Navy CTO courts Series D-F startups with new tech priorities and co-investment push

The U.S. Navy is publishing an updated list of the technology areas it expects to buy over the next several years, part of what its chief technology officer describes as a longer campaign to turn the service into a predictable customer for startups and their backers. According to TechCrunch, which spoke with Navy CTO Justin Fanelli this week, the new list was reviewed by a small group of venture investors before release, after last year's version visibly changed how investors read the Navy's buying plans.

A funnel instead of a maze

Fanelli has spent roughly three and a half years on the problem. When TechCrunch first interviewed him last year, he characterized the Navy's old intake process as a confusing tangle of entry points and argued for something closer to a funnel: companies that deliver results get pulled into the Navy's technology base as enterprise services.

The scale is large. Fanelli put total Navy purchasing at around $150 billion a year, while separating that figure from anything resembling direct equity investment. Most of that money still moves through traditional contracting channels, but he said the Navy is shifting toward what he calls co-investment: backing companies alongside private capital rather than only writing checks to established prime contractors. Taking an equity stake is the most aggressive version and remains rare; more typically, the Navy waits for a company to mature a product on its own and then buys it.

The stage of company has shifted too. Fanelli told TechCrunch the Navy now mostly buys from Series D through Series F companies. It previously funded early-stage research itself to cover the seed-to-Series-B gap, and is now handing that job to commercial investors — which, he argued, obligates the Navy to publish a clearer signal about what it will want down the line. That is the stated purpose of the priorities document.

Five priority areas

The updated list, jointly issued by Fanelli's office and the Portfolio Acquisition Executive for Mission Systems, groups Navy interests into five categories:

• Applied AI, spanning machine learning and increasingly agentic software that turns raw data into decisions — sensor fusion, targeting support, autonomous behavior and software-based cyber operations.
• Quantum information science, focused less on owning quantum hardware and more on applying quantum or quantum-adjacent techniques to navigation, secure communication and cryptography.
• Advanced networking, aimed at moving data securely where connections are degraded or intermittent, whether on a ship at sea or across a coalition partner's network.
• Electromagnetic spectrum operations, meaning technology that senses and manages the spectrum and adapts in contested conditions rather than relying on fixed configurations.
• Digital engineering and interoperability — the plumbing of open APIs, model-based systems engineering and zero-trust architecture intended to let Navy systems talk to each other without bespoke integration work each time.

The memo carries caveats: none of the categories is a funding commitment, no individual programs are ranked, and priorities will shift with near-term and long-term needs. TechCrunch presents it, as Fanelli framed last year's list, as a roadmap for planning rather than a guarantee.

What the Navy has been buying

Fanelli pointed to recent purchases as evidence the model works. A $562 million contract awarded in September covers the MQ-25 Stingray, an autonomous refueling drone that extends the range of carrier-based manned fighters. The Navy has bought edge compute hardware from Armada — essentially shipping containers packed with servers for ships and remote sites — brought in Gecko Robotics for inspection work previously done manually and at real risk, and uses Domino Data Lab to run its machine learning pipeline. In a case he seemed to enjoy describing, commercial cameras paired with software from Applied Intuition replaced a defense contractor's years-delayed shipboard camera system, cutting roughly four years off the timeline and reaching more ships than planned.

Purchase decisions, he added, run through a small source selection committee rather than the sprawling review process outsiders might imagine, with the goal of keeping selection merit-based.

Why it matters

For tech vendors, the message is that the Navy is positioning itself as a later-stage customer while expecting venture capital to carry early risk — so alignment with the published categories matters more than chasing any single program. The harder lesson is survival inside the service. As Fanelli explained to TechCrunch last year, the most common reason promising technology fails there is budgetary, not technical: the Navy plans in long cycles, and a new tool only persists if it replaces something the service is already paying for. Otherwise, even a demonstrably working product can lose funding within a year or two, leaving a startup with a strong track record and no contract. Building an exit path for an existing budget line may be the most important design decision of all.