Tech startups are integral to the federal government’s and Defense Department’s ability to stay ahead in our world of heightened geopolitical tensions. Known for embarking on public-private partnerships, the Department of Defense requested a budget increase for 2025 totaling almost $850 billion dollars, including a significant allocation for further research and development, which is sure to be felt in startup ecosystems around the country, including here in Arizona.
In September 2024, an ASU-led defense microelectronics hub received a massive Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act grant aimed at supporting multiple next-generation technology projects for national security. The Southwest Advanced Prototyping (SWAP) HUB, which operates out of Arizona State University and defines itself as “a regional ecosystem for innovation in microelectronics and defense,” was awarded nearly $30 million for five projects that work to advance national security. SWAP is among eight other regional hubs under the U.S. Department of Defense’s Microelectronics Commons to accelerate the innovation and production of microelectronics technologies critical for security defense. The five projects are among 33 other nationwide projects awarded a total of $269 million under the bipartisan CHIPS and Science Act, passed in 2022. U.S. Department of Defense officials joined ASU partners on September 17 to announce the awarding of the grant.
Federal funding flowing into projects in states like Arizona signals a growing shift of the technology industry inland. In a White House fact sheet on the CHIPS Act, the White House said in a statement, “Economic growth and prosperity over the last 40 years has clustered in a few regions on the coasts, leaving far too many communities behind. The CHIPS and Science Act will ensure the future is made in ALL of America, and unlock opportunities in science and technology for those who have been historically left out.”
But when not attached to a university, being an innovator or producer of defense technology can be riddled with challenges when trying to secure funding for your startup. An article by J.P. Morgan discussed how these startups, often the cradle of valuable defense innovation, face challenges navigating complex government systems when attempting to procure a government contract.
The Defense Advanced Research Project’s (DARPA) website states, “DARPA knows ideas that lead to breakthrough technologies for national security often start small. To maximize the pool of innovative proposal concepts it receives, DARPA strongly encourages participation by all capable sources: industry, academia, and individuals.”
To better support startups working in defense technology, the Department of Defense leverages the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs through DARPA. The SBIR program was established in 1982 and the SBIR program in 1992 to provide opportunities for small businesses to participate in federal government-sponsored research and development. Both programs offer funding based on research and production phases, ranging from a couple hundred thousand dollars in early research phases to much larger sums in later phases when testing and prototyping. The amount of funding granted is ultimately at the discretion of the awarding agency.
For startups local to the Greater Phoenix area, the Southwest Mission Acceleration Center (SWMAC) can help connect defense tech startups to the resources they need. SWMAC is part of a national network of installations dubbed “the front door to the Department of Defense,” “enabling access to the right partners for rapid, scalable transition of emerging technologies needed by the warfighter.” Bringing together academic institutions, the venture community, and non-traditional and technology companies, SWMAC seeks to solve the most pressing national security challenges facing the United States.
Utilizing programs like STTR, SBIR, and the SWMAC can be a lifeline for startups specializing in defense tech, while increased federal funding flowing into projects in non-coastal states and cities may indicate busier and brighter days for startups located inland wishing to receive funding and partner with government agencies.
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