leaders describe. The result is a lot of interesting AI developments, but the companies and investors that can make a difference in the space the most quickly aren’t very involved.  

The Army may be overlooking the true benefit of working with venture-backed companies. These companies bring additional capital that can enhance the Army's budget and lower its risk. Currently, those with program-level funding focus on small, relatively insular issues. Meanwhile those who are swinging for the fences continue to lack the program-level support to scale successful small bets.

Moving Toward Scalable Solutions

If the Army wants to leverage cutting-edge commercial technology, it must aggregate demand signals across different programs and structure opportunities in a way that is large enough to be venture-relevant. A more strategic approach – aggregating demand signals to solve many small problems and demonstrating unambiguous institutional backing for high-payoff small bets – would do wonders to attract serious investment and attention from America’s innovation base.

At the same time, venture leaders must engage more deeply with the nuances of defense procurement. Simply asking for "bigger deals faster" is not enough; we must understand and propose acquisition pathways that align with both military needs and commercial viability. The communities are too different to anticipate each other’s needs without cross-cutting talent clearing the path.

The event was a step in the right direction filled with people on all sides of the problem who are committed to getting it solved, and it is incredibly encouraging to see the Army’s PEOs actively engaging with the venture community. However, real progress requires alignment on both sides—venture must meet the Army where it is, and the Army must structure opportunities that align with the realities of venture-backed growth.

I look forward to continuing this discussion and working towards solutions that bridge the gap between national security needs and commercial innovation.

If you have thoughts or insights, I’d love to hear them!

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