NEW YORK (Fortune Magazine) -- It's 1900 hours on Veterans Day in Fayetteville, N.C., a pistol shot from the Fort Bragg military base. Ten minutes ago a 25-year-old self-taught engineer named Adam Gettings pulled into the Waffle House parking lot, lifted the hatch of his black SUV, and unveiled what could very well be the future of urban warfare: a toy-like but gun-wielding robot designed to replace human soldiers on the battlefield.

It's two feet tall, travels ten miles an hour, and spins on a dime. Remote-controlled over an encrypted frequency that jams nearby radios and cellphones, it'll blow a ten-inch hole through a steel door with deadly accuracy from 400 meters.

Now Gettings is sitting calmly on the other side of a plate of fried eggs and sliced tomatoes, talking about how his company, Robotex, has teamed up with a wild-eyed Tennessee shotgun designer to rethink the development strategy for military technology. "

The idea that you can use investor money rather than [government] research money - that's a new thing," says Gettings, who's in town for SpecOps, a war-fighter technology conference.

Military contractors typically get the funding to build, test, and sell new weapons systems from federal agencies. It can take forever.

Robotex, based in Palo Alto, is financed by angel investors and went from idea to product in six months. "This is the new defense, Silicon Valley-style," says Gettings. "You build only what's necessary, iterate quickly, and keep the price low."

How low? Try $30,000 to $50,000. A similar bot, the Talon, which was developed by defense contractor Foster-Miller and is being tested in Iraq, costs six times that amount. "Our system does all the same things as the Talon, weighs half as much, and costs a fraction," says Gettings.

An endorsement from Blackwater

Robotex is the brainchild of Terry Izumi, a reclusive filmmaker who comes from a long line of samurai warriors, has trained Secret Service agents, and worked both at DreamWorks (Charts) and in Disney's (Charts, Fortune 500) Imagineering division.

When Izumi decided to build a better war robot in 2005, he recruited Nathan Gettings, a former PayPal software engineer and founder of Palantir Technologies, who brought in his brother Adam as well as a fourth (silent) partner who hails from both PayPal and YouTube. They had a prototype in no time. But they needed a weapon, and that's how Jerry Baber, his revolutionary shotgun, and a pilotless mini-helicopter come into the picture.

Baber is the fast-talking, white-haired founder of Military Police Systems, an arms manufacturer and ammunition distributor based in the hills of eastern Tennessee. When his chums at Blackwater, the security contractor, told him that the Robotex guys were the real deal, he invited them for a visit.

"I called Nathan and Adam on a Monday, and on Thursday they were here," says Baber.

With that meeting, he turned a promising little robot into something both multifunctional and truly scary. His company's $8,000 Atchisson Assault-12 shotgun was fresh off the assembly line after a dozen years in development. It's made of aircraft-grade stainless steel, never needs lubrication or cleaning, and won't rust. Pour sand through it and it won't clog. It doesn't recoil, so it's accurate even when it's firing in automatic mode, which it does at a rate of 300 rounds per minute.

"It delivers the lead equivalent of 132 M16s," says Baber. "When they start firing from every direction, it's all over."

Is the military really ready to deploy robot soldiers?

And the AA-12 is versatile. Along with firing ridiculously powerful FRAG-12 ammo - a straight-out-of-Terminator shell that contains a whirling miniature grenade - the AA-12 can handle non-lethal Tasers and even bullets that are deadly up to 120 feet but fall harmlessly by 800 feet.

Limited-range bullets are important in urban combat situations, Baber explains, because once an insurgent gets between the robot and a soldier operating it on the ground, the bot is rendered useless - unless the soldier wants to shoot at himself.

Baber has paired the AH and its smaller sibling, the MH, with a remote-control mini-helicopter called the AutoCopter, which holds two AA-12s and can carry the bots into battle. His plan is to buy the robots from Robotex and the helicopter from Neural Robotics in Huntsville, Ala. Then he's going to arm them, resell the systems, and split the profits.

It's a classic Silicon Valley tale of a few engineers who do what they're best at, team up with some kindred spirits, and together build a product to take on the establishment.

The wild cards here, of course, are Beltway bureaucracy and public sentiment. Is the military really ready for low-cost killer robots? Are you?

At 72, Baber says he doesn't have a lot of time to wait to see his system deployed. And the next step is the toughest. "It's a bitch, let me tell you," he says of trying to sell innovative concepts into an entrenched government procurement system. But he has a plan.

First, the entire armory will go on display in Blackwater's lobby. That should get some attention. If not, he's counting on a public outcry.

"If moms and dads around the country find out this system is available while their sons are off sopping up bullets in Iraq, they're going to tear the White House down," he says. "This will take the soldiers out of harm's way."

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