Venture capitalists unite Pentagon with small companies

The Pentagon, in an effort to keep up with commercial technology, is relying on a group of venture capitalists to connect it with small companies that build products with potentially useful military applications.

Called the Defense Venture Catalyst Initiative — or DeVenCI — the program is convening later this month to give companies a chance to pitch energy-related technologies, such as those focused on greener data centers or more efficient wastewater treatment.

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Companies generally first pitch their offerings to the venture capitalist representatives, who then nominate a group to meet with Pentagon officials.

The initiative, which does not fund the development of products or technologies, was conceived as a way to help the Pentagon become more aware of what’s available commercially while helping small companies intimidated by government buying policies make inroads.

H. Lee Buchanan, formerly the Navy’s top acquisition official and now a venture partner at Paladin Capital Group, said the need was clear when he worked at the Pentagon.

“There was never any doubt that the military needed a new window into what was going on in the commercial community,” he said.

At Paladin, Buchanan focuses on “dual-use” companies, or companies that have commercial products that might also be of interest to the government.

“Our companies have found DeVenCI a great way to get introduced,” Buchanan said. “For these small companies, a large part of the problem is just breaking through that outer shell.”

Herndon-based Xceedium, which ensures organizations can safely provide third parties such as contractors or vendors access to their IT assets, found that the program helped it make inroads in the Pentagon.

The small company, which was selected to move forward in 2008, had a pilot deployment in a single Pentagon office. But after meeting with Defense Department officials through the DeVenCI program, the company soon added more of the department’s offices as customers and expanded into the Department of Homeland Security.

The Pentagon said 10 technologies identified through DeVenCI are now in use.

Roger Novak, founder of Novak Biddle Venture Partners, said the group is improving as it attracts a broader group of defense and intelligence agencies and more venture capitalists with experience working with the military.

Additionally, he said the program has become less parochial; Novak himself has referred companies backed by other venture capital firms.

As the government’s budget shrinks, Novak said he expects the program to be all the more relevant as a way to provide the Pentagon and the intelligence community with a means to find innovative products that could be purchased more cheaply.

“Agencies [are] coming in and saying, ‘Here are real problems we have that we need to solve,’ ” Novak said.