Maximizing the Returns of Government Venture Capital Programs

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www.nu.eu/inss dh No. 71 1

he stories o Google and Segway certainly end dierently. With a mar-

ket capitalization o over $180 billion, Google is arguably the biggest

success in the inormation technology (I) industry in the last decade.

Te phrasegoogle ithas worked its way into everyday language and dictionaries.

On the other hand, Segway remains a privately held company whose products are

largely relegated to use by tourists in major cities and security personnel at airports.

We certainly do not hear people say that they segwayed to work this morning.

Oddly enough, these companies started out in similar places. Both had po-

tentially game-changing new technologies that needed investment to urther

their development and company growth, and both received this investment rom

Kleiner, Perkins, Caueld, & Byers, a well-regarded venture capital (VC) rm.

Te stories o Google and Segway succinctly demonstrate both the power and

pitalls o the VC industry. Venture capitalists have unparalleled access to cutting-

edge technology. However, this technology is generally in an immature state, and

its successul development and implementation are ar rom guaranteed. Venture

capitalists provide the unding necessary to advance the technology and in return are

given partial ownership (an equity stake) in the company. In this sense, the FederalGovernment and venture capitalists are involved in related, though separated, worlds.

Like venture capitalists, the government invests billions o dollars in the research and

development (R&D) o new technologies, many o which will never mature into a

usable product. Te government does not receive an equity stake, however.

For decades, the government was the major source o cutting-edge tech-

nology research. In the 1980s and 1990s, however, private sector investment be-

gan to outstrip public sector investment, especially in the I eld. Suddenly, the

Maximizing the Returnsof Government VentureCapital Programs

by Andrew S. Mara

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2 dhNo. 71 www.nu.eu/inss

government no longer had its nger on the pulse o tech-

nology development. It was alling behind the private sector.

In response, several government agencies created

their own VC-like entities meant to reconnect the gov-

ernment to the private sector and harness new technology

investments. Te largest o these programs, and the topics

o this paper, are the Central Intelligence Agency (and the

larger Intelligence Community) In-Q-el, the U.S. Army

OnPoint echnologies, and the Department o Deense(DOD) Deense Venture Catalyst Initiative (DeVenCI).

Tis paper examines how government venture capi-

tal (GVC) initiatives can provide our key benets to

the government: a wider window on new technology

development, an increased potential government sup-

plier base, more leverage o private investment, and more

rapid acquisition o new technologies.

Te majority o the inormation in this paper was

compiled rom interviews with corporate and private

venture capitalists and survey responses as well as inter-

views rom GVC-backed companies. All o the surveys

and interviews were nonattributional, a necessary caveat to

ensure that the interviewees could provide honest and un-

censored responses. While this study generally ocuses on

improvements to these programs, it should be noted that

most companies surveyed and interviewed were largely

positive about their interaction with GVC programs. In a

survey, 81.5 percent o In-Q-el and 100 percent o On-

Point echnologies companies rated these programs assimilar to or better than their private VC investors.1

gVC Pms

In-Q-Tel

Founded in 1999, In-Q-el is a nonprot entity

unded entirely by the Federal Intelligence Community

(IC). Trough 2007, In-Q-el had received approximately

$350 million in unding, o which about $150 million has

been directly invested in small technology companies ei-

ther as equity or work program investments.2 Te major-

ity o In-Q-el investments are in the I eld, which is

tting given IC interest in data management, analysis, and

processing. Connecting In-Q-el to the CIA is the In-

Q-el Interace Center (QIC), whose main mission is to

connect the technologies in the In-Q-el portolio to po-

tential Central Intelligence Agency (CIA) missions. Te

QIC also serves as the portal through which the unclas-

sied work rom the company is transerred to the classi-

ed work o the IC. Since most companies will not have

personnel with proper security clearances, this portal is ex-

tremely important. Moreover, the QIC provides an annualproblem set that provides guidance to In-Q-el in terms

o the types o technology that the CIA nds o interest.

