Happy Friday, and welcome to Inc.’s 1 Smart Business Story. Rising geopolitical tensions, surging defense budgets, an intensifying AI arms race with China, and the success of companies like Palantir and SpaceX have thrust defense tech back into the spotlight. 

What was once considered niche (and even controversial) within Silicon Valley is quickly becoming one of the most fundable opportunities in tech, and one uncomfortably entwined with the rise of AI. Last year, defense tech startups pulled in a record $49 billion in venture capital—a figure that’s likely to climb as global conflict escalates and governments ramp up spending. 

At the center of the action is Steve Blank, a veteran-turned-entrepreneur and Stanford adjunct professor. His course, Hacking for Defense, connects students with real-world national security challenges and asks them to solve those problems with startup-style thinking. 

As Inc.’s Brian Contreras reports, the program has quietly evolved into one of the most influential pipelines in modern defense tech. Now active at nearly 70 universities worldwide, Hacking for Defense has helped launch 78 startups and is funneling talent straight into the “lucrative Silicon Valley-Pentagon nexus.” 

In this piece, you’ll discover:

Amid wars overseas and a Silicon Valley defense tech gold rush, this Stanford class could be the most important business program in America right now.

BY BRIAN CONTRERAS, STAFF WRITER

As a first-year MBA student in Stanford’s Graduate School of Business, Andrew Powell knew he wanted to bring his entrepreneurial skillset to bear on America’s national security needs. There was just one problem: He didn’t have any experience in the world of defense contracting.

“I just thought, man, if I get a crash course in three months on how the [Department of Defense] works and what it looks like to try to build for national security, that would be really cool,” Powell recalls. So in 2019, he enrolled in a Stanford course called Hacking for Defense, or H4D, which pairs students with real-world partners throughout America’s military, intelligence, and national security ecosystem and tasks them with applying their technical and entrepreneurial skillsets to solving some of the defense community’s toughest problems.

Powell, for instance, had a background in ed tech, so H4D matched him with the Air Force’s Air Combat Command, which needed help training pilots more quickly. Over 10 weeks and across more than 100 stakeholder interviews, Powell and his teammates explored how software tools—including AI—could supercharge the Air Force’s training methodology.

“By the end of it, we had a pretty clear picture of how we thought we could move out and solve that problem, and that led to a close to $1 million Air Force R&D contract to really build out that solution at scale,” Powell says. His class project evolved into a full-fledged startup, Ethos, for which he raised a $4 million seed round during his second year of business school. After graduating in the summer of 2020, he started working on it full-time; it now counts all four branches of the military as clients, in addition to several large private companies and professional sports teams.

Powell’s is a familiar trajectory for alumni of the H4D program, which began at Stanford as the brainchild of veteran-turned-entrepreneur Steve Blank, but has steadily spread to nearly 70 other universities and become something of a farm system for defense tech talent. To both legacy defense contractors and upstart competitors in the increasingly trendy sector—as well as to defense-inclined investment firms and the military itself—H4D offers a pipeline of eager young talent eager to leverage their software, engineering, and entrepreneurial acumen in service of national defense and warfare.

“Students ended up being embedded in those organizations; some of them went back to government, some of them were serving in the military,” says Blank. “We populated the ecosystem, not just in startups but in venture and government.”

And with defense tech enjoying a lot of tailwinds right now—a boom that insiders attribute to a perfect storm of cultural shifts, investment opportunities, and changes to the federal procurement system—H4D’s alumni represent an increasingly in-demand subset of Silicon Valley talent.

But that wasn’t always the case. Less than a decade ago, Google employees’ protests of their company’s work with the Pentagon became international news, symbolizing tech’s skeptical, even adversarial, relationship with national security institutions. Indeed, H4D predates the current boom in defense tech—and, depending on who you ask, may have even helped fuel it.

According to the Council on Foreign Relations’ Global Conflict Tracker, there are currently 13 conflicts around the world with a significant or critical impact on the United States. There’s also our long-simmering AI arms race with China. With the national defense budget poised to grow to $1.5 trillion next year, Blank’s contrarian bet could well be the most influential entrepreneurship course being taught in America right now.

Blank, co-founder of the Hacking for Defense program, is well-positioned to bridge the gap between East Coast defense institutions and West Coast startup culture: He served in Vietnam and then built a career as a serial entrepreneur, founding or helping build eight startups over more than two decades.

After retiring in 1999, Blank says, he started thinking in a more abstract, holistic way about the nature of entrepreneurship—and realized that the traditional 20th-century model of startups, which conceptualized them as essentially just smaller-scale versions of mature companies, was wrong. As an alternative, he and the entrepreneurship blogger Eric Ries developed a theory they call the lean startup, emphasizing iterative testing, minimum viable products, pivots, and other heuristics to enable fast, flexible business development at small scales.

That theoretical framework, in turn, evolved into a Stanford course called the Lean Launchpad in 2011, which gradually spread its tendrils from Palo Alto to other universities and to the federal government via the National Science Foundation.

But Blank, now an adjunct professor at Stanford, saw it grow to even greater heights when, in 2015, one of his students—“an ex-Delta Force guy, or maybe Special Forces operator,” he recalls—noted that the lean methodology had a lot in common with the practices of the Army’s Rapid Equipping Force. (The REF, now defunct, was a skunkworks-style team tasked with developing innovative, rapid-fire solutions to whatever problems troops asked for help with during the war on terror.)

A colonel who’d led the REF, Pete Newell, was now running a company in Palo Alto, the Lean Launchpad student added; would Blank have any interest in meeting with him?

Blank expected their meeting to be a quick meet-and-greet, but it ended up lasting four hours. As it turned out, they had a lot to talk about. They’d independently arrived at the same theories of innovation methodology, with Newell doing on the battlefield what Blank was doing in the boardroom.

“He was drawing on a dry-erase board the lean methodology, and I was drawing on a dry-erase board the methodology I used to extract problems and find solutions in Afghanistan, and our drawings were identical,” explains Newell, who was in Palo Alto working on BMNT, a public sector consulting firm of which he’s the chief executive. “Steve left the room and said, ‘You and I are going to work together, and we’re going to solve this Rubik’s cube for the government.’”

The result of that collaboration saw them adapt the lean methodology to the military’s innovation needs through a new Stanford course that they piloted later that year: Hacking for Defense. The thinking was that leaders in the military, natsec, and intelligence communities could run their most vexing problems by some of the brightest young minds in civilian America—Newell sourced early project ideas from his network of government connections—while eager students could direct their energy toward purpose-driven problems of the sort that Blank thought were sorely needed on Stanford’s campus.

“This was the time when the best thing a student at Stanford could think of doing was going to Google and Facebook, or making a fart app,” he says. “I thought that we were missing something.”

Hacking for Defense subsequently spread to other universities; a program spokesperson says that 66 universities currently offer it, with almost 4,000 students having participated across more than 1,000 projects, and 78 startups having formed as a result. There are now spin-off programs in the United Kingdom and Australia as well.

Blank’s goal was never to create a “military incubator,” he says—yet that is, to an extent, what has happened. Over the past few years, 100 percent of the student teams in Stanford’s H4D program have moved on to either develop a defense tech startup or otherwise work with (or for) the government, according to Blank. H4D has become, in other words, a direct pipeline into the increasingly lucrative Silicon Valley-Pentagon nexus.

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“The Feed is Fake” (New York Magazine)

“Want to Start an AI Company? Here’s What VCs Are Looking For Now” (Inc.)

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