Meet the Army’s tech incubator

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Army Applications Lab turns five this year—and boasts that the startups it has worked with raised nearly $1 billion in funding.

AUSTIN, Texas—The Army’s tech incubator keeps a low profile in downtown Austin, but it’s spent the past five years cultivating new startups interested in working with the Defense Department. 

Since it opened in 2019, the Army Applications Laboratory has helped 158 companies, according to the organization’s first performance report, released earlier this month. Nine out of 20 completed projects were moved to other homes across the Defense Department, representing 13 technologies in robotics, contested logistics, armored formations, human performance and energy.

I came across AAL by accident while looking for a panel session on emerging technologies and national security at SXSW. I spotted a tightly clustered group dressed in T-shirts, jeans, and sneakers, with the occasional blazer and hard-bottomed shoe. They were hosting office hours for startups to come in and ask questions about how to work with the Army and if there’s a need for specific tech.

In just the first weekend of the conference, about 140 companies came through for office hours, said Casey Perley, AAL’s executive director. 

“We exist to expand the Army's access to our civil innovation base,” Perley said. “That's industry and academia. And it's so critical we do that, because it's a real strategic advantage over near-peer competitors, China and Russia. They don't have the creativity and the entrepreneurial culture that we do.” 

That mission echoes those of the NavalX, AFWERX, and the Pentagon’s Defense Innovation Unit—all of which are located in the same co-working space here, called the Capital Factory. But Perley said some things separate AAL from its defense innovation siblings: 

“There are things the Army needs that only the Army needs—doubly so since the Marine Corps divested of tanks,” she said. “Our companies tend to be at earlier stages. A lot of them haven't raised [money], or if they have, they've raised like a seed round…We're earlier, we're trying to get that tech in when it's less mature.”

Defense One sat down with Perley to learn more.

Has AAL cultivated any tech that was sent to another program for further development? 

They’ve gone multiple places. Some have gone to program executive offices—Joint Program, Executive Office Armaments & Ammunition is a great example of that. Some have gone directly to soldiers. Some have gone to the Air Force, because the technology—this is the one that that kind of kills me—it was so great, but the Army use case just wasn't there. Sometimes they've gone to DEVCOM labs and centers that can be for further development. AAL tends to handle projects in like, two to three years—we're done, we're out. So if the tech is great, but it takes longer to mature…or if it needs integration into a larger system…DEVCOM is a transition partner that can help that happen.

So AAL has been around since 2019, but you just released your first annual report here at SXSW.

It's a bit of a misnomer, because it's really a five-year report. It's the first one we've ever done. So one of the things that we did when we released the report is, I kind of walked through the history of how we think about what is [the return on investment] for military innovation, how we're going about measuring it. What we didn't have ready for this year…we're building business cases now for every one of our projects. We've never done that before. But that means some of our completed projects don't have ROI for military specific utility, because the lab didn't do that four years ago.

Here's a good example: breaching a minefield is one of the most dangerous things that we can ask our soldiers to do. It also is one of the more time-consuming things we can ask our soldiers to do when they're out in the open. I'm looking for technology that can increase soldier standoff distance from the breach… improve soldier safety and can increase the speed of clearance.

I want to keep the soldiers back. And I want to do it faster. Once the minefield is breached [or a pathway is cleared for a tank, soldier, or vehicle], they can move across more rapidly, either on foot or in vehicles. They don't have to pick their way across, leaving themselves vulnerable to enemy fire.

In the past, we hadn't set out the metrics for how much do I want to increase the standoff distance by? How much faster? Do I want them to be able to do this breach? So when it came time to prove military utility, all of our early values were qualitative: I did the thing I gave the unit, the tech they wanted, I solved this gap. For us, what we've come to realize is we define return on investment for innovation for Army innovation and DOD innovation as a military utility for the cost. So we had to go figure out military utility. That's not in the report this year. But everything else is.

What kind of tech is used to clear the path in the minefield?

There's a lot of different things. So one of the cool things about AAL is sometimes we're giving problems, like this breaching problem, that are super complex that really need three, five, seven different technology areas to go out and solve.

We bring in like five to 15 companies, each of whom can do a component. And we say, we don't need you to do the whole thing, just do what you're best at. And then we create a collaborative environment. So the companies work together, and at the end of the day, we can build a ‘Best In Breed’ solution made up of pieces from three to six companies. One of those companies often steps forward to act as an integrator so that we can get that integrated solution.

For Breacher, we've got some technologies that do detection: one is based on hyperspectral imaging, one is based on ground-penetrating radar. We've got a couple of different mine-defeat mechanisms, some for individual mines, that you would then maybe swarm a [drone] with these on it to eliminate a row of mines. 

