Inside the Secret Affair Between Silicon Valley and the Pentagon

Silicon Valley is often praised as an exemplary model for private sector innovation. But this characterization can ignore an important element of startup work, namely Silicon Valley's relatively under-the-radar relationship with Washington.

It turns out the private sector's prized center for entrepreneurship has a close and expanding relationship with the government defense community. The Pentagon has long turned America's brightest technology minds in Silicon Valley in order to help develop data and security systems to fend off digital threats developing in the 21st Century. But the relationship is not, in fact, one-sided. Just as defense professionals are turning more and more to California's startup hub, Silicon Valley has also turned to the government to recruit intelligence experts to contribute to private sector innovation after they leave Washington. 

This surprisingly symbiotic relationship between the Pentagon and the technology industry developed quickly as the increasing threat of cyber attacks expanded demand for innovations in data management and online security. With increasing demand from government officials to better protect America's cyber systems, more and more money has poured into Silicon Valley to help contribute to the country's digital innovations. The Department of Defense spent a whopping $40 billion in overall IT spending last year, a significant chunk of it toward private technology contractors. According to the National Venture Capital Association, overall venture funding for digital security startups in Silicon Valley has more than doubled in only a few years.

But the relationship between defense programs and the startup world is not simply defined along financial lines. Much of the under-the-radar aspects of Washington's ties with Silicon Valley relate to a symbiotic exchange of personnel taking place more and more between professionals involved in these sectors.

These industry ties gained some high profile exposure, for example, when Max Kelly, the former Chief Security Officer for Facebook, left the social media company in 2010 to work for the U.S. National Security Agency. Kelly's swift move to government raised some eyebrows at the time, as most of the startup world's stars were expected to remain within the hallowed halls of Silicon Valley's major startups.

But just as Washington has turned to Silicon Valley to help finance cyber security innovations and recruit experts, Silicon Valley has also turned to Washington to identify new players to contribute to private sector work on data security. A number of prominent Department of Defense and intelligence professionals have even left Washington on their own accord to join or start technology start-ups specializing in data and security systems.

Jay Kaplan and Mark Kuhr, for example, are two former NSA counter-terrorism operatives who met at the government agency, and leveraged their Washington expertise after four years of government work to head to Silicon Valley. Soonafter leaving the NSA, the pair raised $1.5 million in seed money to start Synack, a growing startup that works to vet for security vulnerabilities.

Kaplan and Kuhr are just two examples of many former intelligence officials making the shift to Silicon Valley. Matthew Howard, a former Navy intelligence analyst, now works as a managing partner at Silicon Valley growth equity investment firm, Norwest Venture Partners. He recently told the New York Times that his relationship with Silicon Valley as a former intelligence official is not uncommon. Military and intelligence professionals have, "unique insights," he explained, because they've been on the front lines of security crises. But he admitted the relationship can be tenuous. “"Now they'’ve got commercial desires," he added about his colleagues, admitting, "The lines are blurring.”"

Marc Rotenberg, Executive Director at Washington's public interest research firm Electronic Privacy Information Center, has criticized this relationship between Washingtonians and Silicon Valley as lacking transparency. The close relationship can, he says, be both beneficial and dangerous,:"Sometimes in ways that fund further innovation and other times in ways that might be very troubling to many people.”" He added, “"Both sides like to maintain a myth of distant relations. The ties have been in place for a long time."