If you're a startup founder or business owner exploring new revenue streams, the defense sector might seem like an intimidating, jargon-filled world reserved for industry giants. 

The Department of Defense (DoD) actively seeks innovative solutions from companies of all sizes, including yours. Our guide strips away the complexity and acronyms to provide a clear picture of defense contracting, how your business can participate, and the steps to get started, with no military background required.

What Exactly Is a Defense Contractor?

At its simplest, a defense contractor is any business, regardless of size, that provides products or services to military or intelligence departments of the government.

Defense contractors provide a range of offerings to military or intelligence agencies, including physical products such as aircraft, vehicles, and electronic systems, as well as services like logistics, technical support, training, and engineering assistance.

Unlike what Hollywood might suggest, working as a defense contractor doesn't mean manufacturing weapons or deploying security personnel overseas. The defense ecosystem requires a diverse range of services, from software developers and cybersecurity specialists to office furniture suppliers and construction firms.

Examples of common defense contractor offerings include:

  • Cybersecurity and software development
  • Data analytics and AI tools
  • Logistics and supply chain management
  • Construction, facility upgrades, and maintenance
  • Professional training and consulting

Types of Defense Contractors (And Where Your Startup Fits)

The defense contracting landscape includes businesses of all specialties and sizes across several key categories.

Product-based contractors provide physical goods to defense agencies, ranging from major weapons platforms and specialized electronic components to computers, networking equipment, specialized software, and even basic supplies like uniforms, construction materials, and office equipment.

Service-based contractors deliver expertise rather than physical products, encompassing but not limited to engineering, IT support, systems integration, professional training, logistics management, administrative support, and specialized consulting in fields such as cybersecurity, AI, and healthcare.

The research and development category showcases many innovative startups. These companies focus on exploring new technologies with defense applications, creating proof-of-concept solutions for defense challenges, and moving innovations from the lab to operational use. R&D is usually the most accessible entry point for technology startups.

When discussing defense contractors, we often distinguish between traditional and non-traditional players. Traditional defense contractors typically work with large-scale, multi-billion-dollar contracts covered by Cost Accounting Standards (CAS) (link). In contrast, non-traditional contractors often qualify for streamlined processes that make government contracting more accessible for innovative startups and small businesses.

As a startup or first-time vendor, you will likely begin as a non-traditional contractor, which offers significant advantages, including access to specialized programs and simplified contracting vehicles designed for innovative companies.

Examples of Defense Contractors: From Giants to Startups

The defense contracting world includes companies of all sizes, from industry giants to nimble startups. Major defense primes, such as Lockheed Martin, Northrop Grumman, and General Dynamics, typically manage complex, multi-year defense programs that span aerospace, defense systems, vehicles, IT, and shipbuilding.

Mid-size specialists have carved out valuable niches in the defense ecosystem. Companies like Palantir Technologies focus on data analytics and software, Anduril Industries specializes in autonomous systems and AI, while Mercury Systems delivers secure processing systems for critical defense applications.

Small businesses and startups increasingly make their mark in defense contracting. 

Innovative companies like Red 6 create augmented reality technology for combat training, while female-owned small businesses like Caliola Engineering specialize in wireless communications and cryptography for government clients. Many defense-focused startups receive backing from top venture capital firms and transform the industry with AI, machine learning, and other advanced technologies to solve critical national security challenges.

The defense sector also welcomes non-traditional innovators who started in commercial markets. SpaceX now provides essential space launch services, Microsoft delivers cloud computing and software solutions, and numerous small AI and cybersecurity startups offer specialized tools that address emerging defense needs.

Defense Contractor vs. Subcontractor: Understanding the Distinction

As you explore the defense market, be aware of two primary entry points. 

Prime contractors directly hold contracts with defense agencies. They bear full responsibility for delivering the contracted goods or services and must comply with all relevant requirements. Subcontractors partner with prime contractors, providing specialized components or services that contribute to the overall scope of the contract. 

Key differences between primes and subcontractors:

  • Prime contractors manage the full contract and report directly to the government.
  • Subcontractors support prime contractors with specific products, services, or expertise.

For many startups, partnering with established prime contractors like Lockheed Martin or Boeing provides a valuable entry point, offering access to established relationships, programs, and knowledge of military procurement processes.

Both paths offer distinct advantages. 

Prime contractors enjoy higher profit margins, direct relationships with government customers, greater control over their work, and build valuable past performance credentials. Subcontractors benefit from easier market entry, reduced compliance burden, mentorship from established defense contractors, and lower marketing and business development costs.

For most startups and first-time vendors, starting as a subcontractor offers a smoother learning curve as you build relationships and gain an understanding of the defense market.

