When the government is the client (some things to keep in mind) • TechCrunch

Five years ago, Google walked away from a Pentagon government contract because thousands of employees protested that its technology could be used for deadly drone targeting. Today, however, Silicon Valley has far fewer qualms developing technology for the US Department of Defense.

So said four investors – Trae Stephens of Founders Fund, Bilal Zuberi of Lux Capital, Raj Shah of Shield Capital and Steve Bowsher, longtime chairman of In-Q-Tel – at a conference event. boot for military veterans today in San Francisco. Says Shah of the change in attitude he has personally observed: “The number of companies, founders and entrepreneurs interested in broader national security – I’ve never seen it at this level.”

Bowsher argued that Silicon Valley’s “reluctance to work with the [Defense Department] and the Intel community” has always been “over the top,” adding that in his 16 years with In-Q-Tel, which is the CIA’s venture capital fund, his team has met around 1,000 companies every year. and only “five in 10 turned us down, saying they weren’t interested in working with the clients we represent.

We’ll have more on the TechCrunch+ panel, but we wanted to share parts of our conversation that focused on things to consider when selling to the US government, given that founders with commercial clients may think more and more trying to sell their products and applications to the US Army. (This is especially true for AI and cybersecurity and automation startups.)

We’ve talked with investors, for example, about mission drift, which is how a startup that starts working with the government can ensure that it doesn’t end up spending most of its time responding to government needs due to new demands – and ignoring earlier, commercial customers in the process.

Here, Trae Stephens – who also co-founded Anduril, a maker of autonomous weapons systems that has aggressively courted business from government agencies since its early days – said this kind of gradual shift in goals is “exactly what makes it difficult to do both [cater to civilian enterprises and the government] at an early stage.

He said that “many programs that [enable founders to] Doing early business with the Department of Defense requires some, like, DoD-ization of your product for this use case.

Although In-Q-Tel supported Anduril from the start, for which Stephens said he was grateful, he offered that many companies that receive government money, including through its Small Business program Innovation Research (SBIR), “end up building all these very specific workflow steps that take them away from the business activities needed to make ‘the business really work’. (Stephens also noted that very few teams can chase exclusively the military, as Anduril did, because it “takes so long to go into production with the DoD that you have to be able to raise, basically, an infinite amount of start-up dollars; otherwise, the business is going to die.”)

Along the same lines, we asked how so-called dual-use companies manage their intellectual property rights once they start selling to the government. For example, you can imagine a scenario where a technology helps the NSA identify certain types of people who make certain types of calls, and although there are commercial applications for that technology, the government does not want it be disclosed to adversaries. Is there a way to fix this in advance, we wondered?

Here, there was no easy answer other than: get the right help and do it as soon as possible.

Zuberi told a cautionary tale centered on one of Lux’s portfolio companies. Said Zuberi: “I have a company that received $100,000 [National Science Foundation] to agree. Two guys started it in my office. I didn’t think much about it; I thought it was good to have on their CV. Then they started doing a Series B raise, and one of [interested] companies exercise due diligence on other contracts [the team might] have, and there was a clause in that NSF grant that said, “Hey, if the government needs [what you’re building] , we can use it.’ So we had to wait six months to negotiate with [someone] to the NSF who didn’t care at all to get it back. I would have paid them double the amount of the grant just to have it gone, but they said ‘No you can’t do that, we can’t go back.’ So youcan encounter problems.

Again, we’ll have more on this discussion soon, including AI in military applications; we learned a lot — I hope you did too.