5min chapter

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005: Raj Shah - Unit X: The Rise of the Defense Innovation Unit

The Defense Tech Underground

CHAPTER

Navigating Innovation Funding Challenges

This chapter explores a critical dialogue between a startup founder and a DIU representative about funding complexities within the Defense Innovation Unit. It highlights the influence of bureaucratic changes and political support on military innovation, especially during a significant transition in leadership.

00:00
Speaker 2
But so you had been a startup founder before. So you had to go into that conversation with Payim and tell him that the funding wasn't there or at least wasn't there yet. What was that conversation like? How did he take it? It was probably
Speaker 1
the worst conversation I had at DIU, to be honest, because the whole point of us was to, if we're going to make a promise to an entrepreneur or a company, we're going to stand behind it. So we're not going to make a lot of promises, right? We may do a project, meet 10 companies and only fund one, but that one we will actually do because we were trying to get over this, this mistrust between the two worlds where, you know, startups were worried that DOD would never actually, you know, pain come through. So it was really tough to call him and have to say, Hey, sorry, we've done everything we've can. Like we fought this thing for months and months and months, but it's not going to happen. Or if it is going to happen, it's not going to be in the timeline that is important for you and your upcoming, upcoming fundraise. You know, sorry, we can't do what we said we were going to do and the paper that we gave you. The good news is he had private investors that still believed in him, and they provided him the capital to keep going and building while the government sorted itself out.
Speaker 3
And so, kind of in that vein, DIU was eventually moved out from its direct line to the SECDef, but has since been moved back. Is that direct chain of command important for its success, and why does DIU need that?
Speaker 1
direct report, one year under Secretary Carter, and then one year under Secretary Mattis. You know, the bad news about bureaucracies is all the things we discuss. There's like a lot of people, 3 million in the case of Pentagon, and, you know, a lot of ways to throw sludge in the machine. The good news about a bureaucracy is that there's usually one person at the top, and if that person says jump, everyone does it. And I think when you're trying to reform and break glass, you need the most senior level support. And that's not just true in the Pentagon. That's true in any private company as well. And that was probably something I underestimated going into the job. So I now, you know, while I wanted to be in stealth mode, Secretary Carter's approach was the right one. And he knew we got to make a lot of noise. And everybody needs to know that he's behind it. So the beer cats will get out of the way. So in the case of DIU, you know, I think there's a lot of reorganization happening in the interim period. Mike Brown has succeeded me. He did an amazing job, though did not have the level of support from the secretary that I think he needed. That fortunately changed when Doug, the current director, came in, and you see it now accelerating.
Speaker 2
Raj, when Secretary Mattis was nominated for Secretary of Defense, I was stationed in 29 Palms, and my Marines bought out the PX of beer that night in celebration. But I have to imagine for you, having a new secretary come in can mean potentially a lot of change for an organization that at times had already been in peril. What was that transition like? We were really worried
Speaker 1
because everybody in the Pentagon and on the hills watching us in the Oregon say, is this Carter's pet project? And does it go away? Or is this something that gets continued? And so I give so much credit to Secretary Mattis that on his first trip to the West Coast, he visits us. He has this huge press conference in our office and basically says, you know, not only I think the quote is, not only do I embrace it, I enthusiastically embrace it. And then several months later, he did the most Washingtonian of things to prove its successes. And he renamed it. So he took off the X, called it DIU. Now he owns the name. And that's why we were able to make that first transition. It was across parties as well. So this is a bipartisan effort. So much credit to him.
Speaker 3
So looking ahead to what DIU is doing today, Doug Beck came in and spoke with us in Steve Blank's Hacking for Defense class, and he's hard charging on their mass building replicator initiative. As you look around the world, the conflicts that we're currently in, either by proxy or directly, why is this change in style from big, expensive, small number of units to cheap, attributable, and many units so important?
Speaker 1
revolution in, I hate the word, the traditional word, revolution, military affairs, it's much a pillory term. But if you think about what helped us win the Cold War, it was big aircraft carriers that could power project, stealth aircraft that no one could see, satellites that gave us immense visibility.

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