Emil Michael warns defense tech founders that a prototype is not enough. The Department of War requires a credible plan for mass production. Startups must prove they have mastered the "skilled manufacturing piece" to win large contracts.

In a major strategic shift, the Pentagon is asking prime defense contractors to invest their own capital—billions of dollars—to expand munition production "on spec." This pushes immense financial risk onto publicly traded companies, a difficult ask given the government's historically cyclical and unreliable purchasing patterns.

The American defense industrial base is not constrained by a lack of capital but by crippling uncertainty over future demand. The reliance on single-year congressional budgets prevents companies from making the long-term, multi-year investments necessary to plan for and build capacity efficiently.

The US defense industry is hampered by Congress's reliance on one-year funding and 'Continuing Resolutions' (CRs). CRs prohibit 'new starts,' preventing the Pentagon from launching new technology programs. This lack of multi-year budget authority discourages private investment and slows modernization.

The problem with large defense contractors isn't the companies themselves but an acquisition system that awards contracts before a product is built. This shifts all development risk to the government. The solution is to force companies to invest their own risk capital first.

Obtaining non-dilutive funding from the Department of Defense is not about a single grant application. It's a long-term process of establishing credibility and familiarity with the agency. Companies must build a body of research and leverage inside advisors to demonstrate alignment with the DOD's strategic needs over several years.

The Pentagon is moving away from decades-long, multi-billion dollar projects like aircraft carriers. The new focus is on mass-produced, attributable, low-cost systems like drones, which allows for faster innovation and deployment from new defense tech startups, not just the old primes.

A massive one-year defense budget increase is insufficient for rebuilding war stocks. The defense industry requires a sustained, multi-year funding commitment to justify long-term investments in expanding supply chains and hiring, which a temporary spike fails to provide.

The defense procurement system was built when technology platforms lasted for decades, prioritizing getting it perfect over getting it fast. This risk-averse model is now a liability in an era of rapid innovation, as it stifles the experimentation and failure necessary for speed.