As the United States moves toward a shift in the political context, the Department of Defense (DoD) continues to anchor its innovation strategy on agility, resilience, and dual-use technologies. Through its SBIR and STTR programs, the DoD invests over $2 billion annually in early-stage companies solving national security challenges with commercial potential. These funding opportunities, often overlooked by startups outside the defense ecosystem, are becoming increasingly relevant amid global instability, rapid technological disruption, and evolving military doctrine.

With the AFWERX SBIR/STTR submission deadline on August 9, 2025, small businesses and innovators should focus on understanding the DoD’s shifting priorities under the new administration. While the overall budget for defense innovation programs is expected to remain stable or increase, there is a clear emphasis on technologies that directly support military readiness, resilience, and technological supremacy.

Funding Stability and New Opportunities

Despite broader discussions around freezing federal grant programs, the DoD has clarified that SBIR and STTR contracts remain unaffected. Because these programs are structured as contracts—not grants—they have maintained stability during recent federal budget negotiations.

In fact, new proposals in Congress could increase the share of R&D budgets allocated to small businesses. One such initiative, the INNOVATE Act, suggests raising the SBIR set-aside percentage, which would translate into more funding opportunities for early-stage companies.

In parallel, the DoD has introduced the idea of “Strategic Breakthrough Funding,” which would provide significant SBIR capital for projects that also receive support from other government programs or private investors. This reflects a broader push to accelerate innovation by combining public funding with commercial readiness.

Shifting Priorities in Defense Innovation

The DoD regularly updates its list of critical technology areas. In 2025, many of these priorities remain the same—such as artificial intelligence, autonomy, microelectronics, and secure communications—but the new administration brings subtle shifts in how these technologies are evaluated and supported.

For innovators preparing to respond to solicitations like AFWERX’s August 9 call, some clear trends include:

• Focus on Readiness and Deployment: There is growing interest in technologies that can be quickly integrated into defense systems. This favors applied research and development over long-term, exploratory projects.
• Supply Chain Resilience and Manufacturing: Strengthening the defense industrial base—especially through domestic production and innovative manufacturing—has become a key theme. This creates new space for small businesses with dual-use applications in logistics, energy, and infrastructure.
• Emerging Energy and Computing Needs: Technologies related to clean, resilient energy (including advanced nuclear concepts) and high-performance computing are receiving increased attention, especially when they support secure data and artificial intelligence environments.
• Border and Homeland Security Tech: While not a core DoD focus, several new funding areas intersect with border technology, surveillance, and communications—creating opportunities for crossover solutions.

At the same time, there may be reduced emphasis on research that lacks clear links to national security or military capability. This doesn’t mean such work is no longer important, but proposals that directly address defense challenges will likely stand out more in the current climate.

How to Position a Competitive SBIR/STTR Proposal in 2025

Given the evolving environment and funding landscape, here are some strategies for businesses preparing to submit proposals through DoD programs like AFWERX:

• Highlight National Security Impact: Make it easy for reviewers to see how your solution solves a defense problem, supports military readiness, or improves existing systems.
• Demonstrate Commercial Potential: With growing emphasis on speed and scalability, projects with a clear business case—and potential for rapid deployment—are more likely to be supported.
• Explore Co-Investment Opportunities: Whether through partnerships with other federal programs or private capital, aligning your project with multiple sources of support can increase its appeal.
• Stay Updated on Program Changes: The SBIR/STTR programs are up for reauthorization in September 2025, and legislative updates may introduce new rules, award structures, or evaluation criteria.
• Use Official DoD Tools: The SBIR/STTR topic portal and preface documents from solicitations are excellent resources to understand current priorities and shape strong proposals.

Conclusion: Agility in Uncertain Times

While it’s too early to measure the full effect of the new administration’s policies, one thing is clear: innovation remains central to the DoD’s strategy. Early-stage companies that can adapt quickly, align with national priorities, and bring scalable solutions to the table will find strong opportunities in the SBIR and STTR programs.

For businesses exploring entry into the U.S. defense innovation space, now is the time to engage. The funding is there, the priorities are taking shape, and with the right approach, small companies can make a big impact. In particular, the AFWERX SBIR/STTR submission deadline on August 9, 2025, represents a critical opportunity to align your innovations with DoD priorities and secure funding to advance your technologies.