“Innovations for FCAS”: Airbus concludes cooperative pilot phase with startup companies in Germany

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  April 2, 2020

  Panel wants to double federal spending on AI

  Aaron Mehta A congressionally mandated panel of technology experts has issued its first set of recommendations for the government, including doubling the amount of money spent on artificial intelligence outside the defense department and elevating a key Pentagon office to report directly to the Secretary of Defense. Created by the National Defense Authorization Act in 2018, the National Security Commission on Artificial Intelligence is tasked with reviewing “advances in artificial intelligence, related machine learning developments, and associated technologies,” for the express purpose of addressing “the national and economic security needs of the United States, including economic risk, and any other associated issues.” The commission issued an initial report in November, at the time pledging to slowly roll out its actual policy recommendations over the course of the next year. Today's report represents the first of those conclusions — 43 of them in fact, tied to legislative language that can easily be inserted by Congress during the fiscal year 2021 budget process. Bob Work, the former deputy secretary of defense who is the vice-chairman of the commission, said the report is tied into a broader effort to move DoD away from a focus on large platforms. “What you're seeing is a transformation to a digital enterprise, where everyone is intent on making the DoD more like a software company. Because in the future, algorithmic warfare, relying on AI and AI enabled autonomy, is the thing that will provide us with the greatest military competitive advantage,” he said during a Wednesday call with reporters. Among the key recommendations: The government should “immediately double non-defense AI R&D funding” to $2 billion for FY21, a quick cash infusion which should work to strengthen academic center and national labs working on AI issues. The funding should “increase agency topline levels, not repurpose funds from within existing agency budgets, and be used by agencies to fund new research and initiatives, not to support re-labeled existing efforts.” Work noted that he recommends this R&D to double again in FY22. The commission leaves open the possibility of recommendations for increasing DoD's AI investments as well, but said it wants to study the issue more before making such a request. In FY21, the department requested roughly $800 million in AI developmental funding and another $1.7 billion in AI enabled autonomy, which Work said is the right ratio going forward. “We're really focused on non-defense R&D in this first quarter, because that's where we felt we were falling further behind,” he said. “We expect DoD AI R&D spending also to increase” going forward. The Director of the Joint Artificial Intelligence Center (JAIC) should report directly to the Secretary of Defense, and should continue to be led by a three-star officer or someone with “significant operational experience.” The first head of the JAIC, Lt. Gen. Jack Shanahan, is retiring this summer; currently the JAIC falls under the office of the Chief Information Officer, who in turn reporters to the secretary. Work said the commission views the move as necessary in order to make sure leadership in the department is “driving" investment in AI, given all the competing budgetary requirements. The DoD and the Office of the Director of National Intelligence (ODNI) should establish a steering committee on emerging technology, tri-chaired by the Deputy Secretary of Defense, the Vice Chairman of the Joint Chiefs of Staff, and the Principal Deputy Director of ODNI, in order to “drive action on emerging technologies that otherwise may not be prioritized” across the national security sphere. Government microelectronics programs related to AI should be expanded in order to “develop novel and resilient sources for producing, integrating, assembling, and testing AI-enabling microelectronics.” In addition, the commission calls for articulating a “national for microelectronics and associated infrastructure.” Funding for DARPA's microelectronics program should be increased to $500 million. The commission also recommends the establishment of a $20 million pilot microelectronics program to be run by the Intelligence Advanced Research Projects Activity (IARPA), focused on AI hardware. The establishment of a new office, tentatively called the National Security Point of Contact for AI, and encourage allied government to do the same in order to strengthen coordination at an international level. The first goal for that office would be to develop an assessment of allied AI research and applications, starting with the Five Eyes nations and then expanding to NATO. One issue identified early by the commission is the question of ethical AI. The commission recommends mandatory training on the limits of artificial intelligence in the AI workforce, which should include discussions around ethical issues. The group also calls for the Secretary of Homeland Security and the director of the Federal Bureau of Investigation to “share their ethical and responsible AI training programs with state, local, tribal, and territorial law enforcement officials,” and track which jurisdictions take advantage of those programs over a five year period. Missing from the report: any mention of the Pentagon's Directive 3000.09, a 2012 order laying out the rules about how AI can be used on the battlefield. Last year C4ISRNet revealed that there was an ongoing debate among AI leaders, including Work, on whether that directive was still relevant. While not reflected in the recommendations, Eric Schmidt, the former Google executive who chairs the commission, noted that his team is starting to look at how AI can help with the ongoing COVID-19 coronavirus outbreak, saying "“We're in an extraordinary time... we're all looking forward to working hard to help anyway that we can.” The full report can be read here. https://www.c4isrnet.com/artificial-intelligence/2020/04/01/panel-wants-to-double-federal-spending-on-ai/

