Federal funding priorities are continually evolving, influenced by policy changes, global events, and technological advancements. As outlined in our recent article, “Scaling Innovation in Federal Funding,” success depends on strategically leveraging initial grants, building lasting federal partnerships, and positioning innovations for long-term growth. For AI and technology innovators, staying ahead of trends is crucial to securing funding and maintaining a competitive edge. Understanding the forces driving these shifts enables organizations to position their proposals for success.
However, the landscape of federal funding is constantly shifting. New priorities, global events, and technological advancements are shaping how agencies allocate resources. Understanding and anticipating these trends is essential to staying competitive and securing the next wave of funding.
This article expands our Scaling Innovation strategy by exploring:
- The key policy drivers influencing federal funding
- The emerging technology areas receiving increased investment
- The strategic approaches AI and technology companies should take to align with agency priorities
Key Policy Drivers Shaping Federal Funding
Federal investments in AI and technology are driven by national security concerns, economic competitiveness, and legislative mandates. The following policy developments are shaping the future of funding for AI, cybersecurity, and next-generation technologies.
Executive Actions on Artificial Intelligence
Recent executive actions have established a national approach to governing artificial intelligence (AI), focusing on safe, secure, and trustworthy development and use. These directives aim to promote competition in the AI industry, prevent AI-enabled threats to civil liberties and national security, and ensure U.S. global competitiveness in the AI field.
Funding Opportunity: Federal agencies are expected to create dedicated “chief artificial intelligence officer” positions, leading to increased funding opportunities for AI governance and compliance.
Federal Budget Allocations for AI Development
The current administration’s fiscal year 2025 budget proposal includes significant investments in AI. These investments include $3 billion allocated to responsibly develop, test, procure, and integrate transformative AI applications across the federal government, and $2 billion dedicated to the National Science Foundation (NSF) for AI research and development, emphasizing U.S. leadership in AI.
Funding Opportunity: Agencies are prioritizing projects that align with these budgetary allocations, offering substantial funding opportunities for AI initiatives.
National Security and Technological Competition
Concerns about global technological competition, particularly with nations like China, are influencing federal funding. Former U.S. security officials have urged increased funding for federal scientific research to maintain a competitive edge in critical technologies. Emphasis on supporting the NSF’s Technology, Innovation, and Partnerships Directorate to transform research into practical applications vital for U.S. military and economic power.
Funding Opportunity: Projects that contribute to maintaining technological superiority, especially in AI and cybersecurity, are likely to receive prioritized funding
Emerging Areas of Focus for Federal Investment
Securing a federal grant is only the first step. To scale innovation, companies must align with high-growth, federally funded sectors.
AI in Cybersecurity
The federal government is increasingly investing in AI-driven cybersecurity solutions to protect critical infrastructure and national security interests. The Cybersecurity and Infrastructure Security Agency (CISA) utilizes AI to automatically detect and analyze potential threats, flag unusual network activity, and identify patterns in vast amounts of data that could indicate cybersecurity threats or emerging risks in the nation’s critical infrastructure.
Example: The Department of Defense’s Defense Advanced Research Projects Agency (DARPA) recently hosted the AI Cyber Challenge (AIxCC) at the DEF CON hacker conference, showcasing advanced AI tools designed to detect and patch security flaws in code. The competition’s finalists are set to enhance the security of real-world critical infrastructure, reflecting the government’s commitment to integrating AI in cybersecurity measures.
Funding Opportunity: Federal agencies, including CISA and DARPA, are actively seeking AI solutions that can bolster cybersecurity defenses. Organizations developing AI technologies focused on threat detection, network security, and infrastructure protection are well-positioned to secure funding in this priority area.
AI in Government Services
Federal agencies are investing in AI to enhance public-facing digital services and internal operations. The Technology Modernization Fund (TMF) supports projects that modernize high-priority systems, strengthen cybersecurity, and improve digital services. The fiscal year 2025 budget request emphasizes AI and customer experience (CX), allocating funds to develop, test, and integrate AI applications across the federal government.
Funding Opportunity: Agencies are seeking AI solutions that can improve citizen services, streamline operations, and enhance cybersecurity, presenting opportunities for technology providers.
