TrendVCs help government identify new technologies

Published 10 May 2007

Sharp-eyed VCs, as they look for new technologies in which to invest, may see things that government purchasing officers may miss; the defense and intelligence communities now harness the skills of VCs to identify emerging technologies

This may not capture the popular imagination as the Da Vinci Code has, but the DeVenCI (for Defense Venture Catalyst Initiative) program is certainly important. It also marks a refreshing recognition on the part of government of the role venture capitalists, and sharp-eyed business people more generally, can play in strengthening the nation’s defense.

The New York Times’s Matt Richtel reports that DeVenCI, which held three meetings since October, calls for the Defense Department to use the top U.S. technology investors to identify innovations being hatched by small start-ups or in obscure labs — the kind of places, in other words, in which government agencies, inclined to signing large contracts with large contractirs, have typically been conspicuous by their absence.

The program brings together a select group of VCs for meetings and an exchange of ideas with strategists and buyers representing the major military and intelligence services. Government officials discuss their needs and preferences, and the investors list solutions and products they have encountered and studied while examining business plans and funding requests from technology start-ups.

Both sides find the program useful and stimulating. “We’re a search engine,” said Bob Pohanka, director of DeVenCI, noting that the program is an opportunity for military procurement officers to have more intimate contact with investors who make their living reconnoitering laboratories and universities for the latest innovations. VCs “have knowledge of emerging technology that may be developed by companies as small as two guys in a garage,” Pohanka said. “These are companies that are not involved in the DoD supply chain.”

Investors beneift from becoming more familiar with agencies which have vast spending power and which may well be customers of the start-ups these VCs back. In the wake of the bust, VCs have been relativley slow to come off the mat, so the opportunity do develop a more intimate relationship with big spenders in large markets should be welcomed. The military is “like a Fortune No. 1 company,” says Rogers Novak Jr., managing director of the venture capital firm Novak Biddle Venture Partners, and one of the investors who consults with the government. “We may get a customer and the DoD gets something that helps them.”

DeVenCI started out after 9/11, when several VCs met with defense officials to see what technologies the defense and intelligence communities needed as a result of the fact that the United States was now engaged in a different kind of war. Participants say that by the end of 2005, the recommendations of the group led to the adoption of fifteen technologies for military and intelligence uses. In early 2006 DoD expanded the project and it now pays for an office with four full-time staff members.