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Summary:

Join Russell Long at Prodacity as he explores overcoming the notorious "Valley of Death" in defense innovation, a metaphorical gap that hinders the transition of technology from concept to deployment within the Department of Defense (DoD). Russell, the founder of Long Capture and a former Air Force contracting officer, shares his expert advice and experiences to bridge the gap between industry and DoD, aiming to enhance national security and support our Warfighters more effectively. From identifying demand and planning ahead to leveraging various funding sources and understanding the intricacies of DoD engagements, this talk is a must-watch for anyone involved in defense technology and innovation. Dive into the strategies that can smooth the path from innovative ideas to real-world application, ensuring that valuable technologies reach those who need them most.

Transcript:

Russell Long (0:14)

Hi everybody. Thanks so much to Bryon and the Rise8 team for giving me the opportunity to do this. The reason I've gathered you here today, is "Taking the 'Death' Out of the Valley." Other working titles include, "Why I Think the Valley of Death is a Load of Bulls%@!". Marketing Team said maybe not, and don't say that on stage, but here we are. So, something I'm very passionate about, in case you can't see me, I'm there too. And this is also evidence that I wore a suit once, I guess. This slide has nothing to do with imposter syndrome and everything with just putting some numbers on the scoreboard and showing you that hopefully I know what I'm talking about. So, worked with quite a few different tech companies over the years. I used to be an Air Force contracting officer, still recovering. I started Long Capture about six years ago to help bridge this gap between industry and working with the Department of Defense, specifically. Some of the numbers up here, again, those are things that we have physically touched and helped our clients to win. A lot of the playbooks, relationships, funding sources, things like that have gone on. I really see this as kind of a foundation. So, all that to say, I've spent a lot of time on both sides of the fence, working on these problems from both sides. 

(1:21)

So, why talk about the Valley of Death? Your companies are too important, our national security is too important, and the lives of our Warfighter is too important for this to exist. So what I want to get into today is what you can do about really bridging this gap, getting rid of this stupid valley of death terminology, and actually doing a couple of different things to help you make this more of a smoother transition. So we'll hit on some of the timelines that comes into play, and one or two, maybe three programs that we can hit on, specifically some different funding sources to, again, help turn this into a smoother on-ramp. There's going to be a lot more than what I'm able to get into here today, but these are just some different starting points. So first, let's define, what is the Valley of Death? So I really see this term thrown out in kind of two different ways, used pretty interchangeably. So the first that I've seen when people talk about the Valley of Death is kind of the traditional Small Business Innovation Research program. So back in the day, or well, still most agencies are still doing it, including the Department of Defense, but they'll write a very specific topic and they'll bring in a very immature idea and technology. The first step is a feasibility analysis and then the phase two is research and development to actually build a prototype and kind of prove, is this actually doable? And so in the traditional sense where the gap was is like, "Hey great, we made it to TRL Four." Or if we got real frisky, maybe we got to TRL Five, things got crazy. And then there's a big gap. How the hell do we get to TRL Seven, eight, nine, actually commercialize the technology, actually start getting the technology to the Warfighter in the case of the Department of Defense. So that was the first gap. And honestly where we first started, when I started Long Capture just over six years ago, it was actually kind of tackling this. There are some different funding sources, some different things there to help bridge that gap, but not what I wanted to get into in detail today. 

(03:25)

What I really wanted to hit today is kind of definition number two. So thanks to AFWERX, thanks to the Open Topic and a lot of things that have really changed over the last five years, and I continue to see momentum on what I consider that as like the first wave. So with SBIR reauthorization last year, they forced all DoD components. So a lot of the different military branches to try out some version of the Open Topic, which we've seen a lot of hits and plenty of misses on how they're actually trying that out. But what we see is more mature technologies, for the most part, coming in through these programs. Getting a phase one or two and they're tweaking the tech, so it's actually fitting the defense use case. Now, let's say things go swimmingly, just absolutely superb. You find a program office, they love it, they say, "Yes! You're the answer to all of my hopes and dreams. We have great news, we're going to write you a $50 million check four years from now." What the hell do you do for the next four years? Because of the budgetary cycles, even though we've gotten through some of the initial funding, we have a technology that's ready, the budgetary process is so long that there's this massive gap between, "Hey, I've got interest and I want to buy it," to when the money actually shows up to where they can make a purchase at scale. 