In-Q-el identies companies that may address an issue

in the problem set and then urther consults with the QIC

to veriy that a proper match has been made. Only then

does In-Q-el make an investment.3

In-Q-el has two options when making an invest-

ment. It can make either an equity investment, where it

receives part ownership in the company, or a work program

investment. Work programs typically provide unding or a

company to develop its technology in a way that suits IC

needs. For example, i a company has developed a new com-

munications antenna, but the CIA needs that antenna to be

50 percent smaller, it could make a work program invest-

ment to help und that reduction in size. ypically, In-Q-el

makes both equity and work program investments. In addi-

tion to equity in the company, In-Q-el receives an observer

seat on the board o the company. While this observer does

not have a vote in company decisions, he has access to all othe inormation about them, providing In-Q-el with an

excellent way to monitor the companys progress. Trough

2009, In-Q-el reported more than 100 investments.4

OnPoint Technologies

OnPoint echnologies was ounded by the U.S.

Army in 2002 specically to address the Services con-

work programs provide funding fora company to develop its technology

in a way that suits IC needs


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tinued need or new power and energy solutions. Like

In-Q-el, OnPoint is run as a separate, nonprot en-

tity. OnPoint was initially unded with approximately

$62 million o unspent R&D dollars that were swept

up at the end o government scal years and then

invested in OnPoint. Te authority to add money to

OnPoint has since expired; thus, there are no plans

or it to receive additional unding. However, OnPoint

has done an impressive job o growing its original in-

vestment. Public records indicate that OnPoint now

has total assets o almost $150 million.5 Tis increase

in assets is caused by an increase in value o OnPoints

portolio companies. Given its small und size, OnPoint

is not capable o making work program investments

and makes only equity investments in early stage tech-nology companies. It monitors the companys progress

through its position on the management board. Tere

is no organization analogous to the QIC, so all invest-

ments are discussed directly with potential customers

within the Army to ensure that OnPoints portolio

companies match current Service needs. Furthermore,

OnPoints sta is in charge o acilitating technology

transers to the Army, and the pay structure provides

substantial incentives and bonuses or successul trans-

ers. Trough 2009, OnPoint had made 13 investments.

DeVenCI

Unlike In-Q-el and OnPoint, DeVenCI does not

make direct investments in technology companies. De-

VenCI was ocially ormed by DOD in 2006, though it

had been operating as an unocial group or several years

prior. DeVenCI uses a number o voluntary VC con-

sultants who help link private companies to potential

DOD customers.6 DeVenCI communicates the needs o

its customers to the VC consultants, who provide inor-

mation on companies that may be able to t those needs.

DeVenCI then sets up meetings and presentations be-

tween the two groups to explore whether there may be a

match. Tus, DeVenCI is more o a meeting broker than

a venture capitalist. Recently, DeVenCI has received a

small amount o unding that it can use to sponsor eld

tests and trials o new technologies. Because DeVenCI

does not make investments, it is able to interact with a

much larger number o companies on a smaller budget

than either OnPoint or In-Q-el. DeVenCI has hosted

meetings between more than a hundred small companies

and potential DOD customers.

op Ww tc

Venture capitalists have tremendous access to small,

high-tech companies since they are oten the only poten-

tial source o unding or high-risk, high-reward business

ventures. Tus, VC rms review thousands o business

plans a year (o which approximately 1 percent receive an

investment), providing them with a comprehensive look

at technology development. Te stream o business plans,

known in the industry as deal fow, is the lieblood or

any VC investor. Furthermore, many o the companies in

this deal fow are not inclined to interact with or market

to the government. Te government is not likely to be a

high-volume customer, and the procurement process is

slow and intimidating. Tus, there are literally thousands

o small technology companies that the government is

unaware o. I the government has knowledge o techni-

cal developments in the private sector, it can better posi-

tion itsel to ensure it is capitalizing on those develop-

ments and prevent duplicative eorts. Tis knowledge isknown as the window on new technology.

All three o the GVC programs are actively involved

in expanding their sponsoring agencys window on tech-

nology. As a potential investor, In-Q-el has reviewed

more than 7,500 business plans and gathered inormation

on technologies that almost certainly would have other-

wise escaped the ICs eye.7 While only a small raction o

there are literally thousands of small

technology companies that thegovernment is unaware of


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these business plans ever receive an In-Q-el investment,

the Intelligence Community still benets rom knowledge

o developments in the private sector technology pipeline.

Likewise, OnPoint has reviewed over 500 business plans,

in step with its substantially smaller budget and narrower

ocus.8 Both o these programs have established connec-

tions within the VC community allowing them to share

some o the deal fow rom other private rms.

