Collaboration: Why Defence and startups must work together

Jessica Glenn

The war in Ukraine has firmly cemented what Defence has known for the last decade: the pace of innovation and adoption for new defence technologies has gone from 10-year cycles to sub-year cycles. Defence needs to be faster, more agile and more efficient. Sub-year cycles. 

To rise to this challenge, Australian tech startups and the Australian Defence Force (ADF) need to work together for Australia to achieve both these national security and broader economic goals. This isn’t a natural fit for either side, and the efficacy of this partnership is lost when using innovation intermediaries such as the primes. This paper will explore why.


Constructive collaboration between startups and the ADF is so critical to modern manufacturing and sovereign capability, and how it can be recalibrated within the existing policy framework with the necessary tools to empower both sides to better capitalise on Australian ingenuity.

Australian ingenuity is our key strategic advantage. We aren’t a country of unlimited resources, nor are we a country of plentiful people. Australia is a middle power that punches well above its weight, fuelled by our agility and learned ability to do more with less.

Australia’s aptitude for innovation has saved many lives, both in the ADF and in civil society; from drip guns guarding the withdrawal of ANZACs from Gallipoli cove, to the black box becoming a critical feature of air safety around the world, and over 1,400 Nulka decoys protecting sailors not only on Royal Australian Navy (RAN) boats but across our allies as well. 

The unique challenges and constraints that Australian innovators face lead to world leading solutions — which is why the rest of the world tends to acquire them. This pattern of Australia absorbing the risk and outsourcing the reward has unfortunately led to a decay in the mechanisms to take an idea from prototype to capability.

Decades ago, when we started moving down the path of foreign dependence for defence innovation, the risks associated with this approach could be mostly mitigated by ensuring local sustainment was maintained.

This made some sense when technological iteration cycles were measured in decades and the odds of our supply lines with our key allies being encumbered were low.

In 2022, the landscape has a significantly different topography to navigate. The rate at which new technology can be produced, and the outsized impact of that technology, has meant that the modern battlefield is being rapidly shaped and reshaped by emerging and asymmetric threats. 

This isn’t an entirely new phenomenon. Measure and counter-measure has long been a feature of conflict and deterrence. What has changed is the pace and the cost.

Today, for less than $2,000, one can acquire, or build, a highly effective surveillance platform, and for only a little more you can arm it. Put some smart people in a room and for not a lot more you can harden it and rapidly make modifications, both to the hardware and software, to adapt it to new challenges. Notably, this has recently given Ukraine an edge over a much larger and, especially earlier in the conflict, far better armed adversary.

This ability to rapidly iterate, adapt, and generate new tools is a key capability for any middle power in the 21st century. Australia can clearly achieve this; we just haven’t exercised those muscles for some time, so they appear to have atrophied. 

In today’s age, highly adaptable, rapidly iterating, teams are no longer the forte of large international primes but rather the realm of highly engaged tech startups, of which Australia has a growing supply. With Australia’s history of being able to achieve more with less, we should be at quite the advantage here.

It is important that Australia learns how to press this advantage. Deterrence by asymmetric innovation is critical for middle powers in the 21st century but beyond this urgent need, there are significant second order economic effects as well.

Australia has spent over a decade trying to foster an innovation economy, funding incubators, and accelerators, in the hopes of seeing similar success to Silicon Valley.

Seeding an economic powerhouse is a laudable goal but it has been missing a critical piece. Most of Silicon Valley’s success can be traced back to defence spending on technology projects with smaller companies. 

Many military innovations and inventions end up filtering into dual use and consumer tech. The most pervasive of which is most likely the Integrated Circuit developed by Fairchild Semiconductor, often identified as the spark that lit Silicon Valley. Sustained defence investment in capability development, if invested in Australian companies, would likely have a similar effect.

