Here are excerpts from a nice article from Ben Van Roo, “Emerging tech is transforming war in real-time, yet the biggest DOD incubator is stuck in the past.” By the way, he posted all his data from Beta SAM, so check it out!
From 2016 to today (5/3/2022), there were 15,664 SBIR awards going to 3,925 companies totaling $7.7 billion dollars. That’s fantastic! However, over this six-year horizon, a deeper dive shows a snapshot of who is actually making all of this money — very few companies. How few? Of the 3,925 companies that received $7.7 billion dollars in funding:
- 8 companies received 10% of the total awards
- 1% of companies received 25% of the total
- 5% of companies received 50% of the total
- 10% of companies received 61% of the total
Now let’s look at the Top 25 companies. Over the last six years with the SBIR program, they’ve made an absolute killing — $1.56 billion. These companies win because have built processes and teams to specifically win SBIRs. They develop networks in the DOD and they use them.
From a contribution standpoint, anecdotal information from multiple sources says we should comfortably assume 20 –30% of companies awarded DOD SBIR contracts use these third-party advisors. If we combine the 60% of business going to the top 10% of the companies, with the 25-30% of awards for companies that use these searvices (unlikely they overlap), 80-90% of the SBIR pie is now spoken for.
Ben has a few interesting recommendations: (1) getting rid of SBIR Phase I and focusing awards on larger $2M+ SBIR Phase IIs; (2) focusing awards on emerging tech companies and not rinse-and-repeat SBIR companies; and (3) using thematic requirements in solicitations rather than detailed point solutions.
That third recommendation is an underappreciated source of tension with nontraditionals. It was discussed on my recent podcast with nontraditional folks:
When you’re going to price out something, you’ve got to have different quotes for every single screw that you’re going to include in the product that you got from suppliers, and why you’re justifying, it is really onerous. The waterfall process they expect you to fit this into is also not how startups fundamentally build products, which is very iterative, includes a lot of like quick decision-making and rethinking of assumptions. The way that you’re going to have to write your proposal will lock you in to a very defined waterfall process that ultimately leads to bad products.
What this does is turn a company chasing DoD work into a business that chases these stovepiped DoD requirements rather than allowing them to build the best enterprise technology and tailor that to use cases. So while a company has to become excellent at writing DoD proposals that look like it came from Lockheed or Boeing, it at the same time creates tensions that ruins a company’s ability to differentiate, use modern development practices, and drive value:
Are you a commoditized product, as in another piece of software or a certain parts maker that someone else can 3D print for cheaper? Or are you something that they literally can’t replicate, which is hopefully where a lot of this American industrialism and dynamism will end up.
If it is something others cannot replicate, then it is difficult for DoD to write a requirement for it in a competitive solicitation.
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