DeVenCI uses echnology Showcase events to pro-

vide a window on technology not only to the DeVenCI

sta, but also to interested DOD groups. DeVenCI likely

has a narrower window since it does not actively review

business plans or invest in small companies. However, by

using its VC consultants, it gains insights into the deal

fow o multiple private VC rms at a raction o the costo making investments.

Tus, each GVC program appears to be observing

new technology cycles that otherwise might have remained

obscured. However, or the most part, knowledge o the

deal fow o GVC programs remains within the program

itsel and is not shared or widely disseminated throughout

the government. Some groups in the Intelligence Com-

munity who contribute unds to In-Q-el indicated that

while they had mechanisms to provide input on potential

investments, they did not have any way to systematically

search In-Q-elinvestigated companies to gather a largersense o developments in the I eld. Likewise, many o

the military Services are interested in issues o power and

energy, and the author has spoken to numerous ocials

who were completely unaware o OnPoints eorts.

Tere are some concerns o privacy involved in shar-

ing this inormation. Certainly, some companies may not

wish to have inormation on their technology released to

GVC programs should be able to

nd and fund companies that would

otherwise be excluded from thegovernment supplier base

other government agencies. Some companies are operating

in stealth mode, where they release little inormation on

their workings. But these concerns on condentiality seem

overblown; an overwhelming number o the venture capi-

talists and companies interviewed or this study welcomed

the opportunity to share inormation on their technology

with potential government customers. Indeed, inormation

on the companies in GVC portolios is oten already avail-

able to some extent on company Web sites, or through VC

databases such as Dow Jones VentureSource or Tompson

VentureXpert.9 Secrecy concerns could be mitigated by cre-

ating a password-protected database available only to gov-

ernment personnel. By providing the window on technology

to a wider range o government oces, existing investments

in GVC could be urther leveraged or maximum eect.One can easily envision, or example, a Deense

Advanced Research Projects Agency program manager

searching company inormation to determine the state

o the art in microcommunications. Or think o the value

that such a database could provide to the new Marine

Corps Expeditionary Energy Oce (E2O). By provid-

ing a glance at the energy technologies currently under

development, the E2O would have a signicant jump on

identiying new technologies or Marines deployed in

Iraq and Aghanistan. While creating a database o com-

panies in the deal fow o GVC would likely take some

additional manpower (but probably no more than one

ull-time position or each program), this cost would be

more than oset by the value created. Te database need

not contain detailed inormation. One-page summaries

o the technology along with contact inormation or the

companies would be sucient to extend the window on

technology to potentially interested government parties.

Recommendation 1: GVC programs should create asearchable database containing contact inormation and tech-

nology descriptions or each company in their deal ow.

ics P gvmSpp Bs

Government (and DOD in particular) diculties in

dealing with small companies are well documented.10 o


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its credit, the government does make a sizeable invest-

ment in small companies via the Small Business Innova-

tion Research (SBIR) program, which provides research

grants to small companies. Reviews o the SBIR program

are mixed and will not be covered here. Unortunately, a

recent court ruling specically excludes venture-backed

companies rom receiving SBIR grants, removing an

entire segment o small technology companies rom the

major source o engagement.11

Tus, GVC programs should be able to nd and

und companies that would otherwise be excluded rom

the government supplier base. Indeed, this appears to be

an area where GVC is perorming well. O the 13 com-

panies in the OnPoint portolio, none had received gov-

ernment contracts or SBIR grants prior to interactingwith OnPoint.12 Tus, all o OnPoints companies were

new government suppliers. At least some o these com-

panies may have been attracted to the government as a

potential customer even without OnPoints interactions.

However, a survey o six OnPoint companies shows that

none o them thought they were highly or extremely

likely to sell to the government beore OnPoint, versus

50 percent ater. Indeed, one OnPoint companys tech-

nology is already implemented in batteries stocked and

used by Army Soldiers.

In-Q-el appears to have had similar success. In a

survey o 39 In-Q-el portolio companies, only 26.3 per-

cent o companies thought that they were highly or ex-

tremely likely to sell to the government prior to their In-

Q-el interactions. Tis number substantially increased

to 78.9 percent postIn-Q-el interaction. Additionally,

at least 62 o the 103 In-Q-el portolio companies had

not received a government contract or SBIR grant prior

to In-Q-el investment, indicating that 60.2 percent othese portolio companies are new potential suppliers.13

While technical diculties precluded a similar sur-

vey o DeVenCI companies, at least 60 o 128 companies

(46.9 percent)14 that have presented at DeVenCI technol-

ogy events had no prior contracts rom the government.

