Army Futures Command Is a Year Old. Has the Austin Innovation Ecosystem Changed?

After one year with Army Futures Command, the Austin innovation ecosystem has dramatically changed... but not how one might expect.

(Disclaimer - the views, thoughts, and opinions expressed in this article belong solely to the author)

August 24th marked the first anniversary of the Army Futures Command activation ceremony in Austin. It was a beautiful ceremony adorned with state and Army leadership. Secretary of the Army Mark Esper (now Secretary of Defense) commented that Austin would “immerse [the Army] in an environment where innovation occurs, at speeds far faster than our current process allows… a location that had the right combination of top-tier academic talent, cutting edge industry and an innovative private sector." 

I couldn’t agree more. On July 13, 2018, the Army announced Austin as the “winner” of the Army Futures Command search, and I wrote a LinkedIn article framing the AFC decision against the MIT Innovation Ecosystem Stakeholder Model. Austin's strengths in the components (entrepreneurs, risk capital, corporations, government, and academia) combined with proximity to DoD installations and friendliness toward the military made its selection a no-brainer. The addition of a major DoD player would be the perfect way to tap into the surging demand to work with the military, seeded by organizations like DIU.

The launch of AFC brought an overnight shift in public awareness and support. My conversations with companies across Texas shifted from, “Why is the DoD in Austin?” to “How can I work with DoD?” AFC’s title sponsorship of Austin Startup Week the following month further fanned the flames of interest. 

Over the next year, Systems Integrators, key to scaling efforts across military programs, began opening their own outposts in Austin. Capital Factory launched its Center for Defense Innovation on the 8th floor of Capital Factory. Army Futures Command opened the public-facing Army Applications Lab. The National Geospatial-Intelligence Agency and the National Security Innovation Network joined DIU and AFWERX in Austin. New organizations like the Texas Defense Innovation Forum and Grayline Defense began connecting DoD with industry as non-Federal entities. 

But there was a secret hidden in Austin Startup Week 2018’s first-ever Defense Innovation Track - the launch of AFWERX’s attempt to overhaul the Small Business Innovation Research (SBIR) program. To some, SBIR was the poster child for billions of dollars in wasted Federal spending, so it was a prime target for a new approach. By hacking SBIR to offer a shorter application process, an accelerated contract award, and a shorter period of performance, this >$1 billion annual program could finally work in a way that effectively connected entrepreneurs and earlier-stage companies to DoD problems.

The results have been impressive. In March, AFWERX and the Air Force Research Lab reported 160 awards valued at $58 million awarded over a five-day period in Austin. If the current trends continue, AFWERX will be able to claim over 2000 awards worth over half a billion dollars by this time next year. With visionary leadership from Dr. Will Roper, Assistant Secretary of the Air Force for Acquisition, Technology and Logistics, the program will only get bigger and more “joint” in the future. 

For Austin, this means AFWERX has stepped in to connect earlier-stage companies to DoD opportunities -- a role the ecosystem expected Army Futures Command to fill. My conversations with companies have gone from, “How can I work with DoD?” to “I received a Phase I or II SBIR award from AFWERX, let’s talk about how best to set up transition in a Phase III.” This has been the greatest catalyst for change in the Austin defense innovation ecosystem over the past year. 

SBIR is by no means a panacea for dual-use technology or defense innovation, but it has greatly expanded what the National Defense Strategy refers to as the National Security Innovation Base. Thousands of companies will become eligible for sole-sourced contracts across the DoD following the successful completion of their projects. DoD entities tend to learn hard lessons about the need to "do deals" and move dollars to maintain their relevance. The Secretary of Defense launched my organization, formerly known as DIUx, in August 2015 to much fanfare and high expectations. However, DIUx “suffered from an overly broad purpose and unrealistic demands; unlike other startups, it missed the opportunity to operate in ‘stealth mode’ to address these issues early,” and was relaunched as DIUx 2.0 in May 2016. 

The re-launch of DIUx 2.0 will go down in history as how to not prolong failure in the Federal government. Just 9 months after its initial launch, DIUx 2.0 brought new leadership, new reporting structures, and most importantly, an engine to do deals in a way that Silicon Valley understands. Three years later and sans the “x,” DIU has executed ~150 deals worth over $400 million to primarily startups and other non-traditional defense suppliers. My colleague Kevin Landtroop recently commented that there is a perception that AFC “hasn’t done anything yet,” which is unfair considering how much work has been done to establish a 4-star command. I agree with him, but I also think it’s important to turn to the sage wisdom of Mark Twain: history doesn’t repeat itself, but it rhymes. Army Futures Command has a very broad purpose and unrealistic demand for quick wins, and like DIUx 1.0, it never had the opportunity to establish business processes and address issues in stealth mode.

Is it time for AFC 2.0? Time (and Congress) will tell. However, in its first year, Army Futures Command has done important things to transform the Austin defense innovation ecosystem into a Texas defense innovation ecosystem. In partnership with Texas A&M, AFC launched a $130 million hypersonics research campus to tackle what is a matter of national importance. Agreements are being inked between AFC and academic institutions across the state. AFC is reorganizing a huge swath of the Army in its largest overhaul in 45 years. It’s just not readily apparent to Austinites that this is happening as people aren't seeing contracts awarded to companies.

With that said, I think we can get there before AFC’s second birthday. Here’s my wishlist for the next year:

...that Army Futures Command reinvents the Army’s SBIR program. Whether it’s through partnership with AFWERX on joint SBIR or an AFC effort modeled after it, this could revolutionize how non-traditional companies to tackle the six Army Modernization priorities. As Assistant Secretary of the Army for Acquisition, Logistics and Technology, Dr. Bruce Jette understands the cooperation between intelligent culture and industrial pursuits. This is known at MIT as its motto of “mens et manus,” or “mind and hand.” As an MIT alumnus, Dr. Jette is in the perfect position to put mind and hand into practice for the Army as Dr. Roper has done for the Air Force. 

...that Army Applications Lab is seen as a place to get deals done. AAL has an outstanding public-facing space on the 8th floor of Capital Factory. More importantly, they have a cadre of capable and motivated people, many of whom I have had the pleasure of getting to know over the past 6 months. Once they turn on the deal-making engine, there is to limit to their impact in Austin and beyond.

...that more organizations across Texas get involved in the rapidly expanding defense innovation ecosystem. MassChallenge and TechStars are two examples of startup accelerators with a history of working with the DoD in Boston, and that expertise could go a long way in the Lone Star State. There are also world-class organizations in Texas, such as SXSW, that could have a huge impact on the National Security Innovation Base if given the opportunity. 

...that Systems Integrators find a way to get more involved. Love them or hate them, they're integral to long-term, sustaining innovation within the DoD. I have enjoyed briefing them during their visits to town, but it's clear that they haven't quite figured out how best to approach this rapidly evolving ecosystem. There is a tremendous amount of value to be created in this space, however, and the first one to get it right will be able to capture a lot of it.

This morning I heard Congressman Mac Thornberry, Ranking Member on the House Armed Services Committee, speak at an event in Austin. He began his remarks about the prevalence of the lyrics, “you don’t know what you’ve got ‘til it’s gone.” He used that as a segue for a discussion on how the United States has defined the world order since World War II. I would offer that those lyrics are just relevant to the unprecedented expansion of the National Security Innovation Base over the past few years. It has never been easier for startups to Fortune 100 companies to work with the DoD to solve national security challenges. I hope that both Texas and the nation realize what we’ve got before it’s gone.