(4;44)

Now something, this is where I want to throw the BS blank, okay? And the way that people talk about the valley of death, if you look at the commercial sector, the private sector, businesses fail. You know, 90% of all, that's like overall time. But really, in the first five years, 45% fail and first 10 years, 65% fail. So no one's running around saying, "There's a valley of death in the private sector." Like, it's just how it works. Building a new technology, building a new company is risky. And so we see a lot of failure. So, I have seen almost a, just like expectation that just because you got some phase ones or twos or some initial awards that you're almost owed some follow on contracts even though it's a different customer, different funding source, different contracting vehicle, et cetera. So all that to say is I think it's a little bit of an unfair wrap and a little bit of fearmongering to say, "Hey, oh on the defense side it's the valley of death." Yes, there's a lot of problems. Yes, it's a new challenge, it's a different customer, the bureaucracy is a huge pain. There are challenges there, but I don't want to over blow it. And really what we're going to get into here today are some of the common mistakes that I've seen over the years and some ways that you can address it. So again, we can make this just an inconvenient valley, not a valley of death. So, I'll get off my soapbox. 

(6:01)

All right, these are the key takeaways. This is what I really want to have you all understand today. And then, we'll get into again some specific examples, some specific timelines to try and make this concrete. So is there demand? Here's a story I've seen over and over again. Commercial company, maybe they've raised a series A or seed investment. They've got some kind of decent commercial traction. And they come in and they start talking to the Department of Defense. They don't know where to start. I can see it. They don't know where to start, okay? They don't understand the rank structure, the bureaucracy, the language, it's all different. And so what happens is they go to some events where they finally find someone. Like, okay, we got Airman Snuffy. Airman Snuffy, he's got a great idea and it aligns with what we want to do. They get a customer memorandum, they go put it in a phase two. Two years later, let's fast forward, you get to the end of this project. And because they found this customer and they kind of put all their eggs in that basket, they didn't keep looking. They didn't keep talking. They didn't keep figuring out if this was an enterprise-wide problem. And what happens is at the end of two years is Airman Snuffy has a permanent change of station and he disappears forever. But somewhere else, the replacement isn't really interested. And what has happened is that this was actually just a pet project. This was just a good idea and there was never a larger problem, there was never a larger buyer. And so people get to the end of the phase two and it's just a wasted time, resources, manpower, money. And they get very frustrated and they're basically starting from scratch all over again. So really, is there demand? So once you find someone, keep going, keep looking, keep reaching out. I'll hit some of the ways you can do that in the Get Smart section in just a second. 

(7:53)

Plan ahead. This one is huge. Again, I see it over, over, and over again. People will get to the end of their phase two and they'll reach out to someone like us and say, "Hey, we're ready to start going after phase threes." No, no, no, no, no. You're now going to have at least a nine month gap, probably 12 or more. The time to start working towards phase threes and other funding sources is day one. As you're determining and again figuring out, is there demand? Is this a big problem? Before you even go after something like a phase one through the SBRA program, you need to be looking at, hey, who might be the buyer? Who is the customer? One more example, I kid you not, I will neither confirm nor deny if they're a client. But I have seen companies that have finished a STRATFI. So $15 million plus a couple million and some other phase two, so let's say $18 million, three years plus of runway. And they are within a few months of the end of their STRATFI, and then they start saying, "Who's going to buy this?" "Who's the procurement office?" And so now we're going to have a gap no matter what, because, and one, like yes, the research lab in this hypothetical scenario has been very supportive and great, but they're not the buyer at the end of the day. It's the procurement offices. It's the program offices, the PEOs. So like, "who are you building this for?" Because maybe the scientists like it, but at the end of the day they're not the buyer. 

(9:26)

So you know, as you're going through this development, as you're going through phase ones and twos and beyond, you've got to really be looking at, again, who's actually going to be the buyer and pulling them into these different conversations. And again, starting as early as possible. Get smart. They said be smart, I changed that. I'm not that smart. I read lots of books because it takes five or 10 times to get it through this thick skull. So there are a lot of different resources out there to get smart on these programs. Coming to events like this, all kinds of different conferences where you can sit down and actually ask questions of the war fighter and the capability owner and the customers. And something I want to really emphasize here, again and working with tech companies over the years, we're eager to tell our story. We're eager to get too technical too quick. We're eager to start saying, "Well, back in '92, Tom and Jerry were in the garage and they had this idea." You've lost everyone. Everyone's bored. So make sure as you go to these events and you talk to these folks and you reach out via LinkedIn or email or whatever it is, that you are approaching the conversation to learn and figure out what are the gaps, what are the needs, what are the pain points. And something I'll say here, like I've seen it with Rise8, I've seen it with a bunch of other companies that were founded by people that came out of the Department of Defense. They moved to these huge 50, a hundred million dollars contracts very, very shortly. And that's because they understand the problem. So, if you didn't do your time on that side of the fence as the government, maybe you hire some people to your team that have that experience, have that perspective, or again, just going and listening and really digging into understand what these big, pain points are. 

