Why defense tech isn’t a typical startup game

This article summarizes an episode of 20VC’s video series featuring Matthew Steckman, president and chief business officer of Anduril.

President and chief business officer of Anduril, Matthew Steckman/ Photo credit: Anduril

Anduril builds technology and hardware for the defense industry. President and chief business officer Matthew Steckman argues that many startup founders misunderstand the defense sector, treating it like a typical market when it rewards only a few dominant players.

To succeed, founders must move beyond incremental improvements. Instead, defense startups need rigorous systems to test early concepts, allowing them to invest aggressively without risking catastrophic failure.

Rethinking the first-mover advantage

Entering the defense industry without understanding its history can be costly. Silicon Valley founders often assume their software-driven ideas are novel, when in reality, many were explored by defense contractors decades ago.

By overlooking this, teams risk wasting millions rebuilding existing tools instead of addressing current operational gaps.

“There’s too much hubris in the technology market, [this belief] that, as high-tech people, we can do everything better than everybody else,” Steckman notes, warning that perceived innovation is often not new at all.

Selling to other countries

Attempting to build a global defense product from day one will destroy a startup. Sovereign nations have distinct military priorities and tend to protect domestic contractors, making the international market highly fragmented.

As a result, securing a strong foothold in the United States is critical. With roughly half of global defense spending concentrated there, ignoring the US market significantly limits a company’s chances of survival.

“50% of defense spending is in the US and 50% is in the rest of the world. And so if you are cutting off half of your market from the get-go, that’s probably a big problem,” Steckman explains.

The cost of making small improvements

Building a business by acting as a cheaper alternative does not work in defense procurement. The Pentagon, the headquarters of the United States military, does not subsidize crowded markets; it heavily funds one or two definitive winners per category.

Instead of pouring all available capital into a single niche, a serious defense company must aim to control entire categories. Anduril strategically built a massive portfolio of foundational technologies designed to solve a wide array of military operations.

“You’re basically shooting the moon,” Steckman argues. “You have to create a monopoly.”

To survive the brutal economics of defense contracting, Anduril actively manages 20 distinct product lines, recognizing that horizontal scale was required from inception.

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