How to Become a Defense Contractor: Your Step-by-Step Path

Entering the defense market requires preparation, but you can navigate the process more easily than you might think. Start by determining your business size status. The government classifies small businesses based on both revenue and the number of employees. Select the North American Industry Classification System (NAICS) codes that best describe your business to determine if you qualify as a small business under federal guidelines. Small business status can provide significant advantages through set-aside contracts and specialized programs.

Next, register your business for government contracting. Before pursuing defense contracts, complete several registration steps: obtain a Unique Entity Identifier (UEI) to identify your business in federal systems, register in the System for Award Management (SAM) at SAM.gov, the central database for government contractors, and complete your business profile with accurate capabilities descriptions and NAICS codes.

Understanding contracting opportunities comes next. 

Defense contracts come in various forms, including full and open competition available to all qualified vendors, small business set-asides reserved for small businesses, sole source awards granted without competition when only one vendor can meet the requirements, and Other Transaction Authorities (OTAs) that provide streamlined agreements for innovative solutions, particularly well-suited for non-traditional contractors. 

To identify relevant opportunities, research specific contract vehicles, learn about your target agencies' procurement patterns, and create a capabilities statement that highlights your company's core competencies and differentiators.

Building your proposal capabilities forms another critical step. 

Government agencies typically evaluate proposals based on three key areas: technical capabilities, pricing, and past performance. Document your past projects and understand why customers choose you over competitors to succeed. Designate a team member to focus on government contracting processes and ensure compliance with relevant requirements.

Finally, explore special programs designed for startups and innovators. 

Several programs support new entrants to defense contracting, including Small Business Innovation Research (SBIR) grants for R&D projects, the Defense Innovation Unit (DIU) for adapting commercial technology, innovation hubs such as AFWERX, NAVAIR, and Army Futures Command, and Mentor-Protégé Programs that pair small businesses with experienced contractors.

For defense startups, building the right connections proves critical. Attend industry events, join relevant associations, and develop targeted marketing strategies to break through initial barriers to entry.

Gallium Solutions supports founders and small teams at every stage of the journey from initial registration to identifying the right contract types and programs.

Common Challenges for First-Time Defense Contractors (And How to Overcome Them)

As you venture into defense contracting, prepare for several common challenges and implement practical solutions. The defense world speaks its own language of acronyms and technical terms, creating a learning curve for newcomers. 

Start with basic resources from the DoD Office of Small Business Programs, and ask questions when needed. Everyone starts somewhere, and most contracting officers appreciate your efforts to understand their requirements.

Defense contracts come with compliance requirements that can overwhelm newcomers. Begin with smaller contracts or subcontracting relationships to learn the ropes gradually rather than jumping immediately into complex prime contracts with extensive compliance obligations.

Government customers often require previous defense contract experience, creating a Catch-22 for new entrants. Leverage your commercial experience by starting with smaller contracts to build your past performance record, or partner with established contractors to gain entry into the market. With persistence, you can overcome an initial obstacle like this.

With thousands of contracting opportunities available, identifying the right fit is a challenge for many newcomers. Focus on specific defense agencies or problems that align with your company's strengths rather than pursuing every opportunity. A targeted approach like this yields better results than spreading your efforts too thin.

The presence of large, established contractors in your space may seem intimidating, but don't let it deter you. Emphasize your innovative approaches, agility, and specialized expertise large firms may lack. Many defense agencies actively seek fresh perspectives and cutting-edge solutions that smaller companies excel at providing.

Why Consider Defense Contracting for Your Startup

Despite the learning curve, defense contracting offers compelling advantages for your business. 

The Department of Defense awards at least 20% of its contracts to small businesses, creating significant opportunities for companies of all types across the defense sector.

Unlike the volatility of commercial markets, defense contracts typically offer stable funding and predictable revenue through multi-year agreements, defined payment schedules, and protection from economic downturns. These characteristics help stabilize your company's financial outlook and support long-term planning and growth.

Defense work provides a meaningful impact through your innovations. Your company can directly support national security missions, enhance the safety of service members, and protect critical infrastructure. A sense of purpose like this often resonates deeply with team members and becomes a powerful tool for recruitment and retention.

The defense sector also creates significant growth and scaling opportunities. It provides a proving ground for innovative technologies, pathways to larger contracts as you build performance history, and credibility that transfers to commercial markets. Many commercial tech giants began with defense innovations that later transformed civilian industries.

Ready to Explore Your Path into Defense Contracting?

Entering the defense market requires preparation and patience, but fewer barriers exist than most founders believe. 

Your innovative solutions, fresh perspectives, and agile approaches align precisely with what defense agencies increasingly seek.

Gallium Solutions helps first-time vendors and founders navigate the process from start to scale. We understand the unique challenges innovators face in the defense ecosystem and provide personalized guidance to help you succeed.

Get started today to explore how your company can become part of the defense innovation landscape.

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