Entrepreneurs from Silicon Valley and other American innovation hotspots are turning their attention—and investment dollars—to areas once perceived as the sole domain of the defense industry.
Facebook bought drones, Google has balloons plus drones, and Amazon wants to build a fleet of autonomous craft for delivery right to the doorstep.
What if revolutionary technologies for the offset strategy come from players new to the defense industry?
“The race to put the first man on the moon was led by the US and Russian governments, but today it is private companies—the cash-rich digital corporations of Silicon Valley—that are driving the sub-space race,” trilled the Manchester Guardian after Facebook scooped up a British dronemaker.
The Pentagon isn’t directing this change. But under a new initiative, DOD may extend a warm welcome.
Seeking advanced technology from new players is at the core of the offset strategy articulated in November by then-Defense Secretary Chuck Hagel. Specifically, the offset strategy’s innovation initiative will “help identify, develop, and field breakthroughs in the most cutting-edge technologies and systems—especially from the fields of robotics, autonomous systems, miniaturization, big data, and advanced manufacturing, including 3-D printing,” Hagel said.
Under this new strategy, “many, if not most, of the technologies that we seek to take advantage of today are no longer in the domain of DOD development pipelines or traditional defense contractors. We all know that DOD no longer has exclusive access to the most cutting-edge technology or the ability to spur or control the development of new technologies the way we once did. So we will actively seek proposals from the private sector, including those firms, and from those firms and academic institutions outside DOD’s traditional orbit.”
The Pentagon will find that Silicon Valley money is on the hunt for many of these same “cutting-edge” technologies and talent. Entrepreneurs appear to have an appetite for raw technology even when proven results aren’t yet in hand.
Both Google and Facebook have made recent acquisitions that overlap the aerospace sector. For the tech behemoths, these buys were only a tiny fraction of their overall acquisition activity. Facebook’s acquisitions focused far more on information sharing and analytics. They did not seek “entry” into the defense sector as traditionally defined; their motives were to carve out new commercial markets. However, the moves could impact the defense sector over time by creating a new stream of products relevant to security applications.
Google bought start-up Titan Aerospace out from under a rumored Facebook bid of a reported $60 million in 2014. Titan made the sale on the persuasive powers of a concept demonstrator for a long-endurance unmanned airplane called Solara. The surface of its long, thin wing and horizontal stabilizer would be covered by 3,000 or more photovoltaic cells to recharge solar batteries. On the 164-foot wing, they could produce seven kilowatts of power, according to statements made by Titan Aerospace before the acquisition. Solara would fly at 60,000 feet, above commercial traffic and FAA regulations. From that perch a single Solara could cover 6,564 square miles, an area equal to 100 cell towers. Multiply the coverage and the profit appeal becomes obvious.
Industry experts recall similar projects as far back as the 1970s. A small solar-battery airplane called Sunrise flew in Fort Irwin, Calif., in 1974, as did the Gossamer Penguin in 1980.
“If you look at the history of these projects, you’ll notice almost all were destroyed because they flew through a little bit of weather,” Kevin D. Jones of the Naval Postgraduate School told IEEE Spectrum in December 2013.
Stronger, lighter composites, better guidance, and more efficient solar cells solved some of the early troubles. A more recent and much more robust success was the Zephyr made by British firm QinetiQ. Zephyr logged a flight of 14 days and 22 minutes at the US Army Proving Grounds in Yuma, Ariz., in 2010.
Despite Zephyr’s encouraging success, challenges remain at altitude and in the basic concept. Lithium batteries are limited to around 200 recharge cycles, according to Jones. Under those conditions even the best air vehicle could draw power only for about six months.
With Titan in the Google fold, Facebook acquired British UAV maker Ascenta in March for $20 million. Facebook CEO Mark Zuckerberg billed the acquisition as part of his wider connectivity initiative. Yet he could not resist mentioning that the Facebook Connectivity Lab team was already a powerhouse.
“Our team has many of the world’s leading experts in aerospace and communications technology, including from NASA’s Jet Propulsion Lab and Ames Research Center,” he said.
Not all of the activity is in mergers and acquisitions. Some comes from in-house work. Google had its own development underway with Project Loon. Lighter-than-air technology is at the core of the initiative. Balloons will travel in the stratosphere and use varying currents there for power and direction. Users with phones or other LTE devices could in theory connect directly to the balloon network instead of space satellites.
“Project Loon is a network of balloons traveling on the edge of space, designed to connect people in rural and remote areas, help fill coverage gaps, and bring people back online after disasters,” Google says.
Google has in this case invested internal research and development in a product devised by the Google X lab. A pilot test of 30 balloons forming a network was run near Canterbury, New Zealand, in 2013.
