The Pentagon Reboots Its Silicon Valley Outpost

  • Even its wireless connection took time to get switched on
  • Tech tourism by Washington VIPs not respected in the valley

One of Washington’s biggest and most ponderous bureaucracies reaches out to do business with Silicon Valley’s agile and impatient entrepreneurs. What could go wrong?

Ash Carter

Photographer: Carolyn Kaster, Pool via Getty Images

Plenty, based on the initial struggles of the Defense Innovation Unit (Experimental), or DIUx, the California technology outpost that’s a pet project of Defense Secretary Ash Carter. Only three of 20 projects in its pipeline were put under contract in its first eight months, an eternity in a region where a successful venture capital pitch can generate almost instant funding.

"The people who do procurement and acquisition in general at the Pentagon want to follow processes that take all the risk out of it,” said Herbert Lin, a cyber research fellow at Stanford University whose colleagues and friends have dealt with the office intended to help the military better tap into technology innovation. “The whole point of Silicon Valley is to be risky."

DIUx was so hobbled by the Pentagon’s red tape and cautious decision-making that Carter staged an intervention last month. He replaced its director, brought the California office under his personal control and added a second location in Boston.

‘Launching DIUx 2.0’

“We’re taking a page straight from the Silicon Valley playbook,” Carter said in a visit to the project’s headquarters on the grounds of Moffett Federal Airfield in Mountain View. “We’re launching DIUx 2.0.”

While the unit was billed as the Defense Department’s version of a flexible startup, that proved an oxymoron at least initially.

"It took them a while to get organized, to get funding, support, to get office space," said Andrew Hunter, a senior fellow at the Center for Strategic and International Studies in Washington.

Even the office’s wireless internet connection took time to get switched on, added Ben FitzGerald, a senior fellow at the Center for a New American Security, who previously worked as an executive for technology companies with defense contracts.

Snowden, Encryption

The new office also had to face ingrained skepticism among some technology executives.

While Department of Defense funding helped create the internet and GPS navigation, the national security establishment is viewed with suspicion in light of Edward Snowden’s disclosure of secret surveillance by the National Security Agency and the FBI’s current fight with Apple Inc. and other technology companies over encrypted data.

"Not everyone in Silicon Valley is going to want to do business with DoD," Hunter, a former Pentagon acquisition official, said in an interview. "But for those who were interested and were intrigued and said, ‘I’m willing to come talk to you, and I’m willing to listen,’ the prospect that we’re going to keep talking here, and there may not be an actual contract in play for another year or two -- that just didn’t translate to Silicon Valley-speak."

Though Carter has credibility among the academically accomplished denizens of Silicon Valley because he holds a Ph.D. in theoretical physics, he followed a long line of visiting military brass whose “tech tourism” was scoffed at by the locals.

The generals would tour "Facebook, Google, Palantir and then call it a day," with no follow-up on how interested companies could close a deal with the government, said Jackie Space, a former Air Force officer who’s now a partner at BMNT Partners, a technology incubator that focuses on national security. "After a while this whole Silicon Valley tourism got to be a problem, because these companies felt that it was just a waste of time."

Funding Pipeline

Carter said last month that DIUx had made contact with more than 500 entrepreneurs and companies and created a "funding pipeline for nearly two dozen technology projects.”

Major Roger Cabiness, a Defense Department spokesman, said in an e-mail that the office had “identified approximately 20 projects in the pipeline for potential service funding, with three projects already on contract and 17 projects at various levels of negotiation with different agencies/entities.”

Bob Goodson

Photographer: Ryan Anson/Bloomberg

Some veterans of the Pentagon’s bureaucracy say DIUx has made a difference already. Bob Goodson waited a year for the Pentagon to complete each of its first three contracts with the data-mining and visualization company he co-founded. This year, Goodson’s company, Quid, pitched a proposal to DIUx in March, and the Air Force was using its analysis software by May.

"Going through DIUx has been dramatically faster than we have experienced in the past," Goodson said in an interview. "One thing I found quite notable is how involved Secretary Carter has been.”

In rebooting DIUx, Carter replaced its first director with Raj Shah, a former F-16 pilot and combat veteran who headed a technology startup, and brought in Isaac Taylor, who had worked at Google on research projects including Google Glass and self-driving cars.

‘Different Mindset’

Technology companies will be more inclined to work with DIUx because Shah has a “better understanding of the mechanics of Silicon Valley” and its entrepreneurial spirit, said Patrick Flynn, director of homeland security and national security programs for Intel Corp.’s Intel Security.

Carter’s willingness to announce that DIUx needed a reboot also resonated with technology entrepreneurs, according to Lin, the Stanford professor who is a former staff scientist for the House Armed Services Committee.

“In Silicon Valley, the first time you do anything, you expect stuff to go wrong,” Lin said. “Washington punishes ‘failure.’ In Silicon Valley they won’t hire you unless you failed before. It’s a very different mindset."

In its early months, the unit had to scrounge for funds from the military services, according to Sonny Sinha, a former Department of Homeland Security official who runs a public affairs firm and coordinated meetings for DIUx at its request.

"When they successfully vetted an innovative capability and it was time to get the paperwork started, they had a hard time trying to shake loose funding from the services, because they didn’t have their own pots," he said.

Lawmakers’ Opposition

Carter said last month that the Defense Department is requesting $30 million in new funding for fiscal 2017 to "direct towards non-traditional companies with emerging commercially based technologies that meet our military’s needs."

Still, funding to deliver on DIUx’s potential remains in question. Key lawmakers evidently don’t share Carter’s enthusiasm for it: The House-passed version of the annual defense policy bill, HR 4909, would eliminate that money.

Now, the retooled innovation office may have only months to prove itself -- in Washington and in Silicon Valley -- before the next president takes office and Carter, its champion, is replaced.

“They need to show that that’s worth keeping in that form so that they have enough institutional strength to continue on their own after the secretary leaves,” FitzGerald said.

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