Inside the New Arms Race: Startups vs. Defense Primes

Jul 07, 2025

Inside the New Arms Race: Startups vs. Defense Primes

In 2022, Russia fired over 3,600 missiles into Ukraine. The United States responded with 13 HIMARS launchers. That mismatch wasn’t a question of will. It was a question of throughput.

Now imagine a real war with China. Or a direct conflict with Russia. The United States would burn through munitions in weeks—then wait months for resupply. Our production lines weren’t built for sustained great-power conflict. We’ve got better weapons, but not enough of them. If the fight drags out, quantity starts to beat quality. And we haven’t outproduced a peer in decades.

We forgot how to build things fast. The Pentagon knows it, but that doesn’t fix it. The process to get a new weapons system from idea to field deployment still takes sixteen years. That’s as long as the iPhone has been around. It doesn’t matter how smart your concept is if it arrives three wars too late.

The U.S. defense base once ran on speed and scale. Now it runs on bureaucracy and PowerPoints. But a wave of startups—funded by venture capital, staffed by impatient engineers—is trying to change that. They don’t have time for the old way. Neither do we.

This isn’t a competition between ideas. It’s a race between systems. And right now, the old system is losing.

Why Startups?

Startups don't wait for a contract. They build something useful, show it works, and sell it. This flips the script.

Traditional primes live off government contracts. They respond to detailed Requests for Proposals (RFPs), often hundreds of pages long. Winning takes years, delivering takes more. The whole thing drags across multiple budget cycles and layers of review. If the program gets canceled halfway, the company still gets paid. No surprise they move slow—there’s no upside for speed.

Startups don’t have that luxury. They raise venture capital and build the product before Washington even decides it wants it. They take the risk up front. That means they have to ship something real. If it doesn’t work, they burn cash and die. If it does, they can sell it to the Pentagon, allies, or commercial buyers. Either way, it’s faster, cheaper, and more aligned with outcomes.

Anduril’s virtual border towers didn’t start with a contract. They started with a product. The company showed up to DHS with a functioning system. Cameras, sensors, power, software. All integrated. All deployable. DHS said yes. Within months, 200 towers were in the field.

This model is common in the private sector. It’s how Apple, Tesla, and SpaceX operate. But in defense, it’s still treated like heresy. Why? Because it cuts out the middlemen. It compresses timelines. It exposes deadweight. And it challenges a system built on inertia.

It’s not just speed. It’s intent. Startups aren’t trying to win RFPs. They’re trying to solve real problems. They test fast, ship often, and fix it in the field. That mindset is common in tech, almost unheard of in defense. And it’s already reshaping how innovation moves from blueprint to battlefield.

The contrast is sharp. Primes take years to ramp up and require layers of subcontractors to build anything. They rarely write their own code. Most outsource the guts of modern systems—software, sensors, autonomy—to smaller shops anyway. The difference now is those smaller shops are cutting out the middleman. They want the contract, the scale, and the mission.

And in a world where threats move faster than acquisition cycles, they might be the only ones keeping up.

Lessons from Colt

The ironic thing is that this isn’t the first time small firms pushed the military to change. In fact, American military strength is built on small-scale innovation.

In 1847, Samuel Colt was a 33-year-old gunsmith with a revolver design and no factory. The U.S. Army needed weapons for the Mexican–American War. Colt landed a contract for 1,000 pistols. He didn't bid on a request. He knocked on the War Department’s door with a working prototype and an offer to deliver fast.

By 1855, Colt had built his own armory in Hartford, Connecticut. He was mass-producing tens of thousands of revolvers, many with interchangeable parts. During the Civil War, Colt’s factory pumped out over 150,000 revolvers a year. He became the first defense entrepreneur to scale rapidly from private inventor to public supplier. The key was speed, volume, and confidence in his product.

That same model drives today’s defense startups. They move like Colt did: build first, deliver fast, and meet the need before the system asks. They don’t need to be told what’s broken. They see the gaps and fill them. With battlefield software. With autonomous drones. With sensor towers that see at night and shoot on the move.

Colt didn’t ask for permission. He showed up with a solution.

Now a new wave of founders is doing the same. The Pentagon just has to let them in the door.

The People Factor

It’s not just about tech. It’s about the people building it.

Startups draw in a different kind of engineer—ones who want to move fast and ship real systems. These are the folks who don’t dream of spending five years writing PowerPoints before touching hardware. They want to solve hard problems that matter. And they want to do it now.

That mindset clashes with the primes. Defense giants are stacked with program managers, lawyers, and compliance officers. Layers of bureaucracy slow down decisions. Engineers get siloed. Progress comes in reviews, not results. For a new grad or a sharp systems thinker, it’s a fast way to lose the spark.

Startups run leaner. A 23-year-old might own the full stack of a drone’s guidance system. The feedback loop is tight—test, break, fix, fly again. Failures aren’t fatal; they’re expected. That cycle attracts builders, not just analysts. It’s no accident that companies like Anduril, Shield AI, and Vannevar Labs keep pulling top-tier talent out of places like SpaceX, Palantir, and Stanford.

