DoW Contracting for Startups 101 | Andreessen Horowitz

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TLDR

  • A practical map of how startups enter and survive the Department of Defense procurement process, from SBIR grants through Program of Record.

Key Takeaways

  • SBIR Phase I pays $50K-$225K; Phase II pays $750K-$1.5M; Phase III unlocks sole-source contracts without further competition.
  • OTAs (Other Transaction Agreements) bypass Federal Acquisition Regulation, enabling rapid prototyping; OTs can transition directly to production scale.
  • Bridge programs STRATFI ($3M-$15M) and TACFI ($375K-$1.7M) connect SBIR-stage companies to sustained Air Force funding.
  • Compliance prerequisites FedRAMP, CMMC, and ITAR must be addressed early; failure creates deal-blocking bottlenecks at contract close.
  • Service branches control 75%+ of R&D dollars through innovation hubs: AFWERX, Army Applications Lab, NavalX, SOFWERX.

Why It Matters

  • The “Valley of Death” between R&D and procurement kills most defense startups; surviving requires a formal Program of Record with congressional inclusion.
  • Anduril (300+ border towers), Palantir (Army TITAN prime), Shield AI, and Skydio show that non-traditional paths through OTs and SBIR can reach production scale.
  • 2025-2026 reforms renamed PEOs to CPEs, introduced Portfolio Acquisition Executives, and added new caps on SBIR applications to eliminate grant-farming abuse.

Andreessen Horowitz · 2026-04-23 · Read the original