Booz Allen Hamilton, Virginia-based IT consulting firm focused on defense, today announced the launch of Booz Allen Ventures, a corporate venture arm that will initially invest $100 million in “strategic” defensive and offensive technologies. The move is indicative of Booz Allen’s desire to form startups in areas it considers related to its core business, primarily in artificial intelligence and machine learning, defense and cybersecurity.
Brian McCarthy, Booz Allen’s vice president of venture capital, said the new fund will invest primarily in early-stage companies (seed, Series A and Series B) and will build on Booz Allen’s existing Tech Scouting program, which connects entrepreneurs with to test new security systems. technology. Through Tech Scouting Booz, Allen has recently supported firms such as covert AI, whose technology compresses AI models; Synthetaic, a data generation platform; and Reveal Technology, which performs aerial imagery analytics.
McCarthy specified that, in addition to capital, companies backed by Booz Allen Ventures will have access to Booz Allen’s executive and engineering teams, as well as client teams. Participants will also receive “strategic” support in the form of potential contracts with Booz Allen clients.
“Our Tech Scouting program gives us a unique insight into where opportunities for rapid growth exist. But it’s not enough to anticipate the opportunity — we need to raise capital to move at the speed of digital technology,” said Brian McCarthy, vice president of technology scouting and venture capital at Booz Allen. “Booz Allen Ventures enables us to proactively bridge the opportunity-to-opportunity gap and accelerate the transformation of services into solutions.”
Outside funds like Shield Capital, which has ties to the Department of Defense, traditional venture capital firms are often reluctant to invest in defense-focused startups, given both the ethical implications and the long road to profitability. (In the USA it usually it takes at least 18 months of planning before a government contractor wins its first contract.) Corporate-backed programs provide an alternative – Booz Allen Ventures joins Lockheed Martin Ventures and HorizonX, which spun off from Boeing in August 2021.
Defense-focused startups trying to win government contracts need all the help they can get. With the exception of rashes such as Anduril as well as Palantirmost contracts concluded with actors — more than 95% of Booz Allen’s nearly $8 billion in revenue comes from government contracts — and any startup that steps in the door must bridge the gap between the R&D stage and the award of a contract.
But even founders looking to ingratiate themselves with the defense industry are sometimes reluctant to accept funding from corporate divisions. They point to onerous terms and commercial arrangements that attempt to protect exclusivity or future direct purchase options for their startup’s technology.
Perhaps because of these concerns, defense-focused corporate funds have invested relatively little capital over the years. Lockheed Martin Ventures, for example, has committed to investing only about $200 million in startups since 2007. As of 2020, HorizonX, founded in 2017, has made just 25 investments — all under $10 million.
Booz Allen Ventures will be required to show that it is not seeking to redeem or take over startups for the benefit of its corporate parent.
Credit: techcrunch.com /