Bridging the gap between government and Silicon Valley

DataTribe pairs up, invests in experts from public, private industry

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If you know where to look, there is a rich vein of ven­ture cap­i­tal look­ing to back inno­v­a­tive cyber­se­cu­ri­ty technologies.

One hot spot is the “Cyber Cor­ri­dor” around Wash­ing­ton, D.C., where ven­ture cap­i­tal­ists are look­ing to com­bine Sil­i­con Val­ley start­up know-how with cyber­se­cu­ri­ty advances com­ing out of the country’s mil­i­tary indus­tri­al complex.

Bob Ack­er­man, Allegis Cap­i­tal founder and Data­Tribe co-founder

When you hear the term ‘gov­ern­ment inno­va­tion,’ it sounds like an oxy­moron, except when you’re talk­ing about cyber­se­cu­ri­ty capa­bil­i­ties and data ana­lyt­ics,” says Bob Ack­er­man, founder of Allegis Cap­i­tal. “In those are­nas, gov­ern­ment is five to sev­en years ahead of pri­vate industry.”

Allegis is a backer of Data­Tribe, which seeks out gov­ern­ment experts with spe­cial secu­ri­ty know-how and pairs them with men­tors from the defense and intel­li­gence com­mu­ni­ties, as well as from the world of Sil­i­con Valley’s ven­ture capitalists.

Find­ing a niche

Rather than tak­ing the shot­gun approach of tra­di­tion­al start-up incu­ba­tors, Ack­er­man said Data­Tribe looks “down the road and antic­i­pates mar­ket needs and iden­ti­fies where appro­pri­ate and rel­e­vant tech­nol­o­gy has been devel­oped. We’ve cre­at­ed a water­ing hole for the deep tech­nol­o­gy thinkers.”

Ack­er­man co-found­ed Data­Tribe with for­mer CIA infor­ma­tion tech­nol­o­gy offi­cer Steve Witt, founder and for­mer CEO of Onyara, a data ana­lyt­ics firm that was acquired by Hor­ton­works in 2015, and Mike Janke, a for­mer Navy SEAL and founder and for­mer CEO of secure com­mu­ni­ca­tions ser­vice Silent Cir­cle.

Data­Tribe will invest between $1 mil­lion and $1.5 mil­lion in seed mon­ey and anoth­er $600,000 in oper­at­ing sup­port in the star­tups it backs, and up to an addi­tion­al $1.5 mil­lion in lat­er-stage, Series A fund­ing. The aver­age seed round cap­i­tal is usu­al­ly about $225,000, and a Sil­i­con Val­ley invest­ment is, on aver­age, about $1 mil­lion, Ack­er­man says.

DataTribe’s port­fo­lio includes:

Dra­gos, which was cre­at­ed by three for­mer U.S. intel­li­gence ana­lysts to devel­op soft­ware to pro­tect crit­i­cal, pri­vate­ly owned infra­struc­ture, such as the elec­tric grid. Dra­gos’ CEO was part of the response team to the 2016 attack on Ukraine’s pow­er cen­ters—the first con­firmed hack to dis­able a pow­er grid.

Enveil, which uses homo­mor­phic encryp­tion that allows the pro­cess­ing of data with­out ever decrypt­ing it. It was the run­ner-up among the 10 com­pa­nies that pre­sent­ed at RSA’s 2017 Inno­va­tion Sand­box in Feb­ru­ary. Enveil was launched by a team of doc­tor­ate-lev­el math­e­mati­cians and com­put­er sci­en­tists from the U.S intel­li­gence community.

Kesala, which draws on recent U.S intel­li­gence com­mu­ni­ty advance­ments to pro­vide VPN-lev­el secu­ri­ty through its cloud secu­ri­ty and data ana­lyt­ics software.

There’s some real­ly great stuff in gov­ern­ment labs, but there’s no com­mer­cial infra­struc­ture around it,” Ack­er­man says, “If we can find a way to bridge gov­ern­ment inno­va­tion with Sil­i­con Val­ley, we have a business.”

Anoth­er play­er active in the Cyber Cor­rid­er is MACH37, a Hern­don, Vir­ginia-based cyber­se­cu­ri­ty accelerator.

Tri­al by fire

Twice annu­al­ly, MACH37 com­pet­i­tive­ly selects eight start-ups will­ing to par­tic­i­pate in an intense 14-week pro­gram in which founders are men­tored and coached into cre­at­ing a sus­tain­able com­pa­ny. They inter­act with domain experts, suc­cess­ful secu­ri­ty entre­pre­neurs, buy­ers and cyber­se­cu­ri­ty investors.

The start-ups also receive a $50,000 invest­ment and access to men­tors through­out the life of their companies.

Rick Gor­don, MACH37 man­ag­ing partner

We help them define what the min­i­mum viable prod­uct needs to be, and what the back­log needs to be,” says MACH37 man­ag­ing part­ner Rick Gor­don. This is done before the focus shifts to the busi­ness mod­el, pric­ing, go-to-mar­ket strat­e­gy, and devel­op­ing a com­pelling propo­si­tion for seed investors.

MACH37 has grad­u­at­ed 40 start-ups in its three-year existence.

These start-ups include:

Vir­gil Secu­ri­ty, which devel­ops cryp­to­graph­ic soft­ware for devel­op­ers. It raised $4 mil­lion in Octo­ber, led by KEC Ven­tures, found­ed by Jeff Cit­ron, founder of inter­net tele­pho­ny com­pa­ny Von­age and oth­er tech­nol­o­gy companies.

Atom­i­corp, a cloud-based serv­er secu­ri­ty soft­ware devel­op­er, which has 2,000 cus­tomers in sec­tors includ­ing uni­ver­si­ties, con­sumer prod­ucts, med­ical devices and the U.S. gov­ern­ment. It raised $1 mil­lion in seed fund­ing late last year, led by Wash­ing­ton, D.C.-based VC Blu Ventures.

Cyber Algo­rithms, which devel­ops behav­ioral ana­lyt­ics that dra­mat­i­cal­ly reduce how long it takes to detect cyber attacks. It was acquired in Decem­ber by enter­prise pass­word man­age­ment provider Thy­cotic, whose 7,500-client ros­ter includes Chevron, Gap, Deloitte and Adobe.

Both Data­Tribe and MACH37 are work­ing dili­gent­ly to over­come geo­graph­ic and cul­tur­al hur­dles that tend to sep­a­rate the rigid world of gov­ern­ment con­tract­ing from the fast-mov­ing tech­nol­o­gy industry.

There’s this incred­i­ble dis­con­nect between this intel­lec­tu­al cap­i­tal base and the peo­ple who know how to scale a com­mer­cial soft­ware busi­ness,” Gor­don says. “We still have to work very hard to get insti­tu­tion­al ven­ture cap­i­tal to invest. You have to be involved, and it’s not easy to do from Palo Alto.”

More sto­ries relat­ed to VC invest­ing in cybersecurity:
Despite chang­ing land­scape, VC invest­ment in cyber­se­cu­ri­ty still strong
Tri­dent Cap­i­tal cre­ates $300 mil­lion fund to invest in cyber­se­cu­ri­ty innovation
Cyber­se­cu­ri­ty star­tups start to see slump in VC spending


Posted in Cybersecurity, Featured Story