Many parts of defence are aware that this is something that they need to address and support – and perhaps the Australian Government’s planned recalibration of the Defence Innovation Hub into the new Australian Strategic Research Agency (ASRA) will help facilitate this resource and development (R&D) investment. 

Organically, organisations have emerged within defence that can take small managed bets in order to test the edges of the ‘Art of the Possible’. This generally takes the form of a couple of hundred thousand dollars to determine if a team is the right, or the wrong, kind of crazy.

So far that effort alone is producing encouraging results. Projects like a semi-autonomous M113 (Armoured Personnel Carrier) that can take wounded troops out of battle, or an Unexploded Ordinance Detector that can let ADF personnel know exactly where danger lies. Or even a world-first enhanced-eye-safety high-power laser system.

These small innovation offices, the Royal Australian Air Force’s (RAAF) Jericho Disruptive Innovation (JDI), the Australian Army’s Robotic and Autonomous Systems Implementation Coordination Office (RICO), and others are critical because of more than just funding. 

The teams are working to bridge the gap between startups and the defence establishment. Indeed, this is no small feat. Both in delivering contextual understanding, but also, just as importantly, investing in understanding the interface between a dynamic and agile startup team with the highly process driven defence environment.

While not yet perfect, as long as both sides are aligned and prepared to come to the table it’s definitely possible to make it work and when it does work, the results are extraordinary.

At AIM Defence we have firsthand experience with this. Several years ago we pitched to many different parts of defence the opportunity for a fully sovereign Laser Directed Energy capability to counter the now well-established problem of weaponised consumer drones. 

Our pitch was essentially that by marrying several state-of-the-art technologies such as advanced computational tracking, aggressive miniaturisation of computer and auxillary systems, and acceleration of Australia’s already world-class fibre laser capability, we could build a high-power laser system that was an order of magnitude more efficient, lighter, and cheaper than anything on the market or under development. 

This flew in the face of all of the advice that major primes were giving and was a relatively contrarian position. Naturally, most parts of defence understandably decided it was too risky for them and refused funding.

Fortunately, RAAF Jericho appreciated the innovation opportunity and potential sovereign capability advantage and provided an initial investment, not the whole budget, but enough to work together and find out if we were the good crazy or the bad crazy.

The results have been exceptional. Working incredibly collaboratively with RAAF and DSTG we’ve been able to build the southern hemisphere’s largest indoor laser test range, build a first proof of concept Counter Uncrewed Aerial System (CUAS) system, built a secondary mission denial system, and then used the lessons learned from those to build a world-first enhanced-eye-safety CUAS system. 

This allowed us to run a high-power laser system demonstration where key defence stakeholders were gathered outside without the need for eye protection. A world first, and a critical step forward for safely deployable directed energy. 

Remarkably, together AIM, Jericho and DSTG have achieved this for less than half the price of buying one international system off the shelf.

Photo: Ryan Fletcher/Shutterstock

Today, this stands as an exceptional project, but there’s no reason that the next start-up interacting with the ADF couldn’t achieve more. AIM’s team is exceptional, however Australia’s startup ecosystem is overflowing with exceptional talent and, as a nation, we need to learn to harness it.

To take full advantage of the position that Australia is in and to build the capability to deter, shape, and respond to emerging and asymmetric threats we need to better empower and better fund our people.

Most importantly we need to enable people working inside government to make faster and bolder decisions, without a poor outcome being an existential threat to their career. Fast decision making and minimal process is a fundamental requirement for startup success. 

This is a challenge for government where process, probity, and patience shield individuals from the consequences of poor outcomes. Importantly though, this doesn’t actually prevent poor outcomes from occurring. Changing this can’t be done by policy alone, it requires long-term cultural change.

In the meantime, we can leverage the people already working at the edge of the art of the possible (JDI/RICO/IXG/etc.) by giving them the tools to expand what they’re currently doing and provide license to be bold.

Currently, their remit is to test the feasibility of a concept and empower people to innovate. Beyond that remit, success is driven by dedicated people going above and beyond to try and piece together funding from other organisations’ budgets, this is rarely successful. 

