NH Tech Alliance Forum: Companies learn how to partner with the U.S. Department of Defense

Jeremy Hitchcock, New North Ventures; Laura Rippy, Alumni Ventures; Chip Walter, Marlinspike Partners; Sherman Williams, AIN Ventures; and Adam “AJ” Jarnagin, Expansia, discussed how small businesses and startups can survive the “valley of death” during a June 10 forum on investing in national security hosted by the NH Tech Alliance. (Photo by James Huddleston, EA Creative)

As the largest purchaser of goods and services in the world, the U.S. government is a customer worth pursuing for New Hampshire businesses of all sizes, but breaking into this market requires careful planning and strategic partnerships, which was the overarching theme of the New Hampshire Tech Alliance’s recent inaugural Northeast National Security Conference.

Held June 10 at Saint Anselm College in Manchester, the networking event featured a variety of speakers in the government defense and national security sectors who shared firsthand insights into the most pressing technological needs of the U.S. Department of Defense (DoD) and how commercial companies and startups, including those in New Hampshire, can get involved.

“We recognize that, as we race to outpace our adversaries, we must be able to harness the innovations and cutting-edge technologies that small businesses provide,” Lt. Gen. Philip Garrant, commander of Space Systems Command (SSC), said in a keynote.

SSC has “dedicated significant resources toward industry outreach,” strengthening existing partnerships and establishing relationships with new businesses, Garrant added.

During a forum held at the event on investing in national security, a panel of venture capitalists (VCs) shared how small businesses and startups can survive the “valley of death,” a term used to describe the critical startup phase of a new venture that has begun work on a product or service but that does not yet have a sufficient revenue stream. In these early development stages, funding is critical, as are building the right partnerships.

The No. 1 job of any founder is “to make sure that your team has enough capital,” said Laura Rippy, managing partner at Alumni Ventures, a Manchester-based venture capital firm. “Have a backup plan and plan creatively,” she said.

An example would be “lining up venture debt at the point that you raise your round, not when your back is against the wall,” Rippy said. In laymen’s terms, secure financing early, providing the business with enough capital to sustain operations and support its growth.

“Be mindful of who is on your cap table, because that in a lot of ways is going to … carry you to the next round,” said Chip Walter, managing director at Marlinspike Partners, a venture capital firm that invests in dual-use technologies. A “capitalization table” shows who has equity ownership in the business and how much.

Pay attention to how deep the pockets are of the lead investor and “their history of supporting portfolio companies in times of difficulty,” Rippy advised. If the lead investor does not have enough reserve capital to help the business through the rough patches, then the business “can easily get stranded in that valley of death.” Conversely, if there is a large fund that recognizes that milestones aren’t always going to be hit, the capital will be there to bridge the gap, she added.

Ongoing engagement

The VCs on the panel also stressed the importance of engagement. Public-private partnerships between seed investors and startups are important for sourcing funding. “The tighter you wind those together, the more the benefit,” Rippy said.

The most difficult stages for startups are the Series A and Series B funding stages, but opportunities can be unlocked by building bridges to the next round of funders, Rippy added. “Start to get hooks on the Series A leads,” she advised. “That’s where you start to plant the seed for longer-term growth.”

“You need early engagement,” said Sherman Williams, co-founder and managing partner at AIN Ventures, a venture fund that invests in dual-use technologies and veteran-led startups. Getting through the valley of death is “not some monolithic block. At the end of the day, these are people,” Williams said, adding that face-to-face engagement goes a long way.

Small-business resources

Small businesses, including those in New Hampshire, have many resources available to them to navigate the government contracting process. Two of those resources are the Small Business Innovation Research (SBIR) program and the Small Business Technology Transfer (STTR) program, Williams noted.

Powered by the Small Business Association (SBA), both the SBIR and STTR programs provide equity-free funding through 11 participating federal agencies to small businesses to help fund their advanced technology innovations and pave a path toward commercialization.

Many states have regional resources for small businesses as well. In New Hampshire, for example, there is the Procurement Technical Assistance Center (NH PTAC), which is a cooperative program between the NH Department of Business and Economic Affairs (BEA) and the DoD’s Defense Logistics Agency.

On its website, NH PTAC states that it offers free, confidential assistance to businesses of all sizes to help them navigate the many facets of the government contracting process. NH PTAC also offers training for businesses just getting started in federal procurement, and sponsors events like “Matchmaker,” which bring together small businesses and prime contractors.

PEO engagement

Williams remarked that engagement with the relevant U.S. Military Program Executive Office (PEO) is also important. PEOs play a critical role by overseeing the entire lifecycle of the U.S. military’s acquisition process. Each PEO manages the acquisition program within each department of each of the six branches of the U.S. Military: Army, Marines, Navy, Air Force, Space Force and Coast Guard.

In his keynote remarks, Garrant said for businesses interested in connecting with SSC, for example, “I recommend that your first stop be our Front Door,” which is accessible through the SSC’s web page. “The Front Door acts as our switchboard to direct you to the program that best addresses and supports your ideas.”

There’s also the SSC Small Business Office, which “works very closely with the acquisition team within SSC to make sure we are reducing barriers to entry for small businesses and including small businesses in our acquisition processes and strategy,” Garrant said. Last year, SSC awarded over $990 million to qualified small businesses, he said.

Because each department within each branch of the military has its own unique needs, small businesses and startups may want to consider partnering with formermilitary personnel with government procurement experience to help them navigate the complex web of federal acquisition rules and regulations and to help them understand the unique needs of each department, Williams said.

AIN Ventures, for example, is “deeply connected” with PEOs through its Academy Investor Network syndicate, made up of hundreds of academy graduates, including admirals, generals, fighter pilots, astronauts and more. “We leverage that group pretty heavily to get to the DoD,” Williams said.

NH defense contracts by the numbers

According to data provided by the Office of Local Defense Community Cooperation, defense spending totaled $2.5 billion in New Hampshire in fiscal year 2023, representing 0.4% of total U.S. defense spending. The majority of contracts are for supplies and equipment.

Hillsborough County is, by far, consistently the top location for defense contract spending, totaling $1.4 billion in fiscal year 2023, followed by Rockingham County, with $449.2 million in defense contract spending.

The top five largest NH defense contractors in FY 2023 were BAE Systems, L3 Harris Technologies, Red River Technology, Sig Sauer and the Safran Group. Other defense contractors in the state are Solid State Scientific Corp., Expansia Group, Wilcox Industries Corp., Port City Air and Teledyne Technologies.

But it’s not just large corporations that are awarded federal contracts in New Hampshire. According to the NH BEA, over 23% of all federal government contract spending goes toward small businesses, “including hundreds of New Hampshire companies.”

It’s important to keep in mind that, at times, the DoD may change course simply because it can, Walter said. However, that shouldn’t discourage any business from veering off course. Have patience. Be persistent. “If you stay focused,” he said, “you have the best chance of working your way through that valley.”