Key takeaways from this episode:

• The defense industrial base shrank from roughly dozens of prime contractors to 5 in the 90s. Ukraine exposed the capacity gap, and startups are now filling it.
• The 2027 budget proposes a massive increase in autonomy spending, but the money depends on appropriations. To win it, startups must be truly differentiated and able to explain why fast.
• Software is eating defense hardware, but acquisition rules were written for hardware. The real bottleneck is change management.

For this episode of Between Two Quarters, I sat down with retired three-star Lieutenant General Richard Moore Jr., who served 32 years in the U.S. Air Force, 10 of them in the Pentagon. We were introduced by Skyler Shuford, founder of Reaxiomatic, at the company’s airplane hangar in San Diego this fall.

General Moore finished his career as Deputy Chief of Staff for Plans and Programs. In plain terms, he helped decide where the Air Force’s money goes: the five-year budget, and the 6-to-30-year strategic plan behind it. Few people understand better how the Department of War decides what to buy, and why it so often struggles to buy it quickly.

That’s exactly what I wanted to dig into. At nvp capital, we’ve backed founders who do this exceptionally well, including Skyler at Reaxiomatic and the team at Vulcan Elements. But for most startups, selling to the military is still a black box. How do you actually get in the door?

Across everything General Moore shared, one pattern kept showing up:

In defense – like every other industry – the technology is rarely the hard part. The hard part is people: earning trust, framing the problem, and helping a massive institution change how it works.

What Can Founders Learn from Military Leadership?

General Moore spent 32 years leading people, from flight crews to a wing of 8,400 airmen across six countries. Along the way, he had a front-row seat to who rose, who stalled, and why.

His conclusion is that great leaders aren’t defined by rank. They’re defined by whether people actually want to follow them.

What Traits Make a Great Leader?

General Moore’s answer was simple: technical competence plus charisma.

Competence is the foundation. It’s hard to lead an organization if you can’t show you know the work. But competence alone doesn’t get people to follow you. Charisma and connection do.

When both are present, you rarely have to tell anyone what to do. His favorite example comes from his time as a wing commander at Dover. To get squadron commanders to complete something, he didn’t yell. He gave them six weeks’ notice that progress would go up on the screen at the staff meeting.

He said “All you have to do is give them an opportunity to excel and they will take it.”

Which Military Skills Translate to Startups (and Which Don’t)?

We’ve backed a number of founders with military backgrounds, so I asked what carries over.

What doesn’t: the belief that giving an order is enough. In the military, rank sits on your shoulders. On the outside, nobody cares.

What does: soft skills. Building a team, getting people to want to work together, and keeping them focused on shared goals so personal concerns fall away. A strongly hierarchical culture doesn’t teach those skills. But in General Moore’s view, they work in the military too, and outside it, they’re the only thing that works.

Why Is the Department of War Turning to Startups?

It feels like more startups are working with the Air Force, Army, and Navy than ever before. I asked General Moore whether that’s real or just more airtime.

It’s real. And he thinks it’s remarkably helpful.

The backstory starts with the so-called “Last Supper” in 1993, when the Pentagon pushed defense contractors to consolidate. By his count, the industry went from 88 prime contractors to 5. The defense industrial base has been constrained ever since.

Then came Ukraine. When the U.S. was asked to backfill support, demand ran straight into that constraint. Ukraine was firing more 155mm artillery rounds in a month than the U.S. could make in a year.

Capacity had to expand. And it couldn’t come only from five companies.

There’s a second driver. Private equity and venture capital have funded an enormous amount of strong technology that the government never paid to develop. Some of it can now be in a warfighter’s hands within about a year. That, General Moore said, is demonstrably different from anything that came before.

We see this in our own portfolio. Vulcan Elements makes rare earth magnets in the U.S., securing a supply chain the military depends on. Its founder and CEO is a former Navy officer who saw the problem firsthand in Navy procurement. The company now has a large loan from the Department of War and has raised $600 million in private capital.

Could there be more of this? “Oh my gosh, there could be so much more,” he said. It’s a cultural shift, and it’s moving slower than many would like. But it’s happening.

Should You Start in the Field or at the Pentagon?

Start where you can get in the door. If you can get into the field – it’s land and expand, and it will feel familiar to any SaaS founder.

Operational units give fast, honest feedback, which lets you iterate quickly. When they like what you’ve built, they’ll put you on contract, typically for a few hundred thousand dollars.

Then two things happen. First, happy users tell their friends. Second, the military moves people constantly, so your users get transferred to new units and ask why they don’t have that great tool from their last base.

Once contracts start ending in M or B, you need the Pentagon. That’s where big money moves. But the field work isn’t wasted. At some point, someone at the Pentagon will call a unit that uses your product and ask what they think. When the answer is “this is the coolest thing we’ve ever seen,” that’s what unlocks the big dollars.

How do you reach the field in the first place? Industry days, technical awareness days, and relationships. Someone on your team knows someone they served with, who takes it out to the range and finds out it’s great.

As General Moore put it, this business is no different from yours. It runs on relationships.

Where Will the 2027 Autonomy Budget Go?

Here’s a refreshingly candid admission: when it came to drones, the planners saw the technology but badly underestimated how fast it would arrive.

Five years ago, drones were on the radar. But they barely factored into the plan, because planners didn’t anticipate what would happen in Ukraine, how quickly the tech would advance, or how cheap and ubiquitous it would become. “We missed it,” Moore says plainly. Now the department is catching up at great expense: the 2027 budget puts $56.4 billion toward autonomous warfare, up from roughly $220 million the year before.