Overall, GVC programs have done an admirable job

o bringing new companies into the potential govern-

ment supplier base; however, improvements could cer-

tainly be made to leverage these contacts throughout the

government. A separate study conducted by the author

indicates that approximately 25 percent o companies in

the In-Q-el and OnPoint portolios go on to win gov-

ernment contracts ater investment. While this number

is impressive, it is possible that it could be substantially

improved by spreading word o portolio companies,

work program results, and successul prototypes or eld

tests throughout the government. Te author has met

many project managers and research scientists within

DOD (which has investments in all three GVC pro-

grams) who are completely unaware o some or all o the

GVC programs. One can easily imagine a scenario where

a technology eld test may not t the CIAs needs but iswell suited or a Navy project.

Engaging with other entities throughout the gov-

ernment is a herculean task and will likely require ad-

ditional eort and manpower. One mode o outreach

would be to include more detailed white papers or the

technology in each portolio company. GVC programs

will have intimate knowledge o the technology in these

companies (rom their board observers and due dili-

gence beore investment), which could be shared rom a

or-ocial-use-only portal. Privacy and condentiality

could raise issues, but, as indicated earlier, interviewswith venture capitalists and portolio companies indi-

cate that most companies welcome the opportunity to

share their technology with new government custom-

ers. Complementary models could include portolio

company showcases, GVC program participation in

existing technology events (that is, SBIR conerenc-

es), or technology newsletters distributed to project

one can easily imagine a scenario

where a technology eld test may nott the CIAs needs but is well suited

for a Navy project


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managers, government laboratory personnel, and ac-

quisition ocials.

Recommendation 2: GVC programs should actively

engage and cross-promote portolio companies throughout

the government. Detailed technology descriptions, work

program developments, and eld test results should be

available to government personnel via a searchable data-

base. Introducing portolio companies to many government

customers will leverage the new potential supplier base cre-

ated by GVC programs.

lv Pv ivsm

Tere can be little doubt that GVC programs are le-

veraging private investment. Te act that they are bring-

ing new potential suppliers into the government supplier

base (as described above) constitutes leveraging private

investment, even without counting the number o pri-

vate VC dollars invested in GVC portolio companies.

Trough 2007, In-Q-el reports that it has leveraged

more than $1.4 billion,15 and OnPoint claims about $1

billion in private VC co-investment.16 DeVenCI, by its

noninvesting nature, is leveraging private investment by

deault. Tese claims must be taken with a grain o salt,

however, since the private VC investment would have al-

most certainly occurred without any GVC action. Tus,

the private dollars are only truly leveraged i the GVCinvestment leads to actual transer o a new technology

to a government customer.

Surveys o 34 In-Q-el companies that received

equity investments yielded some surprising results that

aect how GVC leverages private investments. Only

roughly a third o surveyed In-Q-el companies indi-

cated that the equity investment was highly or extremely

important or developing their technology. Tis number

paled in comparison to 65.4 percent o companies who

ound work program investment highly or extremely

important. A similar discrepancy was reported or the

importance o equity and work program investments

on potential sales to government customers (51.5 per-

cent versus 71.4 percent highly or extremely important,

respectively). Tese results line up with responses indi-

cating that o equity investments, work program invest-

ments, links to government customers, and association

with the In-Q-el brand, more than hal o the compa-

nies ound equity investments to be the least valuable as-

set o their interactions with In-Q-el. Furthermore, 59

percent o companies reported that they were very likely

to have received sucient unding or their business ven-tures without any In-Q-el investment.

Given that In-Q-el is not ocused on nancial

gains, these results question whether equity investments

are a crucial part o the In-Q-el process. Indeed, some

interviewed companies observed that In-Q-el seemed

insistent on an equity investment (in addition to a work

program investment) even i the company was not par-

ticularly interested in it.

