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WASHINGTON — The Defense Department’s enthusiasm for commercial innovation isn’t backed by sufficient funding, space industry executives said Sept. 11.
These executives from venture-backed companies argued that while the Pentagon has created several initiatives to collaborate with private companies — such as the Defense Innovation Unit, the Office of Strategic Capital and SpaceWERX — these organizations focus heavily on seed funding and research-and-development contracts. What is lacking, they say, is a clear pathway for companies to move beyond R&D and secure funding to scale up production and become key suppliers in national defense.
John Serafini, CEO of the remote-sensing company HawkEye 360, said DoD has built mechanisms to engage with commercial enterprises but these efforts rarely lead to the kind of long-term, stable funding that traditional defense contractors enjoy.
“The defense tech industry as a whole is at a crossroads,” he said during a panel discussion at the Global Aerospace Summit hosted by the U.S. Chamber of Commerce.
Even when a commercial space technology is considered “operationally relevant,” the Pentagon is not helping companies scale up production, said Serafini. “We have to get to programs of record to enable capabilities at scale.”
Programs of record are acquisitions of products or services that have been officially authorized and included in the DoD’s budgeting process — offering a stable stream of funding for companies involved.
Both DoD and the U.S. Space Force released strategy documents earlier this year focusing on the integration of commercial space technologies to enhance national security. “The Intention is there, but the funding is not there at the scale we need,” he said. “We need a tactical revolution in how we fund commercial technologies.
Commitment to ‘grow the space economy’
Ron Lopez, president of the satellite-servicing firm Astroscale U.S., echoed Serafini’s frustrations. He pointed out that commercial space services do not receive the steady, predictable funding that traditional military programs enjoy, despite the government’s stated intent to leverage private-sector innovation. “The space industry needs a strong commitment from the DoD to grow the space economy,” Lopez said. “Without that, it’s difficult for commercial firms to secure the long-term investments required to scale.”
Serafini pointed to contracts awarded in 2022 by National Reconnaissance Office as a case in point. That year, the NRO awarded deals to six companies — HawkEye 360, Aurora Insight, Kleos Space, PredaSAR, Spire Global, and Umbra Lab — to study the use of commercial radio frequency (RF) tracking data for defense applications. Today, however, only three of those six firms are still operational. Kleos Space went out of business, Aurora Insight was acquired, and PredaSAR failed to get its operations off the ground.
“This highlights just how difficult it is to build commercial capabilities for defense and intelligence applications, and to scale at the velocity needed to support venture capital returns,” Serafini said.
He added that unless the government moves faster in making commercial technologies part of its official programs, the entire defense technology industry could suffer. “The faster the government moves with programs of record, the better off the defense technology sector will be.”