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  January 31, 2020

  ‘The math doesn’t make sense’: Why venture capital firms are wary of defense-focused investments

  By: Aaron Mehta WASHINGTON — In American's technology marketplace, venture capital funds are crucial for pumping capital into small companies in need of cash infusions to keep operating. Part of the venture capital model is acknowledging that many of those businesses will fail, but if a few are successful, venture capitalists can make huge returns on their investments. At a time when the Pentagon is working hard to entice small technology companies to work on defense projects, venture capital, or VC, funding could further mature technology and give entrepreneurs a chance to keep projects going. And yet, investors seem wary of putting forth cash to support companies with a defense focus. Why? In the wake of the very public fight inside Google over working with the Pentagon — which ended with the company pulling the plug on its Project Maven participation — there was a consensus from the defense establishment that there may be a culture gap that is simply too large to overcome. But according to a trio of venture capitalists who spoke to Defense News in December, the reasons are simpler. Katherine Boyle, with VC firm General Catalyst, said the culture issue is overblown for the VC community. The reluctance to work on defense programs comes down to a mix of “math and history," she said. "The math is the reason why investors are hesitant to put a third of their fund into these types of technologies because history shows us that they haven't worked out well,” Boyle explained. She said the math can be broken down into three factors: mergers, margins and interest rates. On the first, she pointed to the fact that the defense sector has seen thousands of firms exit the market, sometimes because of acquisitions by primes. But, she argued, where mergers and acquisitions tend to occur in other parts of the world to acquire new technology or capability, in the defense realm it's all about contracting value. That makes it “very difficult for new technologies to enter the market and ultimately be acquired at the valuations that venture investors would need to see in order to have a return for their fund.” In terms of margins, Boyle pointed out that defense firms are very focused on hardware, which requires a lot of investment upfront. That makes it “very difficult to invest in for venture capital firms because software has 80 percent margins, and it's much easier to build a company that can scale very quickly if it's software-based versus needing a lot of capital,” she said. The third factor, interest rates, ties into the last two. For decades interest rates have allowed VC firms to expand dramatically — something that requires a constant flow of return from investments in order to turn around funds and quickly invest in another opportunity. In the world of defense, investors with $3 billion to $5 billion under management by the VC community will find it difficult to get the kind of returns investors are accustomed to from other markets. All three of those factors come together in a mix that means there are very few chances for VC firms to invest in defense-related companies that match up with what a VC traditionally wants to see, said John Tenet, a partner with investment firm 8VC and vice chairman of the defense company Epirus. “VC investors invest based on speed and scale and probability of a 10 to 20 times return. And so I think that's where you've seen a little bit of apprehension, at least in [Silicon] Valley,” Tenet said. “The exits haven't been that fast, and you sort of have these five big players on one side [that] sort of monopolize the market.” From a pure numbers standpoint, a good benchmark for performance is to look at the S&P 500, according to Trae Stephens, co-founder and chairman of Anduril Industries and partner at Founders Fund. Over a 10-year period, an investor in the S&P can expect to get roughly 3 times their investment back. VC firms want to be able to beat that for an investment to be worth it. To highlight the challenge of attracting VC funding to defense firms with potentially limited return, Stephens pointed to the case of Blackbird Technologies. A venture-backed player in specialized communications tech aimed at the defense market, Blackbird was bought in 2014 by Raytheon for about $420 million. That looks good on paper, but the reality is the churn isn't strong enough for a big, Silicon Valley-based venture