From In-Q-els perspective, there certainly could

be value in making equity investments. Such investments

could be necessary to gain access to private VC deal fow,

though now that In-Q-el is established in the VC com-

munity, continued equity investments might be less im-

portant. Alternatively, In-Q-el may nd that the board

observer seat they receive in return or an investment is

crucial to meeting In-Q-els mission goals. Neverthe-

less, In-Q-el may be able to transition rom equity to

work program investments and increase the technologi-

cal returns to the Intelligence Community. Indeed, it ap-pears that such a shit may already be occurring as In-

Q-el has been slowly trending rom a traditional VC

model to a strategic investor approach.

OnPoint, on the other hand, is largely conned to eq-

uity investments. It simply does not have existing unds

to support a work program approach, and since it will not

receive any additional unding, it is reliant on returns rom

companies report that equity

investments from OnPoint are quite

important for both technologydevelopment and government sales


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equity investments to generate new capital or uture en-

deavors. Companies report that equity investments rom

OnPoint are quite important or both technology de-

velopment and government sales, with 66.7 percent and

60 percent o companies claiming they are highly or ex-

tremely important, respectively. Moreover, since OnPoint

does not have any work program investments to infuence

technology development, a seat on management boards o

portolio companies is one o the ew tools available.

Recommendation 3: In-Q-Tel should continue to shit

away rom equity investments as work program investments

may yield greater benets or technology development and

sale to the government.

Sp acqs nwtcs

Perhaps the most substantial benet that GVC can

provide is access to new technologies on a compressed

timeline. All o the GVC programs report some suc-

cess. In-Q-el reports more than 100 technology tran-

sition events, though their denition includes delivery

o prototypes and eld trials that may never actually be

acquired or integrated. Likewise, OnPoint has elded at

least one major success (out o 13 portolio companies).

A state o charge indicator produced by PowerPrecise

Solutions has been integrated into the BA5590 battery,

reportedly saving the Army more than $281 million. An-

other OnPoint company is currently eld testing metha-

nol uel cells in U.S. operations in the Middle East. Suc-

cess or DeVenCI is harder to quantiy given that it does

not actually invest in companies; however, early results

rom their eld test pilot program look promising.

Unortunately, the technology transer benet is also

the hardest to realize. Corporate venture capital (CVC)programs, which share this strategic goal with GVC, shed

some light on how dicult it is to incorporate new tech-

nologies into existing R&D structures. All o the CVC

programs interviewed or this study reported having an

extremely dicult time integrating technologies rom

portolio companies. Managers o existing R&D pro-

grams were very skeptical o products that were not in-

vented here and did not want to assume the additional

risk o attempting to integrate a new unknown technol-

ogy. Furthermore, even i the technology itsel was a per-

ect t, it was dicult to align the development cycles o

the portolio company and the corporate research division.

Solutions to the technology integration problem

diered greatly, and some CVC programs even ceased

operations altogether. Several CVC units noted that the

easiest way to integrate a new technology was to acquire

the portolio company outright. Motorola Ventures

(which was not interviewed or this study), or example,

has directly acquired at least three o its portolio com-

panies since 2000.17 Clearly, direct acquisition is not an

option or the government, and it is discouraging that

multiple CVC units viewed acquisition as the mostpromising route or technology transer.

A separate approach cited by some companies was to

integrate project managers rom corporate R&D into the

CVC eorts. Tese managers were borrowed rom the

R&D arm to help identiy and monitor the development

o technologies that were applicable to corporate R&D

goals. Once a technology was suciently mature to be

inserted into corporate eorts, the project manager was

returned to the R&D division to serve as the technology

champion who would shepherd the technology into the

corporate pipeline. Indeed, there are diculties with this

approach. Companies had to balance the dierent corpo-rate climates and pay structures in the VC and R&D arms.

Furthermore, successul integration requires a strong tech-

nology champion, and some companies were reluctant to

loan out high-perorming employees to the CVC arm.

Nevertheless, there could be strong parallels between this

approach and GVC. Some o the reported success sto-

ries or the SBIR program center on particularly talented

the program manager chooses

which companies will best help hiscurrent project


8/12


or motivated project managers who serve as technology

champions or their SBIR rms. Additionally, some gov-

ernment ocials interviewed in this study indicated that

rapid acquisition was possible, even given existing acqui-

sition methods, i the acquiring unit had a talented and

motivated acquisition ocer. Clearly, it would be possible

to apply the borrowed technology champion approach

to GVC. GVC programs could recruit project managers

rom interested government units or 2- or 3-year stints,

who would then return to their original locations to inte-

grate the technology into their home oce.

