Booz Allen Hamilton launches $100M corporate venture arm focused on early-stage startups

The Virginia-based, defense-focused IT consulting firm announced the launch of a corporate venture capital arm that will initially put $100 million toward "strategic" defensive and offensive technologies. The move shows that Booz Allen wants to shape startup in areas that are aligned with its core business.

According to Brian MacCarthy, the new fund will invest in early-stage companies and build on the existing Tech Scouting program. Through Tech Scouting, Booz Allen has supported firms such as Latent Artificial Intelligence, which uses artificial intelligence, and Synthetaic, a data- generating platform.

In addition to capital, the companies that are backed by Booz Allen will have access to the company's executive and engineering teams. Potential contracts with Booz Allen customers will be given to participants.

The Tech Scouting program gives us an idea of where opportunities exist. Brian MacCarthy is the vice president of tech scouting and ventures at Booz Allen. Booz Allen is able to bridge the gap between opportunity and capability.

Even though Shield Capital has Defense Department connections, traditional venture firms are hesitant to invest in defense-oriented startups. It takes at least 18 months of planning for a government contractor to win a contract in the U.S. It is possible to find corporate-backed programs that are not backed by Boeing.

They need all the help they can get. Most contracts are awarded to incumbents and any startup that gets a foot in the door has to bridge the gap between the R&D phase

Even if they are willing to ingratiate themselves with the defense industry, sometimes they are reluctant to accept funding from corporations. There are terms and conditions that try to protect future options to buy their startup's technology

Defense-focused corporate funds have invested little capital over the years. Since 2007, only around $200 million has been pledged by the venture capital arm of the company. Only 25 investments were made by the company as of 2020.

To show that it isn't looking to snuff out or absorb startup for the benefit of its corporate parent, it'll be incumbent on Booz Allen to show that.