Avoid contractually locking your roadmap
The biggest mistake defense startups make
This is how defense startups accidentally turn into small government contractors instead of scalable product companies. A small early contract can look like proof of traction, but it also dictates what engineers build, on what timeline, for one buyer. Once headcount is tied to delivery milestones, the company stops choosing the roadmap and starts servicing the contract, which is exactly the trap Anduril worked to avoid and Forterra later had to unwind by spinning down 17 legacy contracts.
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The core issue is not just low margin services work. It is roadmap capture. In defense, contracts often specify concrete deliverables, testing, compliance work, and buyer specific features. A one year old startup that needs the revenue usually cannot decline midstream, so engineering gets split between custom work and the product it actually wants to scale.
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Anduril’s alternative was to use small contracts as stepping stones, then move toward commercial item style procurement and larger production programs. In the interview, the first real proof point was not an SBIR, but a $12.5M FAR Part 12 sole source award, followed later by a billion dollar scale program. The point was to sell a product the government buys, not a project the government invents with you.
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This is why defense startups need tightly paired technical sales and engineering teams. The buyer is technical, the procurement path is complex, and every contract can pull the company into a slightly different micro market. Teams trained in the Palantir and Anduril mold are valuable because they know how to shape early programs around a reusable product instead of letting each award become a custom branch of the company.
The winners in defense will be the companies that treat early contracts as controlled entry points, then widen into repeatable products sold across multiple programs and, where possible, commercial markets. That favors startups with enough capital and discipline to walk past easy money when it bends the roadmap, because the real payoff comes when procurement starts pulling the product forward instead of engineering dragging contracts behind it.