One CVC program interviewed actually changed its

model o VC investing to adapt a technology champion

type model. Ater struggling to integrate portolio tech-

nology companies, the VC arm involved its R&D arms

directly in the investment selection process. Project man-

agers now go to the VC arm and request investments

in particular types o technology. Once the VC arm has

identied potential ts, the project manager helps de-

cide whether that company will receive an investment.

Simply put, the program manager chooses which com-

panies will best help his current project, and he becomes

the technology champion because he now has a vested

interest in the development and integration o that par-

ticular technology. Tis approach is directly applicable to

GVC investing. While the QIC (and OnPoints interac-

tions with potential customers) attempts a similar ap-proach, there is no direct connection between the port-

olio company and the managers o existing projects. I

the budding eld o behavioral economics has taught us

one thing, it is that people respond to incentives (some-

times in unpredictable ways). By directly connecting the

portolio companys success to the project managers own

goals, GVC could create a strong incentive to overcome

the hurdles o technology integration. While companies

interviewed were generally happy with their interactions

with In-Q-el, they repeatedly stressed the rustrations

o being unable to connect directly to their customers.

Classication issues certainly come into play in these

interactions, and they are discussed in more detail later.

Recommendation 4: GVC programs need to develop

methods to reliably produce technology champions in govern-

ment agencies. Such champions could be personnel borrowed

rom R&D eorts who then return to the R&D world to

shepherd in new technologies. Alternatively, project manag-

ers could be directly involved (and incentivized) in portolio

company selection linking successul technology integration to

the project managers own goals and priorities.

o this point, this paper has described organizationalapproaches to help speed technology transer. However,

there are additional inormation-based approaches that

could better prepare portolio companies to deal with ex-

isting government inrastructure. Interviews with VC rms

and portolio companies consistently revealed that both o

these groups were extremely poorly inormed about the

government procurement process. While companies were

interested in selling to the government and understood that

the process would likely take several years, they could not

even identiy the proper place to begin preparing. Along

these lines, multiple interviewees suggested that having a

primer on the government acquisition process specically

geared toward small venture-backed companies would be

o immense value. Each GVC program may need to adapt

this primer to their specic government customers (or ex-

ample, Army, CIA); however, relatively little eort would

be required to produce a document that would greatly help

companies deal with the technology transer process.

Recommendation 5: Create a primer on the govern-ment procurement process that is specic to small venture-

backed companies.

A more intense intervention would be to create an o-

ce within each VC program specically designed to help

companies navigate the acquisition process. Such an oce

would need to be staed with an acquisitions expert who

was well connected to the potential government customer.

if the budding eld of behavioral

economics has taught us one thing, itis that people respond to incentives


9/12


As one government ocial noted, a skilled acquisition

agent can greatly speed the technology transer process.

Someone with extensive experience in R&D who

could bring project managers and companies together

would also be valuable. Granted, technology transi-

tion oces or the SBIR program already exist. But the

useulness o these oces was repeatedly questioned

by company ocials, with one going so ar as to state

that technology transer oces were largely considered

a joke within the venture-backed business community.

Indeed, these oces are generally insuciently staed to

provide the detailed interactions necessary to help navi-

gate the requirements o the Federal acquisitions pro-

cess. By limiting access to these technology transition o-

ces to companies in GVC portolios, companies could

receive a higher level o personal attention and advice.

Many companies indicated that just having someone to

call when they had a question would be helpul.It is important to reemphasize that the sta in these

VC technology transition oces needs to be very amil-

iar with the acquisition processes o the government cus-

tomer. In addition, while In-Q-el may have the budget

to und such an eort, neither DeVenCI nor OnPoint

has a sta or budget capable o doing so. Tus, a con-

siderable investment would need to be made in both

programs to hasten technology transer. Unortunately,

the SBIR program suggests that such investments are

dicult to make. Multiple reports have recommended

a stang budget or SBIR grants, but to date, all man-

dated SBIR unds still must be dispersed as grants.

Recommendation 6: Create technology transition ofces

with skilled acquisition experts to provide guidance and ad-

vice to companies as they navigate the acquisition process.

