US Navy Courts Startups: A New Approach to Innovation

A Shift in Naval Technology Acquisition

While prominent figures in Silicon Valley, including representatives from Palantir, Meta, and OpenAI, are attracting attention for their transitions into Army Reserve roles, a significant evolution is occurring within the U.S. Navy.

Streamlining Procurement for Startups

Justin Fanelli, the Navy’s chief technology officer, reveals that over the past two and a half years, he has been actively working to simplify bureaucratic processes and accelerate traditionally lengthy procurement timelines. This effort aims to make collaboration with the military more accessible for startups.

“We are now more receptive to business opportunities and partnerships than ever before,” Fanelli stated in a recent TechCrunch interview. “We are prioritizing active listening and acknowledging that we welcome innovative approaches to how we allocate resources.”

The Navy’s Innovation Adoption Kit

Currently, many of these collaborations are being fostered through the Navy’s innovation adoption kit. This comprises a set of frameworks and tools designed to overcome the “Valley of Death”—a common challenge where promising technologies fail to transition from prototype to full-scale production.

Fanelli explained that the traditional government onboarding process was complex. “Now, it’s a streamlined funnel, and we prioritize organizations demonstrating substantial positive outcomes, designating them as enterprise services.”

Rapid Deployment: A Recent Success Story

Recently, the Navy achieved a pilot deployment with Via, a cybersecurity startup based in Somerville, Massachusetts, in under six months, starting from the initial Request for Proposal (RFP). Via, founded eight years ago, specializes in protecting sensitive data and digital identities through decentralized data storage—a method that mitigates the risk of centralized hacking.

A “Horizon” Model for Innovation

The Navy’s new strategy is based on a “horizon” model, adapted from McKinsey’s innovation framework. Companies progress through three stages: evaluation, structured piloting, and scaling to enterprise services.

A key distinction from conventional government contracting is the Navy’s shift to identifying problems first, rather than prescribing solutions. “Instead of requesting solutions based on established methods, we define the problem and invite innovative approaches to resolve it,” Fanelli clarified.

Fanelli’s Personal Commitment to Service

Fanelli’s dedication to modernizing Navy technology stems from a personal experience. Initially a scholarship cadet in the Air Force studying electrical engineering, he was deemed ineligible for military service due to a lung condition. He then chose a career with the Navy over private sector opportunities over 20 years ago, driven by a desire to serve alongside those in uniform.

His career has encompassed roles in defense, intelligence, DARPA, and open source initiatives, ultimately leading him back to the Department of the Navy.

Attracting New Partners

This transformation is attracting companies that previously dismissed government work as impractical. A recent competition organized by the Defense Innovation Unit (DIU) anticipated a limited number of bids for a specific cybersecurity challenge but received nearly 100 responses, many from companies new to working with the DoD.

Documented Successes and Key Metrics

Fanelli’s team has documented numerous successful implementations, including a venture-backed startup that automated a two-year invoice backlog in just weeks. Another example involved network enhancements on an aircraft carrier, saving 5,000 sailor hours in the first month.

The Navy evaluates pilot programs based on five key metrics: time saved, operational resilience, cost per user, adaptability, and user experience.

Priority Areas for Technology Investment

Currently, the Navy is prioritizing investments in several key areas, including AI, with a focus on expanding beyond basic generative AI to more sophisticated agentic applications for tasks like onboarding, personnel management, and data processing.

Other priorities include “alternative” GPS systems—specifically, precision navigation and timing software for unmanned systems—and “legacy system modernization,” encompassing upgrades to air traffic control infrastructure and ship-based technologies.

Budget Allocation and Funding Challenges

While Fanelli refrained from disclosing specific budget details, he indicated that emerging and commercial technologies currently receive single-digit percentage allocations compared to traditional defense contractors. He anticipates this balance will shift as AI technology advances.

A common obstacle to successful technology adoption is funding. If a new solution doesn’t replace an existing system, securing continued funding can be problematic, particularly given the Navy’s long budget cycles.

“If we observe benefits and measure those benefits, but funding isn’t secured after a year and a half, it creates challenges for investors and users alike,” Fanelli explained. “We need to address our technical debt to facilitate a smoother transition.”

Impact of National Policies

Regarding the influence of the Trump administration’s “America first” policies, Fanelli noted that the current emphasis on domestic manufacturing aligns with the Navy’s goals of enhancing resilience. This includes initiatives like digital twins, additive manufacturing, and on-site production to reduce supply chain vulnerabilities.

A Genuine Alternative for Entrepreneurs

The Navy is actively communicating to entrepreneurs and investors that it represents a viable alternative to traditional commercial markets. This message is resonating in Silicon Valley, where there’s increasing willingness to collaborate with the U.S. government.

Meta CTO Andrew Bosworth recently stated at a Bloomberg event: “There’s a much stronger patriotic underpinning than I think people give Silicon Valley credit for.”

Invitation to Collaborate

Fanelli, actively engaging with business media and podcast interviewers, aims to attract further interest from the tech community. He extended an invitation to anyone seeking to contribute solutions to the Navy’s mission: “I would invite anyone who wants to serve the greater mission from a solution perspective to lean in and to join us in this journey.”

For those interested in the complete conversation with Fanelli, it is available here.