Refining the Naval Investment Strategy

For the past three and a half years, Justin Fanelli, the Department of the Navy’s chief technology officer, has been working to reshape how the military engages with the technology sector. As noted in his previous discussions [last year](https://techcrunch.com/2025/06/15/the-u-s-navy-is-more-aggressively-telling-startups-we-want-you/), the goal has been to move away from the traditional, complex government procurement structures that created a 'spaghetti chart' of entry points. Instead, Fanelli is advocating for a more streamlined, funnel-like approach that prioritizes companies demonstrating strong, measurable results.

A Pivot Toward Co-Investment

A central component of Fanelli’s updated strategy is the shift toward co-investment. While the Department of the Navy manages significant annual spending—operating in the $150 billion range—Fanelli explained that the institution is increasingly looking to place its capital alongside private investment. Rather than writing checks for early-stage research, which was common in the past to cover the seed-through-Series-B gap, the Navy is now targeting more mature firms, typically ranging from Series D to Series F, to ensure the technology is ready for enterprise deployment.

Fanelli emphasized that this change is designed to provide a 'cleaner signal' to the investor community. By sharing a vetted list of technology priorities, the Navy aims to help founders understand where they should be building, allowing commercial investors to take the lead on early-stage innovation while the Navy acts as a major customer for mature products.

Recent Procurement Successes

The Navy has already begun executing on this strategy with several notable acquisitions. Among the most significant recent developments is a $562 million deal [awarded this month](https://defensenews.com/industry/techwatch/2026/09/15/us-navy-boeing-ink-first-mq-25a-stingray-production-contract) for the MQ-25 Stingray, an autonomous refueling drone designed to extend the range of manned carrier-based fighter jets.

In addition to drones, the Navy has engaged with other commercial entities to modernize infrastructure. This includes utilizing Armada for edge compute hardware, deploying Gecko Robotics to automate dangerous inspection tasks, and integrating Domino Data Lab to manage its machine learning pipeline. Fanelli also highlighted a successful pivot involving Applied Intuition, where the Navy replaced a delayed defense contractor camera system with a commercial alternative, effectively cutting four years off the deployment timeline.

The Five Pillars of Naval Tech Priorities

To guide future development, Fanelli’s office and the Portfolio Acquisition Executive for Mission Systems have released an updated list of five priority technology areas. First on the list is applied AI, which encompasses machine learning and agentic software for sensor fusion, autonomous behaviors, and cyber operations. Second is quantum information science, with a focus on navigation, cryptography, and secure communications.

The remaining three categories include advanced networking for degraded environments, electromagnetic spectrum operations that can adapt in contested conditions, and digital engineering and interoperability. The latter focuses on creating open APIs and zero-trust architectures to allow disparate Navy systems to communicate effectively without requiring custom integration work for every individual deployment.

Navigating Procurement Realities

Despite these efforts to streamline acquisition, the path to implementation remains challenging. Fanelli noted that the most common hurdle for technology integration is budgetary. Because the Navy relies on long planning cycles, new tools are only sustainable if they can replace existing, funded legacy systems. For deeper insight into these government procurement trends and institutional shifts, further reports can be found within the [Government & Policy](https://techcrunch.com/category/government-policy/) coverage area.

For more information on the evolving landscape of defense-tech investment and the CTO's recent comments, see the full coverage at [TechCrunch](https://techcrunch.com/2026/09/19/even-mid-sprint-to-a-secret-flight-the-navys-tech-chief-had-a-pitch-for-investors/).

Sources

• TechCrunchEven mid-sprint to a secret flight, the Navy’s tech chief has a pitch for investors