Ccs

Tere is no doubt that GVC programs have yield-

ed both strategic and material benets or their gov-

ernment customers. A quantitative analysis o these

benets is the subject o another study. However, this

study has identied six key recommendations that

could help maximize the benets that GVC programs

currently provide. Inormation-sharing has always

been a problem or government agencies, and GVCis no exception. Each individual program has done

an admirable job o surveying the realm o privately

backed technology companies, but this inormation is

not readily available to potential government custom-

ers. Several GVC program ocials interviewed or this

study suggested that privacy concerns might prevent

such inormation-sharing; however, interviews with

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the companies themselves (and with private VC und

managers) indicated that these ears were exaggerated.

In act, most companies welcomed the ability to share

inormation about their technology with the govern-

ment. Making sure that this inormation is easily avail-

able will ensure that GVC eorts are ully leveraged.

In terms o technology transer, this study has ound

that strong technology champions are necessary to inte-

grate technologies rom GVC portolio companies into

government R&D programs. Tese champions provide

the intense promotion and motivation necessary to over-

come the diculties o integrating a new technology. In

addition, creating a primer on the government acquisition

process could help prepare small technology companies

or the hurdles they will ace when attempting to sell tothe government. Along these same lines, many companies

and VC und managers indicated that having a contact in

the government who could answer questions about the ac-

quisition process would be extremely helpul. In act, o all

o the ideas discussed with companies, the creation o this

particular oce was oten cited as the most promising.

Te diculties with implementing these recom-

mendations primarily revolve around personnel issues. o

create the databases, primers, technology champions, and

acquisition oces, GVC programs will need additional

unding. By limiting the scope o these programs solely

to companies involved in GVC programs, the number o

new personnel required should not be overwhelming. In-

deed, it is likely that one ull-time employee could handle

most o the inormation-sharing responsibilities. While

additional employees would be needed to implement the

other recommendations, the added value o these employ-

ees should outweigh the costs.

ns1

Approximately 100 In-Q-el and OnPoint-backed compa-nies were sent surveys both electronically and via mail in June 2009.From those surveys, 39 In-Q-el and 6 OnPoint companies returnedcompleted surveys.

2 In-Q-el, Form 990, 2007, available at .

3 Business Executives or National Security (BENS),Ac-celerating the Acquisition and Implementation o New Technologies

or Intelligence, Report o the Independent Panel on the CentralIntelligence Agency In-Q-el Venture (Washington, DC: BENS,2001), available at ; G. Felda Hardymon et al.,In-Q-Tel, Harvard BusinessSchool Case Study 8804106, available at ; Wendy Molzahn, Te CIAsIn-Q-el Model: Its Applicability,Acquisition Review Quarterly

(Winter 2003).4 In-Q-el.5 OnPoint echnologies, Form 990, 2009, available at .6 See ; interviews with

current and ormer DeVenCI employees, JuneSeptember 2009.7 In-Q-el.8Army Venture Capital Initiative, Fiscal Year 2008, Annual

Report to Congressional Deense Committees.9 See and .10 For example, Nancy Y. Moore et al.,Enhancing Small-

Business Opportunities in the DoD, echnical Report (Santa Monica,CA: RAND, 2008), available at .

11 Committee or Capitalizing on Science, echnology, and In-novation,Venture Funding and the NIH SBIR Program, ed. Charles W.Wessner (Washington, DC: Te National Acadamies Press, 2009).

12 Data acquired rom .13 Data acquired rom and .14 Ibid.15 In-Q-el.16 OnPoint.17 Data rom .

The Center or Technology and National Security Policy(CTNSP) within the Institute or National Strategic Studieshelps national security decisionmakers and their stas un-derstand emerging impacts o technology and integratethem eectively into policies through research, teaching,and outreach. CTNSP supports the Department o Deenseleadership and Congress while also encouraging whole-o-government and public-private collaboration.

The Deense Horizons series presents original researchby members o NDU as well as other scholars andspecialists in national security aairs rom the UnitedStates and abroad. The opinions, conclusions, and recom-mendations expressed or implied within are those o thecontributors and do not necessarily refect the views o theDeense Department or any other agency o the FederalGovernment. Visit NDU Press online at www.ndupress.edu.

Linton Wells IIDirectorCTNSP

Hans BinnendijkDirector

INSS

InstItute for natIonal strategIc studIes


11/12


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