The
defense market is a difficult target for a start-up. Very long sales lead
times, security issues that delay or prevent public referenceability, and a
conservative buying culture are formidable obstacles for any VC-backed firm. On
the other hand, US military spending is high, and the life-and-death nature of
the field can help drive early adoption at price points that wouldn’t be viable
in the commercial markets. Some sectors like biotech have been successful in
attracting federal funding, due to the structure of those markets. Elsewhere, a
venture-backed firm needs to look at shortcuts if it plans to make the military
market one of its targets. One potential shortcut involves service-disabled
veterans.

Veterans
as a class as known as stable and often skilled employees, and many bring
relevant contacts within the military. since 9/11, over 24,000 US service
members have wounded or injured on duty, from minor injuries that healed
quickly to permanent disability. In October 2004, President Bush signed an executive
order that required agencies to implement a strategy designed to reach the
government-wide 3% goal for contract awards to service-disabled, veteran-owned
businesses. From 2003-2005, that value had doubled to $514 million a year, or
about 0.3% of total contracting dollars. It had doubled again to about $1
billion by July 2007, but the 3% goal remains a long way away.

 In
response, efforts are underway to narrow the gap – including a stronger focus
on sub-contracting partnerships with larger firms, who may represent a future
acquisition exit. Of course, smaller firms can also avail themselves of these
same contracting partnership benefits. Defense Industry Daily’s updated article Service-Disabled
Veterans Face Contracting Opportunity, Challenges offers more
information, and a wide variety of resources for businesses where 51% or more
of ownership falls to a service-disabled veteran or veterans.

Joe Katzman lives near San Jose; he is the
Editor-in-Chief at Defense Industry Daily