(11:07)

The other thing, all right, every base has a public affairs office. They're constantly putting out puff pieces, news articles about different innovation projects, about different capability gaps they have. If you research online, all of these organizations have a list. They make lists, checklists. The research lab, for example, every couple of years they update their, like 2030 R&D, these are the tech capabilities we want. Office under Secretary of Defense, they have their list of capability gaps. LCMC, like all these just different organizations all the way down to the spark cells, they're all putting together these list of capability gaps. So when I say is there a demand, those are some of the places that you can go and look. Again, the other piece is understanding eligibility, timelines, when submissions happen and the cycles. That information's out there. Shameless plug because it's free, if you go to our website, the programs and funding that we're about to talk about plus many more, are there. I don't even ask for your email. So the information's out there. You can go to places like AFWERX.com for their programs. They've got a pretty good overview of their timelines and some of the different programs. But start looking at the eligibility. What kind of money is this research and development or procurement dollars? How mature does my technology need to be to go after these programs? So anyways, there's that. I will get into a couple examples here. We hit a lot of these and I'm going to hit a concrete example when we get to fallout funding in just a minute. 

(12:43)

What do you need to do now if you want to work with the Department of Defense in 2024? So two scenarios I want to run here. First is, hey, never worked with just getting started, trying to work with the Department of Defense. So have all your government registrations completed. We have a free guide, that one will cost you your email address. It's on our website. Hot take, someone fight me on this in the Q&A please. But the way we like to do business, the way to access a lot of different funding sources is to come with a more mature technology or one that's going to be a high TRL very soon. So again, and even the Open Topics that like AFWERX funds really favors companies that have revenue and investment and things like that, that typically yield a higher TRL coming into it. Again, know your timelines and work backwards. We'll hit some specific here in a minute. And then talk with your end users. So if you don't have one, get out to events, reach out on LinkedIn. Again, find these articles and these names and find ways. Find conferences that they're going to and go track 'em down. But start now, especially before the holidays so that when the February phase one round as one on-ramp option comes around, you are ready and already have an idea of the end user and can write to that in your phase one proposal. 

(14:04)

Now let's say, hey, we're already on a phase two or already on attack by STRATFI. Again, start talking as early as possible about hey, what comes next? The phase two's going to end and I'm assuming you have a good relationship, they're going to be interested in figuring out how to help you transition. But again, a lot of this comes down to you getting smart of like who's the actual transition partner, who's going to be paying for this at the enterprise level and potentially leveraging those relationships to get to some of those people. But anyways, that's how we can get to it. The formatting didn't work out great here. We can come back to this later in the Q&A. Point is, sometimes you need to start now if you want an award by 2026 on some of these programs, but we'll hit that very specifically. 

(14:53)

So, let's talk about STRATFI/TACFI specifically. So if you want an up to $1.9 million TACFI, $15 million STRATFI, and you want to submit in the 2024 cycle, you need to have already put in a phase two. So this most recent direct to phase two cycle was the last shot you have at getting a phase two award in time for you to then be eligible for TACFI/STRATFI next year, which then will result in an award probably in the 2025 timeframe. So if you look at this again, the cycles that AFWERX has on their website on when they plan to award things, even if you put in the most recent phase one cycle, the August-September timeframe or so, the planned phase two award date is beyond when allegedly this program is going to start. Now, this program is a tricky one. The phase ones and twos have been fairly standardized as far as like when the initial solicitation happens. TACFI/STRATFI last year was open around January to June. This year was open for six weeks in the fall. And two different dates depending on TACFI and STRATFI. So know it's a moving target, but the eligibility has been pretty damn consistent across the years. So if you're looking at what do I need getting on a phase two, and there's a bunch of different matching options and start looking at like, well, when are we raising? Can we thread the needle so that, hey, we get this phase two and happen to close investment, after all of a sudden I'm eligible to put in for another 1.9 at least. So things like that really come into play. 

