When the U.S. military and the intelligence community need new technology, whether it's smart batteries or ultrasensitive chemical sensors, often no company produces it and none is willing to try because the limited market and risky research and development likely will make the venture unprofitable.
To fill the gap in private investment, the government runs three venture capital operations to spur the development of cutting-edge technology.
The CIA's In-Q-Tel, for example, has funded the development of software that instantly translates Arabic into English and combs through the vast amounts of data U.S. intelligence agencies vacuum hourly from cyberspace.
Meanwhile, the Army's OnPoint Technologies is investing in companies that develop new power sources such as fuel cells and microturbines, as well as semiconductors, superconducters, conducting polymers and other mobile power technologies.
The Pentagon's entity, the Defense Venture Catalyst Initiative, works to link cutting-edge firms with potential customers instead of investing directly in high-tech companies.
Together, the three venture capital organizations have focused attention on a lot of new and potentially valuable technology that otherwise would have been overlooked, said Andrew Mara, a science and technology policy fellow at the National Defense University's Center for Technology and National Security Policy.
But with relatively simple measures, they could do more, he said in a recently published paper.
For example, by setting up a searchable database of projects they have reviewed, the three venture capital entities could greatly increase awareness of novel technologies.
As they operate today, few outside their own organizations are aware of other federal investments in developmental technologies, Mara said. In-Q-Tel, for example, has reviewed more than 7,500 technology proposals. "One can easily imagine a scenario where a technology field test may not fit the CIA's needs but is well-suited for a Navy project," he said.
Company privacy and confidentiality matters would have to be overcome and operating a database "will likely require additional effort and manpower," but the potential payoff is more high-tech ideas might be turned into useful technology.
Integrating technology from venture capital funded projects into usable products presents another set of difficulties.
In the corporate world, Mara found that "managers of existing research and development programs were very skeptical of products that 'were not invented here,' and did not want to assume the additional risk of attempting to integrate a new unknown technology."
Sometimes "the easiest way to integrate new technology was to acquire" the company that invented it, he said. In other instances, companies "borrow" R&D managers from the high-tech firms to oversee integration of the new technology by companies that will commercialize it.
While it's not feasible for the government to buy high-tech innovators, federal agencies could send their project managers to high-tech firms to work on projects in which they're investing and then return to their home agencies to help integrate the new technology into government programs, Mara said.
Another step to improve the effectiveness of government venture capital entities would be to write clearer instructions for using the federal procurement and acquisition processes. Small, venture-backed companies often have a hard time navigating through the current complexities, he said.