Linking government problems with private solutions

While a lot of the history of technological development in America can be traced back to roots in government-funded research and military projects, the proliferation of startup innovation has caused the government to take a new eye to the private sector. To learn more about what the Department of Defense is doing to reach out to entrepreneurs in the D.C. region, we spoke with Kristen Hajduk, regional director for the national capital region at MD5.

ABERMAN: So when I learned about MD5, it was very exciting to me. Tell our listeners what MD5 is, and what it’s about.

HAJDUK: Sure. MD5 is a part of the Office of the Secretary of Defense within the Department of Defense. We work under research and engineering. And our goal is really to connect our customers, who we consider to be the Department of Defense, to folks in the private sector that they wouldn’t normally interact with. So, we connect them with people like entrepreneurs, startups, universities, and other kinds of laboratories that might have technical, technological solutions the department hasn’t seen yet.

ABERMAN: It’s interesting to me, having been involved in national security innovation and technology for a long time, how much the script has flipped. Thirty or so years ago, maybe 40, a lot of the innovation really was occurring in the federal lab and national security establishment. Now it’s upside down. And so, that’s really why MD5 exists.

HAJDUK: That’s right. I think we really tried to acknowledge that, where innovation is happening has changed. You know, you used to need significant federal resources to find innovative technological solutions. You know, the man on the moon mission, the Manhattan Project, large leaps of technology were really the owner of the federal government. But now, because of the digital age, we know that innovations are happening everywhere, and it’s in the department’s interest to see if they can capitalize on that, and bring that into the department in a way that can increase our national security.

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ABERMAN: I call it the democratization of innovation. So for example, seeing recently that Kalashnikov, the gun manufacturer, was now going to make really cheap drones. It’s a scary time, but it’s also a time we need a lot of nimbleness. Now, MD5 is relatively new. How is it different from other initiatives that maybe some are more familiar with, like DIU, the effort that was started during the Obama administration, and perhaps some others?

HAJDUK: I think we are all part of that same family. I think the department is realizing that they need to have many sources of innovation, not just one major office that is throwing innovation across the department. So, we work very closely with organizations like DIU. Some other organizations that your listeners might be familiar with are AFWERX, SOFWERX, those kinds of innovation hubs. We work with them collaboratively. DIU is our sister organization within the Office of Research and Engineering, and we really focus on TRL 1 through 6.

We focus on early stage startups, and we try to help shepherd those startups, and help them grow to a point where we could theoretically pass them off to an organization like DIU, that could help them find contracting through OTAs, CSOs, VAAs, traditional contracting vehicles that the department has.

ABERMAN: I think that’s a really significant point, and one that, I feel, a number of years ago, when the Pentagon really started to focus on this, it was a real marketing problem because DIU, it was called DIUX at the time, opened up, there was this expectation that it was going to be heavily involved in startups. But the reality was, what they were looking for at that time was shovel ready, or products that were ready for deployment, and it caused a lot of disappointment in the garage inventor space. That was my sense.

So, is MD5, in effect, the Pentagon, like any entrepreneur would do, pivoting and saying, wait a minute, we need to focus on this part of the ecosystem?

HAJDUK: Yeah. I think what you’re seeing is that we’re iterating. The department is learning how to be better at connecting the department with the private sector. And so, what we have done, and what we’ve learned as everyone is learning how to do this better is, we actually start with the technological problem first. We work with the Department to identify what that problem is, and then we host a series of programs and events that then bring in those non-traditional partners, and help them work on a problem.

So, a really good example of that is, one of our more popular programs that we have is called Hacking for Defense, and that is a program that we partner with universities across the country, and we ask the Department for specific challenge sets that they have. We give those to a university to share with what is typically a graduate level class, and those students are able to coalesce.

They join teams around each of those problems, and then the university takes those students through a lean startup methodology, so that by the end of the semester, they’ll have either a prototype at an MVP, or perhaps a more refined question that that military customer can then take and then find other technology, or find other sources of innovation.

In some cases, we’ve actually had students that, at the beginning of semester, just thought they were getting a really cool course. Then by the end, some actually decided to form an LLC around their idea. And then a really good example of that that people might know about is a company called Capella Space. There’s a group of students that was part of the first hacking for defense program at Stanford University, and Capella Space now contracts with the Air Force, and SpaceX actually launched a series of mini satellites in January, and some of those satellites were actually Capella Space satellites.

