AIRC Perspectives

The Valley of Death Results from More Than a Lack of Flexible Funding

March 2022

AUTHOR: Dr. Philip S. Antón

There are no magic solutions—Innovation requires dedication not only to create the ideas but to grapple with the realities of applying and fielding such capabilities. This paper identifies many challenges to transitioning and fielding innovative concepts and systems to operational use to illuminate the range of barriers that will need to be addressed to better reduce and manage innovation risks. These challenges are not just in the DoD; they abound elsewhere. Here are some qualitative and quantitative data that show the net results of innovation in the marketplace.

Most innovative companies fail.
Most companies buy rather than invent due to risks.
Venture Capital “win” rates are very low.

Figure 1. General Profile of Venture Capital Investments (Wins and Losses). 

SOURCE: Huntsman, Blaine, and James P. Hoban. “Investment in New Enterprise: Some Empirical Observations on Risk, Return, and Market Structure.” Financial Management, vol. 9, no. 2, 1980, pp. 44–51,
NOTES: VC firms are reticent to share actual data of the performance of individual investments within their portfolios. The historical data presented are a few exceptions but are generally acknowledged to be representative of the general behavior within VC portfolios and remain cited as seminal insights. It is shown that many investments are losses (even complete losses) while the others (especially the “big wins”) make up for those and provide the relatively high average return for a VC portfolio. Red bars are losses (returns below zero). Light green bars have moderate rates of returns (between 0–20 percent). Dark green bars represent returns.

Innovation offers the potential for enhanced and novel capabilities. Applying and fielding such breakthroughs is difficult business that requires understanding and addressing the full range of barriers.