There’s no surprise that we’ve seen a rapid influx of VC-backed companies entering the defense space. You’ve likely witnessed the meteoric rise of Anduril, which completely flipped GOVCON on its head, catapulting to a $14 billion valuation since its formation in 2017. We are entering a new era in GOVCON, and traditional recruitment teams are in for yet another challenge.
Anduril, led by Oculus VR visionary Palmer Luckey, didn’t wait for the traditional acquisition process to catch up. They built the products for the battlefield of tomorrow without the constraints of outdated bureaucratic processes. By developing best-in-class autonomous systems, they didn’t need to rely on the traditional RFP and award cycle; instead, they made the government come to them. This approach requires serious funding, and VC backing allows for that kind of flexibility and risk-taking. But this isn’t just about innovation in products—it’s about a fundamental shift in how these companies operate, including how they hire.
What Happens When VC Funding Meets Recruitment?
When companies have the backing of venture capital, they aren’t just thinking about the present—they’re tying current costs to future profitability. They don’t need to shoehorn developers and engineers into low-profit labor categories because they aren’t constrained by the need for immediate financial returns. This freedom allows them to pay well above market rates to attract top-tier talent, often pulling it away from traditional GOVCON companies.
The Implications for Traditional GOVCON
So, what does this mean for the traditional GOVCON landscape? It’s simple: we are now competing with companies that are perfectly content not seeing profitability until far down the line. This ethos allows them to pay whatever it takes to drive their products forward, creating a massive shift in the talent market.
You might think, “But we’re not in the products business; they aren’t our competition.” That’s where you’re wrong. These VC-backed firms may not be competing with you for contracts, but they’re absolutely competing for talent. The cleared space is already tight, and we are entering an era in GOVCON that will see a vacuum of technical talent being sucked up by these well-funded startups, leaving a hole in the candidate pool like never before.
Lessons from COVID: Remote Work and Talent Migration
We’ve seen this trend before, albeit under different circumstances. During the COVID-19 pandemic, many cleared candidates were willing to lose their clearance to work remotely. The same principle will apply here. VC-backed GOVCONs that are developing systems and products in the non-classified environment offer appealing opportunities for talent that doesn’t want to be bound by the constraints of working in a classified setting. This could lead to a migration of talent out of the traditional cleared space, exacerbating an already challenging recruitment environment.
Preparing for the New GOVCON Reality
Traditional GOVCON companies need to recognize that the ground beneath them is shifting. The old ways of doing business—waiting for RFPs, sticking to low-margin contracts, and competing on cost alone—are no longer sufficient. The future of defense contracting is being shaped by companies that are agile, well-funded, and unafraid to disrupt the status quo.
However, this is also a very exciting time in the industry. The influx of VC-backed companies is forcing a long-overdue change, pushing the entire sector to innovate and evolve. For many, this disruption is welcome, as it challenges outdated practices and brings fresh energy to the space. But for small to mid-sized businesses, this also introduces a new talent challenge. The key to thriving in this evolving landscape is to get ahead of the curve and ensure your talent strategy is on point.
By proactively addressing these challenges and embracing the new dynamics of the industry, traditional contractors can not only survive but also find new opportunities for growth and success in this rapidly changing environment.
