Justin Fanelli, the U.S. Navy’s chief technology officer, has been working to simplify how startups and investors engage with the Navy’s technology procurement. Over the past three and a half years, he has driven a shift from a complex network of entry points to a more streamlined funnel, making it easier for companies with strong results to integrate as enterprise service providers. Recently, Fanelli revealed that the Navy is increasingly favoring co-investment alongside private venture capital, mainly purchasing from later-stage companies and moving away from funding early-stage research directly.

Fanelli highlighted notable recent contracts, including a $562 million deal for the MQ-25 Stingray, an autonomous refueling drone designed to extend fighter jet range on aircraft carriers. Additionally, the Navy has procured edge computing hardware from Armada for remote or shipboard deployment, engaged Gecko Robotics for hazardous inspection tasks, and adopted commercial cameras with Applied Intuition’s software to replace years-delayed proprietary systems. These examples illustrate the Navy’s preference for adopting mature commercial technology solutions to speed up deployment and reduce risks.

In terms of budget, the Navy spends around $150 billion annually, although direct equity investments remain relatively rare compared to traditional procurement methods. The priority is to support companies that have already matured their products and are seeking buyers rather than funding early development phases. Fanelli stresses the importance of providing clear signals to the investment community on technology focus areas to guide where venture dollars should flow, aiming for a better-aligned pipeline from innovation to acquisition.

The Navy’s updated technology priorities span five key areas: applied artificial intelligence for decision support and autonomy, quantum information science for secure communication and navigation, advanced networking focused on resilient data transfer, electromagnetic spectrum operations for adaptable sensing and management, and digital engineering to ensure interoperability with open APIs and zero-trust architectures. These priorities serve as a roadmap for startups and investors planning to engage with the Navy in emerging defense technologies over the coming years.