AI in Transportation and Infrastructure
Investments are being made in AI to modernize transportation systems and infrastructure. Companies like Wabtec are developing advanced AI and robotic technologies for trains to meet growing freight demand, reflecting a broader trend of integrating AI into transportation.
Funding Opportunity: Federal initiatives supporting AI-driven transportation innovations present opportunities for companies developing technologies in this sector.
Adapting Proposals to Align with Emerging Trends
Federal funding agencies are prioritizing scalable, high-impact projects. AI and technology companies must tailor their proposals accordingly.
1. Align with Evolving Federal Priorities
Agencies fund projects that align with their strategic priorities. To maximize funding opportunities, companies must clearly demonstrate how their innovations support federal initiatives. Those that strategically align their messaging with agency goals are far more likely to secure follow-on funding and long-term partnerships.
Example: An AI cybersecurity firm should demonstrate how its solutions align with national security priorities and initiatives led by agencies like DARPA.
2. Demonstrate Long-Term Impact and Scalability
Agencies seek systemic solutions, not one-off projects. The most competitive proposals quantify potential return on investment (ROI), demonstrate cross-sector applications beyond initial funding, and showcase partnerships with existing federal awardees.
3. Address AI Ethics and Regulatory Compliance
With AI regulation increasing, agencies favor companies that proactively address security, fairness, and compliance. Companies should incorporate independent ethics advisory boards in proposals to meet emerging NSF and NIST requirements.
Looking Ahead: Predictions for FY2025 and Beyond
The next round of federal funding will be shaped by regulatory shifts, cross-agency collaborations, and global technology partnerships.
1. Increased AI Regulation and Compliance Requirements
Expect stricter federal governance and compliance mandates, including:
- NIST’s AI Risk Management Framework, which sets federal AI security standards;
- FTC guidelines on AI transparency and consumer protection, which impact AI-driven business models.
Scaling Opportunity: Proposals that proactively address regulatory challenges will gain a competitive edge.
2. Growth in Cross-Agency Collaboration
Federal funding is moving toward multi-agency initiatives, particularly in:
- AI-Quantum Integration: merging AI with quantum computing for next-generation solutions;
- Cybersecurity for Critical Infrastructure: AI-driven threat detection for power grids, financial systems, and defense networks.
Scaling Opportunity: Companies already working with one agency should explore collaborative grants across multiple agencies.
3. Expansion of Global Research Partnerships
Federal agencies are increasingly engaging in strategic international research collaborations in AI, cybersecurity, and emerging technologies. Initiatives such as the NSF-EU AI research partnerships and the DOE-Japan semiconductor agreements demonstrate the government’s interest in coordinating research efforts with allied nations to maintain technological leadership.
However, navigating federal funding while engaging in international partnerships is complex. Companies pursuing both U.S. federal contracts and foreign collaborations must carefully structure agreements to ensure they remain eligible for federal funding while adhering to national security and compliance regulations.
Key Considerations:
- Agencies prioritize U.S. national security and economic interests when awarding funding.
- Foreign partnerships, even with allies, require careful compliance with export controls, ITAR (International Traffic in Arms Regulations), and CFIUS (Committee on Foreign Investment in the U.S.) regulations.
- Some federal programs explicitly restrict partnerships with foreign entities, while others encourage collaboration under controlled conditions.
Scaling Opportunity: Companies engaged in international research partnerships will have a significant advantage in securing U.S. federal funding, particularly in AI governance, quantum computing, and critical infrastructure security. However, navigating cross-border collaborations presents challenges in funding access, compliance, and strategic alignment with federal priorities.
Stay Ahead with EverGlade Consulting
In Scaling Innovation in Federal Funding, we highlighted how early-stage AI and technology innovators can secure and sustain federal funding. This article extends that discussion by showing how companies can navigate new funding priorities, expand into high-growth sectors, and align with evolving federal initiatives.
In our next article, we’ll explore the evolving federal contracting environment, highlighting the key mechanisms that AI and technology firms can use to secure non-dilutive funding and long-term growth opportunities. Stay tuned to learn how to position your company for success in the highly competitive federal marketplace.
Ready to expand your funding strategy? Contact us at [email protected] to start your journey.