The numbers come first: $80 million, 12 months, 123 employees, and a $1.25 billion valuation. Code Metal, a Boston-based AI software startup, has landed a Pentagon contract to modernize WarMatrix, the Department of War's wargaming simulation environment, Fortune reported exclusively.
The contract was structured as an Other Transaction Authority (OTA) agreement — a procurement vehicle that bypasses the traditional layers of government bureaucracy that have historically turned promising defense proposals into multi-year waiting games. Code Metal first secured $17 million for an initial operating capability, then received the full $80 million funding package.
'I have never seen them move this fast, and that's been really exciting,' CEO Peter Morales told Fortune.
What Code Metal Actually Does
Code Metal builds AI-powered software that translates code across programming languages and verifies that it functions correctly on different hardware architectures. Applied to WarMatrix, the technology is expected to compress analyses that once took months into a matter of days — without discarding the decades of validated legacy code the Pentagon has already built.
'We're not replacing decades of validated code,' Morales said. 'We're really making it reachable to the warfighter and to AI.'
Morales, 38, spent roughly a decade at the intersection of hardware and software before founding Code Metal, including stints at BAE Systems, MIT's Lincoln Laboratory, and Microsoft. At BAE, he worked on software for the F-35 fighter jet — an experience he credits with teaching him how quickly military technology falls behind the commercial world.
A Market Racing to Catch Up
Code Metal is not alone in sensing the opportunity. Roughly 10,000 new defense companies have entered the market over the past two years, according to an analysis by the Center for Strategic and International Studies. In the first quarter of 2026, venture capitalists deployed a record $19.8 billion into defense tech across 262 deals.
Among the 15 highest-valued defense-tech startups — including Anduril and Saronic — Pentagon contract spending tripled last fiscal year from 2022 levels, according to The Wall Street Journal. Even so, those companies still account for less than 1% of total dollars awarded to all defense contractors.
About 75% of Code Metal's current business is defense-related. The company works alongside — not against — the established defense primes, having already partnered with the U.S. Air Force, Raytheon, L3Harris, and Boeing. Code Metal was valued at $1.25 billion in February after closing a $125 million Series B led by Salesforce Ventures.
To scale the business, the company brought in Ryan Aytay earlier this year as president and COO. Aytay previously served as chief business officer at Salesforce and CEO of Tableau.
The Editorial Read
This is what defense modernization looks like when the administrative state gets out of the way. The OTA mechanism — purpose-built to cut procurement red tape — delivered an $80 million contract in under a year. That is not the Pentagon's default speed; it is what happens when urgency overrides bureaucracy.
Free enterprise is doing the work here. A 123-person startup, backed by private capital and led by an engineer who learned the problem from the inside, is delivering capability that decades of cost-plus contracting never could. Capital rewards clear rules — and when Washington moves fast and writes real checks, the market answers.
