Booz Allen Hamilton [BAH] on Wednesday launched a $100 million venture capital fund that will invest in early-stage companies with strategic dual-use commercial technologies that can benefit the company’s customers in artificial intelligence and machine learning (AI/ML), cybersecurity, certain areas of defense, and deep technology such 5G.
Booz Allen Ventures has already made three investments, all previously disclosed, to serve as pilots and to learn some early lessons to build into the capital arm going forward, Brian MacCarthy, vice president of tech scouting and ventures at Booz Allen, told Defense Daily
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The prior investments stretch back a year, beginning with Latent AI, a start-up that enables AI/ML and data compression at the tactical edge, followed by Synthetaic, another AI company with technology that rapidly automates data labeling, and lastly in Reveal Technology, which brings visual analytics and AI also to the tactical edge.
MacCarthy said to expect four to six investments per year, with the year one focus in defense technology, AI/ML, cyber defense and deep technology. Eventually, Booz Allen Ventures may expand its investments to other areas that could help Booz Allen such as healthcare and space, he said.
The defense focus area includes things such as C5ISR and Joint All Domain Command and Control. In the area of AI/ML, MacCarthy said that Booz Allen wants to remain on the “front lines of introducing cutting edge tech to our public sector clients.”
Deep technology includes areas such as 5G, human performance, augmented and virtual reality, and quantum, MacCarthy said. Given that Booz Allen is “one of the largest cyber defense companies in the world,” the capital arm will invest in anything related to cyber defense, he said.
With the investments, Booz Allen expects that it will be able to bring new, cutting-edge capabilities into its contracts and then “downrange” with its customers and warfighters, MacCarthy said.
The investments in these areas will “keep us hyper concentrated, hyper focused on the areas we feel are right for Booz Allen and also what we’ve heard from clients as major investment areas that they care about ingesting dual use tech,” he said.
The ventures “thesis” also has a greater goal of ultimately helping in key mission areas of the defense and national security customers, even if the company’s competitors are able to benefit from partnering with a technology firm that Booz Allen Ventures invests in, he said.
“And really, we’ve kind of heard, particularly with the National Security Commission on Artificial Intelligence report last year, a direct call to action to invest in these dual use capabilities in specific mission areas for our clients,” MacCarthy said. This message has also been delivered by the government and Congress, he said.
The AI commission in its report called for an “integrated national strategy to reorganize the government, reorient the nation, and rally our closest allies and partners to defend and compete in the coming era of AI-accelerated competition and conflict.”
“We want these companies to succeed,” MacCarthy said, adding later that this “is a big response from Booz Allen on how we are not only saying, ‘We’re going to help our clients,’ but also putting a large allocation to say, ‘We’re investing for the long term here.’”
With the new capital arm, Booz Allen joins other defense contractors such as Lockheed Martin [LMT] and Raytheon Technologies [RTX] with similar efforts. Boeing [BA] had a venture arm but shifted it to a strategic partnership with a private equity firm. General Dynamics [GD] and Northrop Grumman [NOC] make similar investments with start-ups and technology companies.
Booz Allen isn’t disclosing the value of its various ventures’ investments but MacCarthy said they will be in the typical Series A to Series B seed funding, which would be in the “low six to medium seven figures.”
MacCarthy wants the new capital fund to remain “evergreen,” so that it can keep investing.
“I can see a scenario in which the first half of that money will be to build a portfolio of 20 to 30 companies and the second half of that money will be to continue to invest in their later rounds,” he said.
In addition to Booz Allen Ventures, MacCarthy continues to lead the company’s Tech Scouting effort, which was begun in 2015 to “hunt, scout and vet” about 1,000 companies annually under customer contracts and for Booz Allen’s own research and development purposes, he said. Tech Scouting doesn’t make investments, he said.
Tech Scouting generates “a lot of lessons learned” and also provides “intellectual capital” to inform Booz Allen Ventures, he said.