WASHINGTON — Booz Allen Hamilton, one of the 10 largest U.S. defense contractors, launched a $100 million venture capital fund to invest in fledgling companies creating promising new technology.
The fund announced Wednesday, dubbed Booz Allen Ventures, will concentrate on bankrolling early-stage firms working on cutting-edge technology, and help them find ways to get those innovations into the field for use.
Brian MacCarthy, vice president of tech scouting and ventures at Booz Allen, said in a Monday interview that the fund plans to invest in four to six firms per year, providing seed money ranging from hundreds of thousands to low millions of dollars.
MacCarthy said there is a growing understanding in the defense world that more must be done to open funding streams for firms working on new capabilities such as artificial intelligence, which could in turn help Booz Allen’s government clients. He pointed to the National Security Commission on Artificial Intelligence’s 2021 final report, which recommended major new investments in AI research and development, as an example of the emerging consensus around this need.
“If we can find these capabilities and technologies, how can we be startup friendly?” MacCarthy said. “How can we be founder friendly and help get these critical technologies into the public sector?”
MacCarthy said the fund will first invest in firms concentrating on four core areas: artificial intelligence and machine learning; cybersecurity; so-called deep technology; and C5ISR, or command, control, communications, computers, cyber, intelligence, surveillance and reconnaissance.
Deep technology includes 5G, or fifth-generation network technology; augmented and virtual reality systems; and human performance technology to improve productivity and competence, MacCarthy explained.
The fund, which could invest in companies working on other technologies in subsequent years, keys off Booz Allen’s 7-year-old technical scouting division, MacCarthy said, which he headed for the last five years. This scouting program gave the company a window into where potential opportunities for considerable growth might be in emerging markets, he added.
But the company also needs to provide capital funding “at digital speed,” he said in the release announcing the effort.
“Booz Allen Ventures allows us to actively bridge the gap between opportunity and capability and accelerate the services-to-solutions transformation,” he added. “As a strategic investor at the intersection of technology and mission, we are uniquely positioned to lead, connect and convene advanced tech solutions to drive change in government, faster than ever before.”
In what MacCarthy described as “trial deals” for this fund, Booz Allen last year invested in AI and machine learning firm Latent AI, and this spring followed up with investments in two more AI companies: Synthetaic and Reveal Technology.
When deciding which companies to fund, Booz Allen Ventures will primarily consider how their capabilities and technologies could benefit Booz Allen’s own R&D processes and technical advancements. Booz Allen will also consider its own clients’ technological needs by identifying customers’ gaps that could be fixed by the startup firms.
While Booz Allen plans to fund early-stage companies, MacCarthy said, it also wants them to have at least some technologies out of the lab and in the field to demonstrate their utility. Technologies that are several years from hitting the field, such as electric vertical-takeoff-and-landing aircraft, are “just too capital intensive and not the right strategic fit for us,” he said.
Booz Allen hopes this will be an evergreen fund, and that revenues generated by the companies it invests in will fund future investments.
“This problem is certainly not going away, in getting critical and emerging technologies to the forefront,” MacCarthy said.
About StephenLosey
Stephen Losey is the air warfare reporter for Defense News. He previously covered leadership and personnel issues at Air Force Times, and the Pentagon, special operations and air warfare at Military.com. He has traveled to the Middle East to cover U.S. Air Force operations.
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