In 2015, Silicon Valley venture firm founder Robert Ackerman was helping the founders of Maryland startup Onyara to prepare for a fundraising round that would allow them to mine the commercial potential of advanced data processing technology developed at the National Security Agency.
“I just found my next billion-dollar idea,” Ackerman says he was thinking at the time.
But then, Santa Clara, CA-based data management software company Hortonworks (NASDAQ: [[ticker:HDP]]) swept in and offered to buy Onyara for “north of $40 million,” Ackerman recalls. And his venture firm, Allegis Capital, missed the chance to lead the Series A fundraising round for a company that might have yielded a much bigger payoff for both founders and investors, Ackerman says.
He realized that founders like Onyara’s—new entrepreneurs coming out of East Coast government intelligence labs—needed more support than a venture firm usually provides. Rather than tackle all the steps ahead for Onyara as a startup, its founders accepted the instant Hortonworks payout, he says.
“If we could have filled that void, we could have taken that company much further,” Ackerman says.
It was one of the pivotal experiences that led Ackerman to co-found a new “startup studio” called DataTribe, whose formation was announced publicly this week. DataTribe aims to find promising technologies developed from government research; form companies to license the technologies; and enlist former government engineers as executives or tech experts.
Such engineers are plentiful in the Washington, DC, Beltway area, where they work on cutting-edge government-funded projects in cybersecurity, big data, and data analytics for defense agencies. But they often lack the entrepreneurial experience to get a startup launched and funded, Ackerman says. And they’re far from Silicon Valley’s ecosystem of incubators, venture firms, experienced product rollout managers, and universities that foster entrepreneurship.
Ackerman co-founded DataTribe with former CIA information technology officer Steve Witt, who was Onyara’s CEO, and Mike Janke, a former Navy SEAL who was CEO of Silent Circle, a secure communications service he founded. DataTribe has attracted financial backing from consulting and audit firm Deloitte; Yahoo Japan, a site that combines search, news and e-commerce features; and other unnamed financial investors. Deloitte and Yahoo Japan are the kinds of strategic partners that could become customers or distribution channels for the products created by DataTribe’s startups, Ackerman says. (Verizon, which announced this week it will buy the core business of Sunnyvale, CA-based Yahoo, will not acquire Yahoo’s stake in Yahoo Japan. That stake will be held by an investment company created from Yahoo’s remaining assets.)
DataTribe isn’t alone as it sets up as a feeder system to funnel ideas and experts from government intelligence agencies into the private market.
At Tel Aviv, Israel-based Team8, three co-founders who are former security experts with the Israeli Defense Forces’ Technology & Intelligence Unit 8200 (described as Israel’s NSA) are tapping their networks to form cybersecurity startups. Team8 invested $5 million in Tel Aviv-based startup Illusive Networks, which closed a $25 million Series B fundraising round in May, backed by investors including Eric Schmidt’s Innovation Endeavors, New Enterprise Associates (NEA), Bessemer Venture Partners, and Cisco Investments.
A new cybersecurity startup incubator, Build Sec Foundry, sprung up last month in San Antonio, Texas, to help ex-military members become new cybersecurity entrepreneurs. San Antonio is home to the Texas branch of the NSA; the FBI’s Cyber Division; and dozens of defense contractors and security companies.
Ackerman says DataTribe won’t confine its reach to U.S. government technology and domestic founding teams, but will look at opportunities in the United Kingdom and other nations.
Ackerman declined to say how much money DataTribe has raised, but says it will have an “appreciable operating budget.”
In February, DataTribe quietly moved into its headquarters in Fulton, MD, near the National Security Agency’s headquarters at Fort Meade, MD, and the I-95 corridor that leads south toward Washington. Its co-headquarters is at Palo Alto, CA-based Allegis Capital, which is a strategic partner of DataTribe’s and a likely investor in the startups it creates. The idea is to connect the technology being generated by government agencies with Silicon Valley expertise and access to capital, Ackerman says.
DataTribe is already working toward the close of its first startup investment: the Maryland company, Dragos, was founded by former NSA intelligence officers to provide cybersecurity for industrial control systems.
Rather than a fund, DataTribe is an “operating company” that will build startups, recruit their executives, and support them with as much as $1.5 million in seed funding, Ackerman says. The plan is to create two to three startups a year, keep them in-house for nine months to a year, and get them ready for a Series A fundraising round. DataTribe would retain significant equity stakes in the companies—a percent that would vary with each startup.
Witt leads an operating team that will consist of about seven or eight full-time members working in either Maryland or California, Ackerman says. DataTribe will also tap into a “brain trust” of