So, there are some really great success stories. Of course, the hacking for defense, the initial goodness is, the students just get really interested in this space, and innovation for the efforts that help our department, and help our country protect itself.

ABERMAN: When you cut through it all, what motivates people often is, I want to create something cool, and if I can have a venue for doing that, and I get paid to do it, let me know how I can sign up. Do you find that, in some ways, now that you’re inside and working this problem on both sides, that the biggest challenge is helping people understand that you can talk about national security challenges without giving away the crown jewels, and frame the problem?

HAJDUK: That’s a really big part of what we do. Even though we are a DoD organization, everything that we do is completely unclassified, and that’s because the technology solutions that we’re looking for are technology solutions that are in the private sector. We want as many people as possible focusing on these challenges, and those people are everyday citizens. In some cases, when we hold programs at universities, they’re international students, and that’s okay, because the technology itself is actually on class.

When we’re talking about the missile context that you just gave, you know, when we talk to our military customers, we just say that context doesn’t need to be part of our discussion. We just need to know what your actual technological need is. So, we’ve done a lot of work with the Special Forces community. We work with the intel community as well, and we work with parts of the department that usually work in classified spaces. But there are technological solutions that we are offering to them that are things that are already known in the public sector.

ABERMAN: It’s just basically talent discovery. And I think it’s a long time coming. I’m really glad to see it. You know, speaking of glad to see it, I was very much on record, wrote extensively about this, shook my fist a lot. I was very unhappy when the initiatives that the Pentagon engaged in, Homeland Security, and everybody ran to Silicon Valley, and I kept saying, why don’t we open an office here, where you have a bunch of people who are entrepreneurial, and want to serve? Well, MD5’s here, you’re here. Why, and how how did that happen? I’m glad it happened, but why are you here?

HAJDUK: Sure. I think MD5 realized that there are technological solutions across the country, especially when we’re talking about universities, and what students have to offer. You know, those are not exclusive to the west coast. So by developing a community in the NCR, my region includes the DMV, but also West Virginia, Pennsylvania and Delaware.

There’s a lot of great universities in this area, and there’s a lot of great startup hubs in this area. And the good news is, for many of them, they focus on this region because they are interested in the value proposition of supporting the government, and helping us defend our country. So, what we’re trying to do is, essentially, to capitalize on that, and help energize that community and give them inroads into the department.

ABERMAN: So you mentioned hackathons, but are you also looking at, are going to have programs that provide rapid prototyping funds, or R&D funds, you know, ways to actually get under contract, or get money from the DoD rapidly, so making Uncle Sam, in effect, an angel investor, in some ways, for local startups? Is that part of your mission too?

HAJDUK: Yes. One of our portfolios is called the acceleration portfolio, and all of those programs under that portfolio are meant to get at that question of transition. How do you transition a startup technology into the department? While MD5 does not have its own funding to invest, one of our major principles of all of our programs is that we want folks from those investment communities to attend our events. You know, when you’re talking about inside the department, the organization or unit or component that has the need, is often not the same component of the organization that actually has the ability to acquire that technology.

So first of all, it’s really important that we identify those people, and make sure that they are participating in all of our programs. So, that’s a big focus on what we do. The other is, we have a lot of ties with the VC community. We understand that, especially in early stages, these startups are going to be looking for angel investors, and initial investments, that the government doesn’t really have in large quantities.

So, we try to bring those folks into our programs, as well as let them see what the startups are doing, and then they understand that there is already a real need inside the government, which then lowers the risk for the VC community. They know that it’s okay to invest in these startups, that there will be some benefit to them as well.

ABERMAN: It’s almost like having In-Q-Tel, the intelligence side, invest in the company. It shows the potential investor that the government has an interest in technology, and has been validated in some way.

HAJDUK: That’s right. And in our programs, on top of what In-Q-Tel’s investment function, that In-Q-Tel is really excellent at, our transition, our acceleration portfolio is really meant to help follow those startups, and shepherd them through the processes by which it takes to get an OTA, or get some initial investment from the department, get a SBIR Phase 1, or Phase 2, on board.

ABERMAN: Almost sounds like a white glove. It sounds really, really cool. Kristen Hajduk, thanks for coming in and spending some time with us today.

HAJDUK: Thank you so much, Jonathan.

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