Saddling some of our best and brightest with this Sisyphean task isn’t sustainable, nor is it effective. 

Instead, an alternative funding option needs to be made available to turn ‘technology proven possible’ into ‘products proven useful’ as quickly as possible. This is not an unknown issue – the head of air force capability highlighted this at a recent conference, saying: “Really the criticality for us is trying to bridge the valley of death of developing that great idea into a capability that we can field.”

For tech startups this function is generally performed by venture capital. Loosely, Seed rounds prove a technology, Series A proves utility, and Series B+ provide returns. Each round is generally an order of magnitude larger than the previous.

In the commercial world, venture capital is often happy to take this risk as long as they can see a path to multi-billion-dollar liquidity inside 10 years.

In Australia, defence is a monopsony that seldom acts as a rational consumer, and for a multitude of reasons defence tech is not a domain in which you can take a ‘global from day one approach’. 

So, relying on venture capital to fill this gap is not an effective solution. Moreover, if venture capital does invest, then its alignment will be solely to the highest return. Traditionally this has translated into Australia’s sovereign capability being flipped into a US entity and ultimately another opportunity being lost for Australia. 

Therefore, for the Australian Government and the ADF to achieve their goals, they need to substitute themselves in where venture capitalists would otherwise reside. The goal is still outsized returns, just on different metrics. Instead of focusing on a purely financial return the focus is on leap-ahead capability and self-reliance. 

Of course, like any investor, we’d suggest the Australian Government should seek to protect its their downside risk. This can be achieved by ensuring outcomes are aligned with the goals they’re trying to achieve.

The primary goal of such a scheme would be the rapid generation and commercialisation of leap-ahead capability. It is important to ensure that the capability and the IP continue to exist, even if the business should fail. Failure is expected: nine out of 10 startups fail. 

Fortunately, six of those fail quite early where the impact and investment is relatively low. To ensure that previous failure fuels future success, IP transfers are going to be critical.

In the event a business fails, or abandons the capability, the IP will need to be transferred to the Commonwealth so that it can continue to be exploited. This will give collaborating startups the flexibility and funding required to grow, while also putting defence in a strong position if they don’t.

Secondarily, a key return on investment comes from self-reliance and the subsequent benefits to the economy of seeding local deep tech. It is not realistic to enforce a ban on foreign investment beyond what the Foreign Investment Review Board is already empowered to do. 

However, we can ensure that companies are incentivised to stay Australian and, if they choose not to, the taxpayer receives some return on their investment.

To support this aim, the scheme should ensure that, if the company is sold or otherwise transferred to a company that isn’t ultimately Australian owned, the government recoups 10 times the funding provided, from the proceeds of the sale (up to a maximum of 80 per cent of the sale price). 

Leveraging the excellent work that is already being done by the innovation teams inside defence, a scheme such as this could be stood up rapidly and would be extremely cost effective. More importantly it would enable defence and Australian startups to collaborate in order to capitalise on the Australian ingenuity advantage.

Incentivising such collaboration is critical to both our national security and economic interests. 

While this is a challenging goal, when we do achieve strong collaborations, world-leading capability is developed, and the economic benefits are extreme. As such, driving this forward should be a key goal of the new government.  

Jessica Glenn is a cofounder at AIM Defence, which has built the world’s safest, smallest, and most scalable high-power laser systems for protecting people, privacy, and property. Over the last decade, she has worked across the globe, successfully exiting three tech startups, failing at another, and building technology from napkin through to IPO, making her one of the most experienced tech founders in Australia.

Watch: Paper Presentation: Collaboration and Conflict – Defence and Startups must work together. Jessica Glenn, Co-CEO, AIM Group. The Innovation Papers Forum, The National Gallery, Canberra, 4 August 2022.

Do you know more? Contact James Riley via Email.

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