And we've got some technology out there that's for command and control. If I've got systems flying that are going to be defeating individual mines, or defeating a line of mines, and I'm trying to detect mines, and I'm trying to prove and make sure my lane’s clear, how do I, as one person, command and control all these different systems, right? Because I don't want one person per system. I want like 10 systems per person, right? But that's a lot of cognitive bandwidth. So we've got a company out there with some software that they're trying to think through, ‘how do we make all of this work.’ 

And all of AAL’s work is open to the public?

We don't really do any classified work. So we are in the most unclassified space you've probably ever been in for a government office.

We do have one particular project where we've kind of seen from the beginning, there's a potential towards the end that it may need to get classified. The good news is seeing that coming from a year plus away, we can work with the companies to ensure that if it does, they are prepared to handle that. I think we have a way forward where it will not need to be. But we are prepared in case it does. 

We don't do classified solicitations. We don't do anything like that, because our goal is to reach out to that civil innovation base that doesn't typically work with the DOD. They don't typically have security clearances or access to a [sensitive compartmented information facility, or SCIF]  to find the classified solicitations.

What is that company working on?

They're doing coating that can help protect vehicles against [radio frequencies]. Coatings, whether that's for RF, for directed energy or counter-radar stealth, that can get real classified real quick. And I'm not talking just secret, like that gets into Special Access Programs real quick.

So AAL is really about pushing the program forward, but the point is not for companies to stay with you.

We have no acquisition authority. Yeah, we do not field. We don't do anything like that. And the goal at the end of the day for these companies is the follow-on contract. So figuring out what is the right home for the technology, getting that transition partner involved early and often, so they're prepared to receive it, there's money in the budget to receive it. We know that all the requirements documents support the transition partner receiving it. We start that work before the solicitation’s even on the street.

How do you prepare them for production and scaling?

It's very different if a company has a predominantly software solution versus if [if it’s]hardware. Scaling software, not super concerned. We fundamentally believe we've won, if a company has a choice to make: Am I going to sell to a large [company] that will then manufacture at scale? Am I going to license to a large [company] that's gonna manufacture at scale? Or am I going to scale myself and attempt to manufacture? That's a business decision. If we've put them in the position to make that decision, we've won. 

We have had companies that have asked us if we have contacts for mentors that can maybe help them think through manufacturability. And if we don't have the mentor, we may know of an organization that provides mentors in a given area. 

On the money side, is the Army giving or providing any funds for these companies? 

AAL's budget is $25 million a year. Some of that comes from some SBIR/STTR funds that are kind of carved out of the Army's budget. We also have access to one of the Army's innovation lines. What that means is we tell Congress in the budget process, we think we're going to work in a couple of broad areas like robotics, sensors, AI, human performance. But the specific project, I don't have to tell Congress until the year of execution. 

It's designed to give us some flexibility to go after emerging gaps, or leap-ahead capabilities in the commercial sector that we didn't forecast the leap for. 

Right now, for our active projects, we've invested about $60 million, and we've gotten $63 million in co-investment—so these are other government sources, as well as private industry. Companies that are on contract—companies that are in our portfolio, so that’s like 158 companies we've put on contract over the five years of AAL—they've gone on to raise over $933 million in venture funds after they've been on contract with us. 

When you think through what is the Army getting for its investment in AAL, we're helping them take advantage of a lot of private-sector investment, which helps companies scale, which helps them get additional features developed into the product that the Army wasn't necessarily going to pay for.

Does your location make it easier to focus on “innovation”? 

It is so nice to be co-located with all these other great innovation organizations, because I don't have to pick up the phone. I mean, I can, but I really can just walk across the hall. And just the immediacy of that…the collaboration that comes because we're all in one place makes Austin such an incredible ecosystem for defense innovation.

AAL stood up in 2019, and when we came to Capital Factory. DIU was here, they'd started up in 2015, so we could learn a lot of lessons from them, both in terms of what doesn't work—because if you remember, DIU 1.0 was, ‘I'm gonna go find the best tech and I'm gonna shop it around the Pentagon.’ And we just learned the difficulty of getting tech into the budget in under two years, when there was no existing demand signal for it. But what it also showed us was the premise that companies, especially venture-backed companies, were willing to work with the DOD. 

But understanding that you could do that, that you could move money a lot quicker than the government typically did, we're like, all right, how do we go do that in the Army? And you figure out how to do it by just going and asking: Hey, how'd you do that? Can I go watch the next time you do it, so I can learn?

This interview has been edited for length and clarity.