The US Navy is more proactive in telling startups that “we want you”

Silicon Valley executives are executives like Palantir, Meta and Openai, but they’re grabbing the headlines to trade Brunello Cucinelli’s best. Army Reserve UniformA quiet transformation is underway in the US Navy.

how? Well, Navy Chief Technology Officer Justin Fanelli says he spent the last two and a half years focusing on cutting off the long procurement cycle that once made working with the military a startup nightmare. This effort represents an invisible but potentially meaningful remake, with government moving faster and clever about where it is spent.

“We’re more open to businesses and partnerships than ever,” Fanelli told TechCrunch in a recent Zoom interview. “We are more humble and listened than before and we know that when an organization shows how to do business differently, we want it to be a partnership.”

Today, many of these partnerships are being promoted through what Fanelli calls the Navy Innovation Employment Kit. It is a set of frameworks and tools aimed at bridging the so-called Valley of Death, dying on the road from prototype to production. “Your grandfather’s government had a spaghetti chart for how to get in,” he said. “It’s now a funnel. If you can show that you have an extra large result, we want to designate you as an enterprise service.”

In one recent case, the Navy was under the age of 8, a Somerville, Massachusetts-based cybersecurity startup, and within six months, went to pilot deployment from Request for Proposal (RFP). (One other Via client is the US Air Force.)

The new Navy approach works based on what Fanelli calls the “horiline” model borrowed and adapted from McKinsey’s innovation framework. Companies go through three phases: evaluation, structured pilots and scaling to enterprise services. The key difference from traditional government contracts is that the Navy has problems rather than pre-determined solutions.

“Instead of specifying, ‘Hey, I want to solve this problem the way this problem has always had,’ I just say, ‘I’m going to say there’s a problem, who wants to solve this, and how they want to solve it,” Fanelli said.

Fanelli’s overhaul naval technology is personal. Originally an Air Force scholarship cadet studying electrical engineering, he was disqualified from military service due to lung problems. Determined to serve anyway, he chose the Navy over a private sector offer over 20 years ago. Because he “wanted to be around people in uniform.” Since then, his career has played a role across defense, intelligence, DARPA and open source initiatives before returning to the Navy division.

The changes he overseen open the door to businesses that previously did not consider government work, and you may have thought it was a waste of time to give it a try. For example, Fanelli runs for one competition through the Defense Innovation Unit (DIU). The Navy was hoping for a small number of bidders for the niche cybersecurity challenge, but received many responses from companies that have never worked with DOD before but have already solved similar issues in the private sector.

Fanelli says his team has fully documented dozens of success stories. This involves a venture-backed startup using automation of the robotics process to zip a two-year invoice backlog in just a few weeks. Another example was to deploy a network improvement of the aircraft’s airlines that saved 5,000 sailor time in the first month alone.

“It not only changed their availability, it also changed the way they could spend morale, Esprit de Corporation and other jobs,” Fanelli pointed out, explaining that the time saved is one of five metrics the Navy uses to measure the success of their pilot program. The other four are operational resilience, cost per user, adaptability and user experience.

As for what the Navy is currently looking for, Fanelli has outlined several high-priority areas, including AI, where the service is actively talking to its team. First of all, the Navy wants to accelerate adoption of AI beyond basic generator AI use cases and become more agent applications, from onboarding and HR management to vessel data processing. He also cited the “alternate” GPS, explaining that the Navy is rapidly adopting alternative precision navigation and timing software, particularly for integration with unmanned systems. He then refers to “modernizing legacy systems,” saying that some of the aging technologies the Navy is trying to modernize include air traffic control infrastructure and ship-based systems.

So, how much money do you want to spend every year? Fanelli said there was no freedom to provide a specific budget breakdown, but said the Navy is now allocating a single-digit percentage for emerging and commercial technologies and traditional defense contractors compared to traditional defense contractors.

As for the most common reasons why promising techniques fail when tried, he said it is not necessarily due to technical shortcomings. Instead, the Navy operates on a long budget cycle, and if new solutions do not replace or “off” existing systems, funding becomes a problem.

“If we’re profiting and we’re measuring that profit, we don’t have money (to reach the startup) in a year and a half. That’s a really bad story for investors and users,” explained Fanelli. “It’s a zero-sum game sometimes. Sometimes it’s not. And there’s a lot of technical debt that needs to be cut down on anchors if you’re going to make the public-private sector more private and ride that wave.”

During our call, we also asked Fanelli if the Trump administration’s “America’s first” policy had any impact on these processes. Fanelli responded that the focus on domestic manufacturing is in good alignment with the Navy’s “resilience” goals (he pointed to digital twins, additive manufacturing, and on-site production capabilities that can reduce supply chain dependencies).

In any case, the Navy’s message to entrepreneurs and investors reveals it is a true alternative to the traditional commercial market, a pitch that appears to have gained traction in Silicon Valley, and has been accepted into partnerships with the US government.

Andrew Bosworth of Meta Recently observed at a recent Bloomberg event In San Francisco, “There’s a much stronger patriotic foundation than people think they’re giving Silicon Valley credit.”

As long-standing industry observers can demonstrate, it is a marked shift from the more skeptical attitude that characterizes much of the valley over the past few years.

Now, Fanelli hopes to attract more of that interest, especially for the Navy. He told TechCrunch:

If you’re interested in listening to the full conversation with Fanelli, you can check it out Here.