Arkenstone Defense came out of stealth on Tuesday, July 7, with $35 million in seed funding and a pitch aimed at one of the Pentagon’s most persistent problems: Many commercial technology companies build tools the military wants, but never become operationally ready to sell them to the federal government.
The Menlo Park, Calif.-based company says it gives startups and other commercial firms a ready-made government contracting back office, combining workforce operations, HR, payroll, insurance, personnel security, contracting support, compliance and accreditation. The seed round was led by J2 Ventures, with participation from Susa Ventures, Granite Hill Capital Partners and Artis Ventures.
In an interview with Military.com, co-founders Peter Dixon and William Treseder said Arkenstone is trying to solve a less visible piece of the defense innovation problem: Even when the Pentagon wants commercial technology, companies often must spend heavily on compliance, cybersecurity, cleared personnel and government-specific business systems before they can compete for meaningful contracts.
A Back Office Built for Defense Work
Dixon, Arkenstone’s CEO, previously founded Second Front Systems—a defense technology company focused on helping software companies deliver products to the government. He also served as a Marine Corps infantry and scout sniper officer in Afghanistan and Iraq, and later advised the State Department and the Pentagon.
Treseder, Arkenstone’s COO, has worked across defense innovation and compliance for more than two decades. He is a co-founder of BMNT, helped launch Hacking for Defense, and continues to serve as a reservist with the Marine Innovation Unit.
Dixon described Arkenstone as “a one-stop shop” for companies trying to build what he called a federal back office. He said companies entering the defense market must think differently about their corporate structure, products, services and workforce than they would in a purely commercial market.
“There are special ways to do accounting,” Dixon said. “There are special certifications that are required. There are special portals and websites where you need to register.”
That means founders can end up hiring specialized lawyers, accountants, security advisers and compliance vendors before they know whether they will win a contract. Dixon said that cost can reach hundreds of thousands of dollars a year for some companies.
The Pentagon Wants Commercial Technology
The Pentagon has spent years trying to pull more commercial technology into defense programs.
The Defense Innovation Unit says its mission is to accelerate the military’s adoption of leading commercial technology and grow the national security innovation base.
The need has become more urgent as software, autonomy, artificial intelligence, robotics and advanced manufacturing have increasingly come from commercial firms rather than traditional defense contractors. The Defense Department’s fiscal 2025 budget request included $143.2 billion for research, development, test and evaluation—as well as $167.5 billion for procurement.
However, the defense industrial base has become more concentrated. A 2022 Defense Department report found that the number of aerospace and defense prime contractors shrank from 51 to five after post-Cold War consolidation.
A 2024 Center for Strategic and International Studies analysis found that defense specialists, meaning firms with little or no commercial business, accounted for 61% of major Defense Department programs by value in 2024—up from just 6% in 1989.
Dixon said that leaves the government dependent on companies that know how to navigate defense contracting, even when newer commercial firms may have stronger technology.
Compliance as a Market Barrier
Arkenstone’s core argument is that the barrier is operational, not technical.
A company may have a drone, software tool or AI system that military users want but still lacks the infrastructure needed to handle federal data, cleared work, audited payroll or government accounting rules.
The Pentagon’s Cybersecurity Maturity Model Certification (CMMC) program is one example. The Defense Department says CMMC Level 2 is tied to the 110 security requirements in NIST SP 800-171 and may require assessment by a certified third-party assessment organization every three years, a self-assessment every three years for certain programs, and annual affirmations after assessment.
For startups, those rules can be difficult to understand and expensive to meet.
Treseder said that lesson came through repeatedly in his work with Hacking for Defense, where university teams work on national security problems and some later become venture-backed companies.
“Many successful H4D teams have formed into companies and raised hundreds of millions of dollars in venture capital,” Treseder said, naming Capella Space and Vannevar Labs as examples. “They know their capabilities beat the current offerings. They know the warfighter wants it. The bottlenecks are all related to contracting, which ties to compliance and security.”
The Valley of Death Problem
The defense technology world often describes the gap between a promising prototype and a funded program as the “valley of death.”
A Defense Innovation Board report on startup financing said the Pentagon must fix that valley of death if it wants to seed world-changing technology and compete with China.
Dixon said Arkenstone is focused on the unglamorous part of that problem: the paperwork, workforce systems and compliance burdens that determine whether a company can move beyond pilots and prototypes.
“We joke that we are the most boring company in defense tech,” Dixon said. “But our view is that without a focus on those things, all these amazing capabilities are going to end up on the cutting room floor.”
Arkenstone said that more than two dozen defense technology companies already operate on its platform. Treseder added the company gives firms “military grade back-office support” from the start, allowing them to pay only for what they use.
A Bet on Speed and Scale
The company is launching at a time when the Pentagon is under pressure to move faster.
The Defense Innovation Unit reported that 10 technology solutions transitioned to Defense Department end users in fiscal 2023, raising its cumulative transition rate from 47% to 51%. Those numbers show progress, but they also underscore how difficult it remains to move commercial technology into sustained military use.
Dixon pointed to the battlefield in Ukraine as an example of why the timeline matters. Technologies and tactics are changing very rapidly, he said, while traditional defense acquisition can take far longer.
His benchmark for success is blunt: the Pentagon should be able to field new capabilities across the enterprise within 12 months.
“We need to be able to iterate at the speed of warfare,” Dixon said.
For Arkenstone, that means building the infrastructure that lets companies move into defense work without becoming government contracting experts first. The goal is not to eliminate security or compliance rules, Dixon said, but to make them easier and cheaper to satisfy.
“The government is saying, ‘The Pentagon’s open for business,’” Treseder said. “We’re like, OK, prove it. Help us solve the business problems that you’ve created for us.”
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