Providing Internet to underserved areas is part of the concept. However, the company recently received a patent for technology to help the balloons cluster in areas with high broadband demand. Its application cast a wide net of potential customers.
“The user of the balloon network could represent an individual user, a corporate user, a government, or any other entity that may have an anticipated need for bandwidth (e.g., Internet services, communications services, etc.) at a specified future time period in a specified area,” Google said.
Granted, some of the featured technologies seem unproven at best, compared to standards in the aerospace industry. “Mystery surrounds the tiny company,” said Britain’s prestigious Financial Times as the Facebook-Ascenta deal closed.
Google has come in for criticism, too. Famous balloonist Per Linstrand all but ridiculed the concept based on the difficulties of operating in the stratosphere.
“Balloons blow away. Wind speeds at that altitude can reach up to 120 knots, so they won’t stay there for more than a minute,” Lindstrand told Techradar.com. “And if you set off a lot of balloons simultaneously around the world, sooner or later they’re just going to collect at the North Pole or the South Pole. They can’t stay in position.”
But the Silicon Valley ventures have cash and time to close the gaps.
Other areas named in the Pentagon’s new offset strategy have long been on the shopping lists of Silicon Valley. Robotics companies have also sold particularly well. Google acquired Boston Dynamics in late 2013. The company is well-known for its military and industrial robots. Others include Schaft, Inc., developing humanoid robots; Meka Robotics, specializing in robot arms; Holomni, maker of robotic wheels; and robotic camera company Bot & Dolly.
All signs indicate the new players are in for the long term.
“Facebook’s purchase of Oculus VR, the maker of virtual reality head-mounted displays, and its attempted acquisition of Titan Aerospace, show that CEO Mark Zuckerberg is focused on the distant future,” stated Bret Kenwell on the website TheStreet.
Virtual reality is a significant market. Zuckerberg explained Facebook’s buy of gaming and virtual reality leader Oculus as part of a shift from building out mobile to the next big thing, virtual reality connections. “We have a lot more to do on mobile, but at this point we feel we’re in a position where we can start focusing on what platforms will come next,” blogged Zuckerberg.
Virtual reality as made by Oculus enables lifelike simulations. “When you put it on, you enter a completely immersive computer-generated environment, like a game or a movie scene or a place far away,” wrote Zuckerberg. “People who try it say it’s different from anything they’ve ever experienced in their lives.”
Simulation is set to become an ever-larger share of training. Advanced applications offer a test method for tactics, unmanned swarming, and more. All those technologies are potentially at the heart of the new offset strategy.
Infrastructure investment is another indicator. With infrastructure, Google is not unlike other aerospace ventures building light industrial facilities at out-of-the-way airports. Google announced it would invest $15 million in a 60,000-square-foot combined research and development, light manufacturing, and office facility for administration, engineering, and test personnel in Moriarty, N.M. With the move, Google is building a test base for the Titan Solara products, much to the excitement of the mayor of Moriarty, Ted Hart.
“By strategically investing in infrastructure between the city of Moriarty and the state, we expect to see great economic development take place,” said Hart in a Sept. 23, 2014, press release.
Then there is SpaceX, the new entrant striving to become a major player with contract launches to resupply the International Space Station.
SpaceX was fueled by the 1990s success of PayPal cofounder Elon Musk. Musk first founded SpaceX in 2002, then went on to join Tesla Motors. To get into the launch business, Musk invested $100 million of his own money and raised hundreds of millions more with venture capital. The big dollars, however, came when NASA awarded SpaceX a contract in 2008 potentially worth $1.6 billion to make 12 deliveries to the International Space Station. With NASA work, SpaceX is taking a time-tested route of leveraging government financing to accomplish research and development. It’s an example of how entrepreneurial management and private cash can work together.
Of course, the most productive overlap may come with sophisticated information technologies. One area of convergence is advanced application of autonomy concepts. Google has said its Project Loon balloons will behave as a flock.
“In my early simulations, each balloon does something similar to what birds do,” a Google team member named Dan explained to Slashgear journalist Chris Davies in a 2013 interview. “They just look to their near neighbors and try to spread themselves out nicely compared to the others.”
The reason for exploring autonomous vehicles as information nodes is to increase data rates, conserve precious bandwidth, and create a network that won’t shut down if a few of the platforms stop operating. A smart flock may be just the solution for innovative communications techniques, too. Orbital angular multiplexing transmits radio waves on the same frequency in twisted shapes that multiply capacity.
“I could have a wave that twists slowly and one that twists a little faster, and those waves are now orthogonal to one another,” explained Alan Willner, of the University of Southern California, in an IEE Spectrum article.
Experiments transmit, split, then untangle the waves. The USC-led experiment achieved a data rate of 32 gigabits per second across about eight feet.
