Steve Blank: Why Israeli Defense Startups Need to Stop Selling Tech and Start Solving Problems

If you think landing a SBIR contract is how you build a defense startup, Steve Blank has news for you: you’re building a hobby, not a business.

An expert on the Department of War’s procurement transformation, Blank co-founded the DoW’s “Hacking for Defense” program, as well as Stanford’s Gordian Knot Center for National Security Innovation. He literally wrote the book on DoW procurement — a 430-page directory we’ve made available to Israeli founders at his request. And in a recent fireside chat with Israeli founders, his message was blunt: the DoW is undergoing the largest procurement transformation in 60 years, and if you don’t understand what changed, you’re wasting your time.

Here’s what matters:

1. Private equity took over the Pentagon — and everything changed

For the first time since 1962, the Department of War isn’t run by process-driven bureaucrats. Deputy Secretary Stephen Feinberg came from Cerberus, one of the largest private equity firms in the U.S. The Secretary of the Army was a venture capitalist and investment banker. The Secretary of the Navy ran MSC Capital.

What does this mean? They looked at the U.S. defense acquisition system — thousands of pages of Federal Acquisition Regulations built during (and expanded after) the Cold War — and said, “This is insane.” The goal isn’t process. The goal is rapid deployment. Israel understood this. The U.S. forgot it. Now they’re catching up.

2. The org chart just exploded — and you need to track it

The Armed Services are rewiring themselves around Portfolio Executive Officers (PAEs) who now control requirements, testing, and acquisition in one role instead of silos that took months to coordinate. The Army has announced their PAEs, and the Navy just stood theirs up. Air Force and Space Force are lagging.

Meanwhile, six execution organizations now sit under R&E (Research and Engineering): DIU, Strategic Capital Office, Strategic Capabilities Office, CDAO, and others. SOCOM (Special Operations Command) remains the only combatant command with acquisition authority.

Blank’s advice: Sign up for his directory updates, because the dust won’t settle for at least another year.

3. SBIRs are research grants, not revenue strategies

SBIRs have been frozen since October due to Congressional battles over “SBIR mills” — companies that specialize in winning grants at high value. Even when SBIRs are reauthorized, Blank’s message is clear: SBIRs are fine for early R&D, but if your goal is a scalable company, a $1 million to $3 million SBIR is a distraction, not a door prize.

What you really want: A path to $100 million+ in annual revenue. That means working with Capability Development Executives (the new name for Program Executive Officers) who control the big contracts. Use SBIRs and DIU as door openers, but your eye should always be on the real money.

4. Stop waving your tech — start talking about the problem you solve

Israeli founders have a massive advantage: Most have operational experience. You’ve deployed systems. You’ve seen the problem firsthand.

Lead with that. Talk about the customer pain, how you solved it in combat, and how your solution works today — not theoretically at scale. Save the technical deep-dive for engineers. For everyone else, the problem matters more than the PowerPoint.

Blank was direct: “If you can’t draw the acquisition pathway as clearly as you can draw your tech stack, you’re building a hobby.”

5. “America First” means U.S. manufacturing — or a U.S. partner

For critical systems at scale, you’ll eventually need manufacturing or a manufacturing partner in the U.S. It checks the box, and for the next three years at least, it gives you an edge in acquisition decisions.

SOCOM and others will find workarounds for niche capabilities, but if you want scale, plan for U.S. production now.

The bottom line

The DoW is finally adopting the iterate-and-deploy methodology Silicon Valley (and China) have been using for years. They want 80% solutions delivered fast, not exquisite systems delivered in a decade.

If you have combat-proven tech that solves a real problem and you can map a clear path from prototype to production OTA to program dollars, Blank calls this the best time in 60 years to be a defense startup.

Contact us to learn more, discuss go-to-market, or to find some of the partners in the U.S. who can assist.