(16:35)

So again, point is, if you missed the timelines this year, what you're looking at is phase one cycle in the February-March timeframe, direct to phase two in the spring, another phase one round after that. Taking a couple of shots on goal in 2024, trying to get to phase two so that by the time we get to 2025 you're on a phase two or a couple and are eligible to put in for a program like STRATFI/TACFI. So another one, APFIT. This one, to me, I like to say least one to two years. if you're starting from, again, nothing, don't have any relationships yet, I'd definitely say two plus years for a program like this. APFIT is new. I think it's super exciting. To me it's part of what I call the second wave. So what we saw about five and a half years now is we started to do these Open Topics. We started to bring in new, non-traditional tech startups in mass. Now we have thousands that have come in the door thanks to things like AFWERX and the Open Topic. So it's great to again open that front door, get a bunch of these companies in, and start working with the Department of Defense. 

(17:48)

And then the next wave, in my opinion, is we start seeing a lot of different programs along these lines, TACFI/STRATFI. Army has a catalyst program now, which is basically the equivalent of this with some nuances. They're doing it a little bit differently. They're talking about revitalizing the Rapid Innovation Program, used to be called Rapid Innovation Fund. And from the draft NDAA language, it's not finalized, what I've seen is I think they're going to bump that to probably $6 million per award instead of three. But anyways, second wave being like there is recognition that the door is kicked open and that we need to do a better job providing funding and resources help bridge this value. So with APFIT, why I have such a long timeline here is it's procurement dollars. So you need a mature technology, high TRL. You need to be budgeted for. So what that means is actually going to like the POMing cycle, which means you need relationships with the program office. It means that they need to acknowledge and say, "Hey, yes, in future POMs we consider this capability to be what we've asked for." So if you are already on a phase two or have some other traction, you have these relationships. If you're starting now through the springs when kind of this budgetary cycle starts, that means you might be eligible by the fall to put in for APFIT. Which means by March to May 2025, you'd actually see it between a 10 million and a $50 million award. 

(19:15)

Again, if you're starting from scratch, that's where, okay, we can leverage things like phase ones and twos to start getting some revenue on a much shorter timeline. And we can start building the relationships with the people who are going to do the budgetary ask and start teeing this up. I think it takes time to build those relationships where the phase ones and twos are a great help is having a very risk, kind of free way to bring in these customers to see your tech. The other piece that's extremely important if you want to win something like APFIT is having a contract in place that can take 10 million to 50 million, and that in itself and setting up a phase three or OT or whatever it might be that can catch money of that magnitude. That can take nine months, 12 months, 18 months to set up. So as part of going to phase one and phase two, start dabbling in some phase threes, setting up a vehicle that can actually catch money like this so that this becomes a real play for you all. 

(20:13)

All right, we'll hit a little bit on fallout money because there's a lot of misconceptions about when fallout money happens. I think most people think there's a mad scramble between August and September, and in many cases, yes, that's fairly true. But what I want to hit on here and what I want you all to understand is. this is a process. This is paperwork. When I was a contracting officer at a small base, we would spend $7 million a year and planned money raining from the sky dollars. And so what's happening right now is that different offices all around the Department of Defense are starting this process because by January-February they're racking and stacking requirements and saying, "This is our cutoff. These are our priorities." So, if you're going through the process, starting now, stuff getting racked and stacked by January-February, contracting starting very shortly after, and then yes, that ultimately culminates with a contract award and a mad scramble in August-September timeframe. Do different things happen? Absolutely. Can you throw egg at my face after this and give me a million examples where this didn't happen? Yes. This is scalable and repeatable is what I'm getting at. Now if we talked about putting contracts in place. If you have a contract ceiling and $2 million, it was unplanned and shows up and you can get it on contract within a couple of weeks, like yeah, you can grab a lot of money at the end of the fiscal year that was unplanned. But just know there are processes and ways to go about it. The other piece here is this operations and maintenance dollars. Meaning, they're buying stuff essentially off the shelf. So if you are at a lower TRL, this kind of funding source isn't really an option for you. So that's when I say like, "Hey, you're at a higher TRL, get a more mature technology," that means you're able to grab some of these other funding sources that otherwise wouldn't be available.