By Doug Cameron
The Pentagon plans to open its first office in Silicon Valley
and provide venture capital in an effort to tap commercial
technology that can be used to develop more advanced weapons and
intelligence systems.
Pentagon officials said the twin moves are part of a broader
effort by the defense department to field technology more quickly
and cheaply amid concerns that potential adversaries such as China
are closing the gap or surpassing U.S. capabilities.
However, the Pentagon's push faces resistance from technology
companies and the venture-capital community, which has long been
wary of becoming ensnared in the department's bureaucracy and
uncertain budget outlook.
Defense Secretary Ash Carter is scheduled to unveil the plans in
a speech at Stanford University on Thursday that will also discuss
a new Pentagon strategy for cyberwarfare. The three-day visit to
Silicon Valley will include meetings with technology executives
such as Facebook Inc. Chief Operating Officer Sheryl Sandberg, as
well as a venture-capital round table hosted by Andreessen
Horowitz, according to a senior Pentagon official.
Hundreds of firms ranging from auto makers to banks and consumer
product firms have set up offices in the Bay Area in an effort to
boost their access to the best technology.
"The only folks that don't have that presence are the
government," said Peter Newell, a former Army procurement officer
who's now managing partner at BMNT Partners, a Palo Alto,
Calif.-based venture-capital firm that is one of the few in the Bay
Area focused on defense work. "I'm surprised it's taken them so
long to have this epiphany."
The Pentagon's planned office in Moffett Field is expected to be
up and running in a month, with around 15 staffers drawn from
active-duty military and reservists. The Department of Homeland
Security also plans an office in the area, it said this week, and
Mr. Newell said two other government agencies had talked with him
about similar moves.
The Defense Department had a significant role in Silicon
Valley's emergence as a global technology center during the 1970s,
funding advances in microprocessing that were used to build
precision weapons, and then applied to develop mass-market
computing.
Now, the department is turning to commercial firms for
advancements in 3-D printing, robotics, and using big data to mine
intelligence.
Frank Kendall, the Pentagon's acquisition chief, told reporters
last week that he's focused on attracting bids from companies that
currently don't vie for government work. He said the department
needs to do a better at accessing and using commercial
technologies. "Our potential adversaries are already doing so," he
said.
With many venture-capital firms avoiding investments in firms
tied to government business, Mr. Carter will announce plans for the
Defense Department to create its own funding vehicle.
The department plans to use In-Q-Tel, a venture-capital firm set
up by the U.S. intelligence agencies in 1999, as the conduit. It
will provide a small amount of seed capital during a one-year pilot
program with the firm, whose past investments have included Keyhole
Inc., which later provided the core technology for Google
Earth.
The Pentagon has toyed in the past with small-scale venture
capital initiatives. The Army set up OnPoint Technologies in 2002,
but its investments were limited to energy-related technologies.
The Defense Venture Catalyst Initiative was created in 2005 as a
loose-knit advisory group of financiers looked to tap technology
for the military, but budget pressures have since curtailed its
activity.
People pushing the Pentagon to become more innovative said it
needs to offer commercial firms a route to use technology for both
commercial and military purposes, expanding the potential
marketplace.
It may also require major change at the Pentagon. "There's a
'fear of failure' culture," said Ben Kohlmann, a former Navy
aviator who set up the Defense Entrepreneurs Forum. The network of
junior officers generated and pushed innovative ideas, including
the use of swarms of small drones to airlift supplies into hostile
areas.
The pursuit of solutions to big problems--that might generate
big financial returns for financial backers--is ingrained in the
nation's tech community. "It has to be done in the manner that the
Valley does business," Mr. Newell said of the Pentagon's
initiative. "They're going to have to learn to expect some
failures."
While Mr. Kendall and other Pentagon leaders have pledged to
reduce bureaucracy and trim other impediments such as ownership of
intellectual property, there are concerns this could take too long
to lure Silicon Valley.
"I don't think they have a plan. It's a structural problem [at
the Pentagon]," said one executive with close ties to the
department.
Write to Doug Cameron at doug.cameron@wsj.com
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