capital group. “A lot of times in the government, people say: ‘Oh, Blackbird is this, like, great example of a success story that was like a boost for venture.' It's actually not. It's not a venture scale of return for most funds,” he said. “There are some funds where the economics of [an exit that size] is really good, but for large, Silicon Valley tier-one funds, it doesn't move the needle. And so you have to have these multibillion-dollar opportunities in order for it to really make economic sense.” Another issue raised by Stephens will be familiar to defense primes as well: concerns over sharing intellectual property with the Defense Department. The department is essentially saying “you are the right product for us, now turn over your source code,” Stephens said. “It's crazy. We're literally doing to our companies in America what we're criticizing the Chinese for doing to their companies and to our companies when we enter that market. And so there has to be a better commercial practice for enabling companies to retain their IP and do business with the government without having to fight a legal battle every time they go through a contract.” ‘Knock down the doors' Despite those concerns, all three venture capitalists that spoke to Defense News are involved in investments in defense-focused firms. So why are they spending their money in the sector? Mission is part of it — the belief that, as Americans, a stronger Defense Department benefits their firms. But that only goes so far if dollars don't follow. Once again, it comes down to math. Investing in a company focused on defense technologies, which may have to wait years to secure a contract with the Pentagon, isn't a great strategy for a VC firm looking for quick returns. But if a company is able to get government funding early on, the business suddenly becomes more worthy of investment, said Boyle. “If the government is allocating capital in the right way, it will get VC dollars immediately. Like, it will follow so quickly,” Boyle said. “I see so many people come in to our office and they have an OTA [other transaction authority contract], and they're excited. It's a small, $1 million contract, and that is great for a seed company. But if that same company came in 18 months later and said, ‘Oh, by the way, the OTA has turned into a $10 million contract,' that would meet every milestone that I usually see to series A.” (An OTA is a type of contract that enables rapid prototyping; series A financing is the investment that follows growth from initial seed capital used to launch operations.) “$10 million to the US government is nothing, but to [a] startup — $10 million is the best startup I've seen all year, if they're an 18-month-old startup and they're getting that kind of capital early on,” she said. Added Stephens: “It means they're doing something right.” That creates a chicken and egg scenario: Venture capitalists only want to invest in companies that already have a Pentagon contract, but small firms often can't keep the doors open long enough without external funding while waiting for the department's contracting processes to progress. While groups such as the Defense Innovation Unit — the Pentagon's technology hub — are helping speed along that process, it remains a problem with no easy solution, at a time when the Pentagon needs the nondefense technology community in ways it hasn't for decades. Boyle believes there is a “growing group” of investors who see the strong success of a handful of companies like goTenna, Anduril or Shield AI that have managed to break through and become successful defense-focused investment vehicles. That means the next few years are going to be critical for everyone involved. “None of us would be here if we weren't optimistic,” she said. “I actually think this is an incredible time to be investing in deep tech, particularly deep-tech companies that are selling to the Department of Defense because if it doesn't happen now, it never will.” https://www.defensenews.com/smr/cultural-clash/2020/01/30/the-math-doesnt-make-sense-why-venture-capital-firms-are-wary-of-defense-focused-investments/

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  September 9, 2022

  B612, the Urban Air Mobility Plazza Accelerator

  As part of Toulouse Metropole's flagship accelerator and incubator centre, B612, the Urban Air Mobility Plazza Accelerator multi-year programme will assist a minimum of 10 start-ups developing urban air mobility solutions from across Europe focusing on environmentally sustainable logistics and [...]