Cluster platforms in the air at a distance conducive to transmission, and the result may be a shifting, high-data-rate network. Position that formation over a disaster site or battle area, and it brings rapid and regenerative communications—a sure winner in the new offset strategy.
Eye On The Future
Is there any chance the pace will slow? Driving the acquisitions is the burgeoning market capitalization of the buyers. Google’s market capitalization stood at $338 billion on Jan. 11, with Facebook’s at $216 billion. Compare that same-day snapshot with Boeing at $93.7 billion, Lockheed Martin at $61.6 billion, Raytheon at $33.2 billion, or Northrop Grumman at $30.8 billion. Even the diversified defense, civil, and commercial manufacturer United Technologies clocked in at $103.9 billion.
Market capitalization admittedly reflects the value of stock but indicates the relative scale of available capital. At a time when defense sector acquisitions have been relatively quiet, the ability of new money to cherry-pick innovative start-ups has the potential to shift the center of gravity of competitive advantage over the long term.
Technology companies like Google and Facebook invest for myriad reasons. Their entrepreneurial culture and huge cash flows make it possible to buy a product just because it sounds cool. Simply put, it’s money they can easily spare. Buying a nouveau dronemaker may appeal to broaden a portfolio, to prevent a rival from making a key acquisition, or to scoop up talented engineers.
Acquiring talent is a major goal. “They take an interest in the firm, but for the most part they seem to want to acquire the people,” commented US tech analyst Rob Enderle in a CBC News analysis. Zuckerberg pointed out that some of the Ascenta team he bought included founders who had worked on Zephyr.
Currently, few upstarts can match the technical virtuosos in the defense industry. However, time, money, and a go-for-it attitude can enable new entrants and their info-money backers to cover significant ground. The situation is not unlike the 1920s when the obscure start-ups were headed by men named Donald W. Douglas Sr., James S. McDonnell, William E. Boeing, John K. Northrop, and Allan K. and Malcolm Loughead.
That said, there’s no guarantee Silicon Valley money will be sympathetic or even respectful when business goals clash with military requirements.
Take the case of Lightsquared. Back in 2004, the FCC authorized Lightsquared to use the 1525-1559 MHz spectrum in L band as the basis for a 4G LTE network spanning the nation. Lightsquared then attempted to change the plan to a terrestrial system with 40,000 base stations. The problem was that GPS signals operated right next door at 1559 to 1610 MHz and the new ground stations created interference. The FCC gave Lightsquared a conditional waiver as long as they resolved any potential interference with GPS.
What ensued was a battle royal. Lightsquared, backed by a major hedge fund, campaigned hard for their new plan. Ads popped up in Washington, D.C. Stories circulated about campaign donations by Lightsquared’s hedge fund masters and rumored White House pressure. Gen. William L. Shelton, who was then head of Air Force Space Command, had to explain to Congress and others that under the new plan the Lightsquared signal “would effectively jam vital GPS receivers.” Added Shelton: “To our knowledge thus far, there are no mitigation options that would be effective in eliminating interference to essential GPS services in the United States.”
The GPS signal was too weak at the front end to resist such high-powered interference from the ground–based network. Shelton likened it to putting a rock band in a quiet neighborhood.
Shelton won the point. Lightsquared filed for bankruptcy in May 2012 and Wall Street continued to sort out its restructuring through 2014. Although this was a battle won, it was unsettling to see a business plan boldly pitted against national security requirements and a fight driven by investor interests.
Open combat may be rare. Perhaps an even greater risk is indifference: the reluctance of high-tech firms to learn their way through the arcane process of being a DOD contractor. SpaceX’s grumpy litigation against the Air Force illustrated the clash of business styles.
Could the tech titans like Google, Facebook, and Amazon be the incubators for must-have defense products of tomorrow? It is too early to say, but one thing is certain: The confluence of entrepreneurial cash and the Pentagon’s quest for new technology advantages could reshape how defense “industry” is defined.
Which leads back to the “third offset.” Deputy Defense Secretary Robert O. Work noted of the second offset of the 1970s, “If we go after stealth, guided munitions, and information technology, and we blend them together, we utilize the strengths of the American armed forces [and] we will have an offset strategy that will allow us to rule the battlefield conventionally for the foreseeable future. And we were right.”
Circa 1975, those technologies resided in or were cultivated by the traditional defense sector. Developing them further offered enticing market share.
Today’s business conditions are different. In 2015, it’s hard to imagine a true offset strategy without the new tech titans.
The worst case is that the tech titans will lack an incentive to do business with the government. Best case, the third offset strategy can be a two-way street blending defense sector expertise with some of the more wild-eyed projects to cultivate the best of American innovation.