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Cyber businessPentagon to invest in Silicon Valley tech startups to help develop advanced cyber solutions

Published 18 May 2015

The Pentagon will begin to invest in Silicon Valley tech startups as part of the department’s plan to develop and acquire more advanced cyber solutions to secure the country and military’s digital infrastructure. The investments will be made through In-Q-Tel, a nonprofit strategic investing firm the Central Intelligence Agency launched sixteen years ago. In-Q-Tel does not invest in companies alone, but rather relies on traditional venture firms to partner and contribute the lion’s share of the funding, so having them on board is critical for the program’s success.

The Pentagon will begin to invest in Silicon Valley tech startups as part of the department’s plan to develop and acquire more advanced cyber solutions to secure the country and military’s digital infrastructure. The investments will be made through In-Q-Tel, a nonprofit strategic investing firm the Central Intelligence Agency launched sixteen years ago and which has backed tech companies such as Keyhole, which helped create Google Earth. As part of the program, the Pentagon will open its first office in Silicon Valley, an outpost in Moffett Field staffed with active-duty military and civilians responsible for “scouting emerging and breakthrough technologies and building direct relationships to DOD,” a senior Pentagon official said.

You’re not going to see someone doing something interesting in a garage if you’re sitting in the Pentagon waiting for someone to bid on a $500 million contract,” said Kim Taipale, founder and executive director of Stilwell Center for Advanced Studies in Science and Technology Policy. “When it became clearly apparent that dealing with information warfare and cybersecurity and online protection was going to be a big defense issue, and that was a domain that the military was going to have an active part in, then it became impossible not to be involved in Silicon Valley,” Taipale added.

According to Mercury News, In-Q-Tel does not invest in companies alone, but rather relies on traditional venture firms to partner and contribute the lion’s share of the funding, so having them on board is critical for the program’s success. That is why Pentagon chief Ashton Carter paid Andreessen Horowitz a visit during his April trip to Silicon Valley. “He’s one of us, he understands our language,” Margit Wennmachers, a partner at Andreessen Horowitz, said of Carter. “He’s trying to make the walls between Silicon Valley and the DOD a bit more porous. That’s just a really smart way to go, because the next big thing in security will likely come out of a startup, not a big company.”

Mercury Newsnotes that tech firms are building microsatellites and drones, pioneering big data and biotechnology, and exploring 3D printing and robotics- technologies the military wants- faster and cheaper than what the federal government is used to. “Much of the expertise necessary for generating breakthrough innovations now resides in the nondefense commercial sector,” said the senior Pentagon official “More and more, these technologies reside in small businesses and startups, not just blue-chip corporate laboratories.”

The Pentagon’s push towards Silicon Valley has received criticism from tech privacy advocates who were appalled after receiving word of the National Security Agency’s - a Pentagon agency- surveillance programs, which involved hacking into communications links that connect Yahoo and Google data centers around the world to collect information from user accounts. In addition, President Barack Obama recently gave a speech at Stanford University to drum up support for cybersecurity laws that would allow private firms to share breach data with the federal government.

Against that backdrop, some tech firms might be considering a partnership with the Pentagon and wondering “How might this come back to bite me?” said Bob Ackerman, founder of Allegis Capital and a cybersecurity expert.