There’s also moral weight to it. These aren’t adtech startups trying to optimize click rates. They’re solving for national security. That mission appeals to a generation raised on war, crisis, and decline. If you can help tilt the balance by building smarter defense systems, you don’t need a bonus to care.

Supply Chain Issues

Even when a startup builds the right product and proves it works, it still runs into a deeper issue: parts.

Fast prototyping means nothing if critical components are stuck in a bottleneck. Or worse, controlled by a geopolitical rival. Many U.S. defense startups still rely on Chinese suppliers for batteries, rare earths, motors, and microelectronics. It’s a quiet vulnerability with explosive consequences. In a serious conflict, those parts stop flowing. And with it, production.

The Wall Street Journal reported in 2024 that decoupling from China is proving slow and expensive. Domestic sources are limited. Rare earth processing is nearly nonexistent. Batteries and chips carry long lead times and depend on fragile global links. Startups that want to reshore find themselves caught in a supply chain that barely exists.

That fragility gets worse under legacy structures. A 2024 study from the Institute for Defense Analysis found that only half of prime contractors pay their suppliers on time. A third pay late even after delivery. Small firms can't absorb those delays. Innovation dries up.

Still, some are moving. Anduril, Hadrian, and other early players are working to build clean supplier networks; no China, no dependencies. The Pentagon is pushing in the same direction, formalizing supply chain risk management and incentivizing domestic production. Booz Allen’s 2025 blueprint proposed distributed manufacturing and vertical integration, to bring resilience back onshore.

This isn’t just about making things in America. It’s about control. The speed of delivery depends on the speed of production, and that starts with who makes your parts. No matter how good your software or design is, you can’t field hardware if your inputs come from your adversary.

What’s holding Start-Ups back?

Even with working products and domestic supply chains, defense startups still fight uphill.

The problem isn’t just industrial. It’s bureaucratic. The Pentagon says it wants innovation. But the system still rewards process over performance. A startup might prove its tech works, secure early pilot contracts, and still stall out. Why? Because scaling means clearing the same contracting gates as the primes. And those gates weren’t built for speed.

Budget cycles run years behind. Money is allocated long before it's spent. Startups can’t wait that long. They live and die on cash flow. That’s why many break through with early buys—DIU, AFWERX, SOCOM—but then hit a wall. Getting to “Program of Record” status, where long-term funding lives, means navigating a process designed in the Cold War.

Some agencies are trying to change that. The Office of Strategic Capital aims to bridge tech investment with defense needs. Innovation hubs have popped up across branches. But without real contract dollars and acquisition reform, startups still end up orbiting the system, not driving it.

And when a program gets canceled—even if the tech is sound—payments stop. The risk sits with the builders. It’s a structure that kills momentum and pushes top talent away.

So while startups move fast, the runway is short. That’s the paradox. We need them to build faster than ever, but we haven’t built a system that lets them land.

Quality over Quantity?

Fortunately, mass production may not be the end-all, be-all for major conflict. The war in Ukraine proved that speed and flexibility matter more than size alone.

Small drones have taken out tanks. AI-enabled targeting tools help front-line units strike faster. Cheap, portable sensors feed battlefield data in real time. None of this came from the big five defense primes. Most of it came from startups, university labs, or off-the-shelf gear repurposed in the field.

The lesson is clear: digital systems, fast iteration, and low-cost hardware can tip the balance in a modern fight. It’s not just about mass production, it’s about adaptability. When Ukrainian troops needed a new drone tactic or a software update, they didn’t wait 18 months for a contract. They patched it in days.

American forces are watching closely. So is the Pentagon. But incorporating that agility into a system designed for legacy platforms is no small task. Our acquisition model still thinks in years, not weeks. And it still favors established players over scrappy newcomers.

This isn’t just about what’s possible. It’s about what’s needed. Future wars won’t wait for a slow rollout. If we want to win—or even deter conflict—we need a system that can adapt as fast as the fight evolves.

The Road to Scale

Startups have the ideas. The primes have the factories. Right now, there's a gap between them—and it’s costing us time we don’t have.

Programs like DIU, AFWERX, and the Office of Strategic Capital are trying to bridge that divide. They give early funding, smooth out contracting, and help new companies survive the Pentagon’s slow gears. But the money still tilts toward the old system. Most of the defense budget flows through established channels built for legacy platforms and predictable timelines.

To scale innovation, the system needs structural change. That could mean faster authorities for buying proven tech. More off-the-shelf purchasing. Or even splitting big programs into smaller, modular efforts that leave room for outside builders.

Startups won’t replace the primes. We still need stealth bombers, submarines, and hardened satellites. But the future of warfare demands a faster layer too—cheaper drones, smart sensors, field software that updates weekly. That’s where new players shine.

Getting both to work together is the real challenge. And the real opportunity.

Inside the New Arms Race: Startups vs. Defense Primes

Inside the New Arms Race: Startups vs. Defense Primes

Why Startups?

Lessons from Colt

The People Factor

Supply Chain Issues

What’s holding Start-Ups back?

Quality over Quantity?

The Road to Scale

Further Reading/Sources

Discussion about this post