That, Moore notes, is what it costs when a trend outpaces the planning cycle.

Compare that to a trend the Air Force got right: survivable weapons. Planners saw early that munitions themselves would need stealth characteristics to get through modern air defenses, not just the aircraft that carry them. Those weapons take years to develop and about three years to arrive after they’re ordered. Because the call was made early, they’re coming off the line now.

How Is the Department of War Finding Startup Partners?

First, a reality check: the autonomy money isn’t flowing yet. It depends on Congress appropriating the 2027 budget, which General Moore expects won’t happen until late winter or early spring.

In the meantime, the department is experimenting:

• Consortiums. Government-chartered groups build a shared reference architecture, so every company’s “black box” can plug into every other. It’s a fast path to contract, but if you’re not in the consortium, you’re cut out.
• New organizations. Groups like the Army’s Joint Interagency Task Force 401, focused on counter-drone work, are moving quickly.
• Unprecedented outreach. The department is talking to industry more than ever before.

But there’s a catch. There are so many drone companies right now that the department simply can’t talk to all of them.

If you want this business, you have to be truly differentiated, and you have to explain why in a short conversation with someone who can make a decision.

Why Does Defense Adoption Move So Slowly?

Founders often read slowness as bureaucracy. Sometimes it’s something smarter.

When the department moves fast, General Moore said, it often discovers two or three years later that nobody planned for training, technical manuals, or sustainment. What’s left is a pile of expensive tools, many of them broken, and no plan for what to do with them.

Then there’s the human side. The department wants to sign more commercial contracts, but it hasn’t trained contracting officers to write them. Worse, those officers have been warned that getting it wrong could end their careers, or land them in jail. Of course they hesitate.

“It’s not that they’re bad Americans,” he said. They have to stay compliant, and their confidence in doing that decides what they’re willing to try.

This isn’t unique to defense. Enterprise AI has the same problem. Big companies have dozens of AI use cases scattered across teams, but few have pulled them together. General Moore offered a sharp test: does your company know where the AI tokens it buys are actually being spent? On code that moves the business forward, or on cat pictures?

Buying new technology is easy. Absorbing it is the real work, and it’s a change management problem, not a procurement one. (Sound familiar? Between Two Quarters guest Rishi Dave, Expert Partner at Bain & Company said the same is happening in enterprise.)

Why Is Encryption the New Front Line of National Security?

My favorite story from the conversation had nothing to do with jets or missiles. It was about random numbers.

General Moore advises a company that generates extremely long, extremely random numbers, strings as long as 2 to the 4,096 bits. The randomness inside them is called entropy, the same idea as thermodynamic entropy, but measured in data instead of heat. Those numbers become the foundation of encryption keys.

Why does that suddenly matter so much? Two forces are reshaping data security at once.

AI is supercharging attackers. General Moore described state-sponsored hackers using AI models to find vulnerabilities in chemical plants, government networks, and financial systems, then using AI to write the code to exploit them. Newer models, he said, can chain those vulnerabilities into far larger attacks. Right now, the best defense is stronger encryption.

Quantum will turn hacking into brute force. Once quantum computers mature, attackers won’t need to be clever. They’ll cycle through combinations so fast that they’ll eventually hit the right one. The only answer is to dramatically increase the number of possible combinations.

The company’s origin story is wonderfully unexpected. It started by collecting muons, subatomic particles from the atmosphere, to build a massive dataset of true randomness. It used that dataset to train an AI model that generates random numbers, paired with a separate system that measures the entropy in every one.

“They’re going to be around for a long, long time,” he said.

How did a three-star general end up advising a stealth-mode cryptography startup? He was consulting for a firm that helped startups win SBIR grants. He did one outside consult for this company, and they asked him to stay.

Put yourself in the right rooms, and good things tend to follow.

Is Defense Spending Shifting from Hardware to Software?

Yes, and faster than most people realize.

When most of us picture military spending, we picture planes, ships, and missiles. But the line between hardware and software is disappearing. General Moore pointed out that the new Sentinel intercontinental ballistic missile has more lines of code than the F-22 fighter jet.

The problem is that the rules haven’t caught up. The Federal Acquisition Regulations were written for hardware. They don’t account for DevSecOps, for agile development, or for the idea that you often get a better product by not locking every requirement in up front.

That mismatch explains a lot of the friction between startups and the department. A dedicated software acquisition pathway already exists, and General Moore expects it to become more prominent and more effective over time. But rewriting decades of regulation and culture doesn’t happen overnight.

“I wish we could pivot just like this,” he said, “but that’s not how it happens.”

For founders, that gap is the opportunity. The companies that understand how software actually gets bought today, and help the department buy it better, will be best positioned as the system catches up.

The Real Insight

Defense is opening to startups in a way it never has before. But the companies that win won’t just have the best technology.

They’ll have figured out the people side:

• Pitch a problem someone already believes in, not a product
• Start in the field, earn fans, and let them carry you to the Pentagon
• Be differentiated enough to explain in one short conversation
• Respect the change management, because buying is easy and absorbing is hard
• Lead with competence and connection, not rank

And maybe, along the way, take General Moore’s wife’s advice. Don’t spend the whole time wishing for what’s next.

It’ll come either way.

Check out the full conversation below, and for more of nvp capital’s Between Two Quarters, visit www.nvpcap.com/content.