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During World War II, the United States transformed its entire economy into an engine of military production almost overnight. Detroit built tanks. California built planes. Small shops became arsenal nodes. This wasn’t a miracle—it took years of planning and disciplined oversight.
In a November 7, 2025 address at the National War College titled Arsenal of Freedom, Secretary of War Pete Hegseth laid out his plan to do it again.
The Problem: Pentagon Bureaucracy Starves Innovation
Defense hardware startup’s already know the landscape—an industrial base dominated by a handful of legacy contractors. These are the household names: Boeing, Lockheed Martin, Raytheon. They win because the system was designed for them. Requirements are shaped in-house, funding flows through multi-decade contracts, and procurement processes reward incumbency.
Meanwhile, nontraditional companies—startups, dual-use tech firms, commercial manufacturers—are excluded. Not explicitly, but systemically. The barriers are baked in: acquisition timelines measured in years, specification lock-ins that favor existing platforms, and compliance regimes that choke smaller operators.
As Secretary Hegseth put it, “The department's perverse process has in turn fostered a culture in today’s defense industrial base that makes it, unlike any other American market, uniquely tailored to the Pentagon in the worst way.” Incumbents benefit from slow cycles, cost-plus incentives, and predictable backlogs. There's no pressure to move fast, no upside to innovation, and no real competition.
The result is a brittle industrial base, incapable of responding to modern threats with the speed, scale, and agility they demand.
The Opportunity: A Pentagon That Wants to Change
Secretary Hegseth is planning on tearing that system down. Regarding the acquisition process specifically, he said:
"Acquisition is a warfighting function, and it must enable and encourage continuous adaptation and improvement of our warfighting capability. We need acquisition and industry to be as strong and fast as our warfighters."
That’s not just talk. Hegseth has ended JCIDS, the Pentagon’s notoriously slow requirements process. He’s pushing modular open systems, multi-source production, and fast-track acquisitions. And if you’re a startup, the new bar is simple: you must scale fast.
What This Means for You
If you're building electronic hardware for defense applications, here's what this shift means:
- You need to prototype fast. That’s familiar.
- Now you also need to scale fast. Not next year. Right now.
The new Warfighting Acquisition System prioritizes short delivery cycles, mission-first execution, and flexible architectures. The Pentagon wants real capability delivered now, not in three years.
Can You Actually Scale?
Many startups think they're ready. Most aren't. Here’s how to find out:
1. Do you have real-time supply chain visibility?
If your BOM is a spreadsheet and your sourcing plan is Google, you’re not ready. You need structured, live data on every part:
- Lead times
- Supplier availability
- Lifecycle status
- Export control and compliance
If you can’t see these in real time, you can’t scale reliably.
2. Can you source and kit repeat builds?
Prototypes can be messy. Scaling must be clean. If you can’t:
- Source critical parts every time
- Manage alternates automatically
- Handle MSL-sensitive components
- Pre-kit builds for your CM
Then you’re going to hit a wall.
3. Can you handle surge demand?
Do you know when the next war will break out? Neither does anyone else, so you might need to scale 10x with little notice. Ask yourself:
- Are you forecasting demand?
- Can you buffer or reserve inventory?
- Are you tracking inventory levels, lead times, and obsolescence in real time?
If not, fix it now.
The Resistance Is Real, But the Shift Is Happening
Change won’t be easy. Bureaucrats fear risk. Incumbents fear competition. But the smart money is already moving fast.
In 2024, VC funding for defense startups hit $3 billion. This year, it’s pacing toward $4 billion. Anduril raised $2.5 billion, and other unicorns like Shield AI, Helsing, and others are pulling in nine-figure rounds.
They’re winning because they deliver. They build faster, cheaper systems. They integrate software and hardware. They don’t just prototype, they scale.
You Have a Window. Make It Count.
This is your shot. The Pentagon is gearing up to buy from companies that can build and scale now. But you must be ready
Tighten your ops. Lock down your supply chain. Make scaling repeatable.
The teams who get this right will own the next generation of defense tech.
Ready to let Cofactr handle sourcing, negotiations, storage, kitting, and delivery so you’re always ready to scale? It’s free to get started with Cofactr today.
Frequently Asked Questions
How do I know if my defense hardware startup is ready to scale fast?
You’re ready if you can prototype quickly, scale production immediately, maintain real-time supply chain visibility, and meet Pentagon delivery timelines without relying on ad hoc processes.
What is changing in Pentagon acquisition for defense startups?
The Pentagon is dismantling slow requirements systems, prioritizing fast delivery, modular open architectures, and multi-source production to bring scalable, mission-ready hardware into service quickly.
Why does Pentagon bureaucracy limit innovation from startups?
Lengthy acquisition timelines, compliance-heavy processes, and requirements shaped for incumbents systematically favor legacy contractors, discouraging speed, competition, and innovation from nontraditional defense hardware companies.
Can I compete with major defense contractors as a startup?
Yes, if you deliver real capability quickly, integrate hardware and software effectively, and scale production reliably, aligning with the Pentagon’s push for speed, adaptability, and competition.
What is the Warfighting Acquisition System?
It’s a new Pentagon approach treating acquisition as a warfighting function, emphasizing rapid delivery, short cycles, mission-first execution, and continuous improvement over rigid, years-long programs.
How do I prepare my supply chain for defense-scale production?
You need live BOM data, supplier availability, lead times, lifecycle status, and compliance tracking to ensure repeatable builds and reliable scaling under unpredictable defense demand.
Why does surge demand matter for defense hardware startups?
Defense needs can spike suddenly, requiring startups to scale tenfold with little notice, making forecasting, inventory buffering, and real-time visibility critical to survival and contract success.
Can I rely on prototype-era processes when scaling?
No, prototype flexibility fails at scale; production demands clean sourcing, automated alternates, MSL handling, and pre-kitted builds to avoid delays and manufacturing breakdowns.
Who is driving these changes inside the Pentagon?
Secretary of War Pete Hegseth is leading reforms, ending legacy requirements systems and pushing acquisition speed, adaptability, and industry alignment with modern warfighting needs.
Is venture capital signaling real momentum in defense startups?
Yes, defense VC funding has surged into multi-billion-dollar annual levels, backing companies that deliver fast, scalable hardware and signaling strong confidence in Pentagon acquisition reform.