In the eagerly anticipated all-hands meeting at Rebellion Defense in March of this year, employees were expecting positive news about a major military contract in the works. The $1 billion AI startup, backed by notable figures like former Google CEO Eric Schmidt, had been working on a significant deal with the Department of Defense (DoD) that was believed to be worth tens of millions of dollars. The contract was seen as a game-changer for Rebellion, positioning it as a key player in the race to dominate AI in defense.

The contract was for a tactical threat awareness tool (TTA), designed to leverage AI for making real-time battlefield decisions. This product was central to Rebellion’s mission of revolutionizing warfare through advanced software. The company had invested heavily, hiring engineers and experts to develop the TTA, anticipating a substantial financial boost upon securing the DoD contract.

However, the CEO, Chris Lynch, a tech entrepreneur with a background in Pentagon executive roles, delivered disappointing news at the meeting. The highly anticipated contract had not been won, leading to the subsequent layoff of approximately 90 employees in the following month. By September, Lynch himself had departed, and Rebellion’s U.K. operations were shuttered.

Rebellion’s spokesperson, Gia DeHart, acknowledged the contract’s absence, framing it as an example of the challenges faced by startups engaging with the DoD. The setback marked a significant dent in Rebellion’s aspirations and financial trajectory.

Founded in 2019, Rebellion quickly became a prominent name in defense tech. However, interviews with former employees and advisors, along with public contracts reviewed by Forbes, painted a picture of a company that may have thrived more on aspirational hype induced by investors than on tangible successes. Despite the flashy offices in Washington, D.C., and London and high-profile visits from military officials, the company’s track record as a government contractor was limited.

The departure of Lynch, who had projected optimistic figures for 2023 that reportedly fell short, was attributed to a board decision to address his overstated financial expectations and failure to secure critical contracts. Lynch had predicted contract values ranging from $50 million to almost $100 million for the year, but insiders revealed a more modest figure, around $20 million.

Rebellion’s lobbying efforts, totaling $430,000 on AI matters, did not translate into substantial government contracts. Government procurement records showed that the company received $7.2 million from publicly listed contracts in 2023, compared to $6.2 million in 2022. The discrepancy between lobbying investments and actual contracts raised questions about Rebellion’s influence and effectiveness in the defense sector.

The new CEO, Ben FitzGerald, acknowledged management challenges and acquisition issues but asserted that Rebellion had right-sized its business and had a strong team in place. The company reported a 50% increase in annual contract value, signaling a strategic shift to ensure long-term sustainability.

While Rebellion seeks to move past the setbacks and Lynch emphasizes the importance of technology in military applications, the company’s journey underscores the complexities and uncertainties inherent in the defense tech landscape. The hype-driven success narrative surrounding Rebellion may serve as a cautionary tale for startups navigating the intricate world of government contracts and military partnerships.