From GPS to the Internet, some of the most impactful technologies of the last century were driven by U.S. military investments. Department of Defense leaders want to continue that tradition, but fear that the military could be missing out on the latest innovations inside of high-tech startups because it doesn’t work with them as closely as it could.
A new Boston-based accelerator program run by Techstars in partnership with the U.S. Air Force seeks to strengthen the relationship between the military and the startup community, says Warren Katz, the managing director of the new program. Katz is a local investor and entrepreneur who co-founded and led MÄK Technologies for 22 years, a company that sold simulation software to the military.
The new Techstars program, announced earlier this month, will invest in and provide other resources to early-stage companies developing autonomous technologies that have applications in defense and the private sector, such as sensors, processors, and security software for drones.
“The DoD in general is discovering innovations going on [within] startups far outstrip innovation going on in their classic defense contractors,” Katz says.
The program—Techstars’ second in Boston—is notable because it signals the U.S. military is experimenting with different ways of nurturing and tapping into the latest technologies. Another example is the “Cyber Proving Ground” developed by an Air Force unit in San Antonio, TX, to test security technologies from outside of its usual group of contractors.
It’s also a reminder of the current startup zeitgeist. Big companies and government entities are trying to show that they’re startup-friendly, while attempting to shake their reputations as entrenched, slow-moving organizations.
Techstars, one of the best-known startup accelerators, began in Boulder, CO, in 2006. Its main Boston program, founded in 2009, was its second location. Today, Techstars offers a full range of entrepreneurship and investment programs, with accelerators around the world focused on a wide range of technologies, primarily in software—but also in a variety of large industry verticals, such as energy and mobility.
In recent years, Techstars has formed partnerships with other organizations to create accelerators geared toward specific technologies. For example, it created a Seattle-based accelerator that invests in voice-powered technologies in partnership with Amazon’s Alexa Fund. There’s also a healthcare-focused Techstars program in Los Angeles in partnership with Cedars-Sinai, a nonprofit academic medical center.
Some of these tailored programs have not panned out. Techstars closed its San Antonio-based cloud computing accelerator last year. And after two years of helping run an L.A. accelerator sponsored by Disney, the entertainment and media giant parted ways with Techstars last year and is continuing to run the program on its own.
Now, we’ll see what Techstars and the Air Force can do. It’s the second defense-focused accelerator Techstars has launched. The other, located in Australia, is run in partnership with Boeing and other private defense contractors.
Many advanced technologies originate in university research labs, often funded at least partly through military or other government funding. A lot of the promising technologies get spun out of the lab in the form of startup companies. The problem for the military is many startups choose not to work with private defense contractors or try to sell products or services directly to the military “because of all the bureaucracy,” Katz argues. “There’s this loss or leakage” of technologies that the military has struggled to access, he adds.
With the Techstars program, the Air Force aims to “engage with startups” more on their terms, Katz says. That means providing mentorship and subject matter expertise, and helping to facilitate connections between entrepreneurs and the military officials that make purchasing decisions. The Air Force’s involvement is part of a push to make it easier for startups to sell products to the military, such as shortening and reducing the complexity of the evaluation process, he says.
“The DoD has finally admitted that they have to change their buying practices in order to appeal to startup companies,” Katz says.
The Air Force is providing an undisclosed amount of money to fund the operations of the new program, but it’s not making equity investments in the companies that participate, Katz says. The investment money is coming from the Techstars venture fund. The terms will follow the standard Techstars model: companies receive $20,000 in exchange for a 6 percent stake, plus $100,000 in convertible debt financing, he says.
The program’s first three-month session will kick off in January. Katz is still searching for a physical space, but he’s targeting Boston’s Seaport neighborhood, home to a growing number of tech startups and support organizations, such as MassRobotics and MassChallenge.
The program will primarily back companies developing underlying technologies for drones, Katz says. He says that could include lightweight, low-cost sensors and processors; algorithms and artificial intelligence-related software that can boost drone performance; high-tech fabrics and other materials; 3D printing technologies; software for secure communications; power and propulsion systems; and blockchain technologies.
That last one is generating a lot of hype right now, and some believe it will have a significant impact on a wide range of sectors. For drones, Katz thinks blockchain technology could enable more trusted verification of a drone’s components, software upgrades, who has bought and sold it, where it’s been, and so on. Essentially, he says, it’s about confirming “the pedigree of the drone, which is going to be a problem real soon” as drones proliferate.
