DARPA derisks working on breakthrough ideas for three big groups: researchers, companies, and other funders.
DARPA obviously derisks whether researchers will be able to get funding to work on an idea. Researchers don’t have as much uncertainty around grant proposals because Program Managers have the ability to deploy money without much overhead so instead of the common situation where someone says “that sounds great! But I need to check with my boss/our budget doesn’t allow it” if a PM says “that sounds great” it probably means that you’ll get funding. The ability to plan is a big deal. PMs also derisk things for researchers more subtlety by building a community around an idea. The community is secretly really important because The peer review and citation system incentivizes people to work on things that other people think is interesting . So even if an academic could get funding to work on crazy shit, most people wouldn’t work on it because they wouldn’t be able to get the results published and cited. By bootstrapping a community, the PM gives researchers peers. A large part of a DARPA program manager’s job is focused network building.
DARPA derisks things for small companies by giving them more confidence that there will be customers for their product - either large companies or the government. In the best case, the promise of future procurement functions like a prize to incentivize startups to spend their own money on top of the money from DARPA. Government procurement and prizes are the same thing) Startups building actual frontier tech often falter at the stage where they need to scale up production. Frontier tech has bespoke sales channels. By encouraging small companies to work with large companies earlier in the process, DARPA PMs reduce scale-up risk as well. (A large part of a DARPA program manager’s job is focused network building.) In this way DARPA PMs act in a similar way to biotech VCs, brokering relationships between small companies with specialized skills and large companies with production capacity. Additionally, other customers often see DARPA funding as third-party validation of a startup’s technology which can be critical for breaking the chicken-and-egg that nobody will buy your product until someone has bought your product.
From a founder:
"DARPA funding and ATP funding have the added benefit of communicating to a third party a validation of the technology.”
For large companies, the off-the-balance sheet work (Companies want R+D to be off of their balance sheets) to show that an idea is feasible and clear evidence of demand derisks the idea to the point that they’re willing to start spending their own R&D dollars on it. For example, DARPA worked with IBM and Intel to develop nanophotonics and afterward the companies took them on as R&D programs.
“So the DARPA piece, while large, was the validation for IBM to spend their own money.” He continues, “The same way for the Intel piece. You know, Intel certainly looked at that project, and then Intel ended up funding it internally, but the fact that DARPA went back to them three and four times and said, this is an important thing, this is an important thing, you know, it got to the board of directors, and it got high enough that they set up a division to do this.”
DARPA Program managers pull control and risk away from both researchers and directors so they aren’t disincentivized to fund speculative work. People giving out grants try to derisk them as much as possible, previous DARPA funding can give the research group the funding they need to derisk a key part of the technology.
From a professor:
"Once you’ve gotten funding from DARPA, you have an issue resolved, and so on, then you go right ahead and submit an NSF proposal. By which time your ideas are known out there, people know you, you’ve published a paper or two. And then guys at NSF say, yeah, yeah, this is a good thing.” He continues, distinguishing DARPA’s place within the broader U.S. government system, “NSF funding usually comes in a second wave. DARPA provides initial funding.” As a consequence, he concludes, “DARPA plays a huge role in selecting key ideas” (from among the broader set of ideas present in the research community).