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Process and Criteria for Selecting Defense Venture Catalyst Initiative Consultants



                          Process an...
Process and Criteria for Selecting Defense Venture Catalyst Initiative Consultants



2.4 If Interested in Continuing, Rea...
Process and Criteria for Selecting Defense Venture Catalyst Initiative Consultants



3.3 Standards of Conduct
Additional ...
Process and Criteria for Selecting Defense Venture Catalyst Initiative Consultants



     •      Annual investment capaci...
Process and Criteria for Selecting Defense Venture Catalyst Initiative Consultants



4.6.2 Track Record of Successes
Idea...
Process and Criteria for Selecting Defense Venture Catalyst Initiative Consultants



4.7 Geographic Location
Since a broa...
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Process and Criteria for Selecting Defense Venture Catalyst ...

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Process and Criteria for Selecting Defense Venture Catalyst ...

  1. 1. Process and Criteria for Selecting Defense Venture Catalyst Initiative Consultants Process and Criteria for Selecting Defense Venture Catalyst Initiative Consultants 1. Purpose of this Document The use of Venture Capitalists (VCs) as consultants is the most distinctive feature of the Defense Venture Catalyst Initiative (DeVenCI). In the DeVenCI model, competitively selected VCs assist the Department of Defense (DoD) to evaluate leading-edge technologies, understand the dynamics and risks of small and emerging-technology businesses, and identify industry experts who can help the DoD use emerging technologies more effectively. The purpose of this document is to help interested VCs understand the application and competitive selection process for DeVenCI consultants. 2. Application Process VCs interested in becoming consultants should follow the process described below. 2.1 Complete the Consultant Application Form Complete and submit the consultant application form. This form is available on the DeVenCI web site at http://DeVenCI.dtic.mil/. 2.2 Wait for Results of Competitive Selection Applicants then undergo a competitive selection process, during which they may be asked to provide additional information or clarifications regarding their applications. Selected applicants will become affiliated with DeVenCI for two years. It is anticipated that notification of selection will be made within approximately one month following the solicitation close date. 2.3 Provide Additional and Confirmatory Information If selected, VCs must then provide additional and confirmatory information, as described below. • Complete the DoD Foreign Activities Questionnaire DD 2859. This questionnaire will be provided to selected VCs as part of their notification package. • Provide a complete listing of the companies in their firm’s portfolio. • If requested, provide additional information on past technology venture successes. • If a security clearance is deemed necessary (this is unusual), complete and submit an Electronic Personnel Security Questionnaire (EPSQ). Specific directions on this process will be provided to specifically designated individuals, when required. Defense Venture Catalyst Initiative (DeVenCI) –1– Timestamp: 0607201125
  2. 2. Process and Criteria for Selecting Defense Venture Catalyst Initiative Consultants 2.4 If Interested in Continuing, Reapply after Two Years A consultant term lasts two years. At the completion of that two years, a VC interested in continuing to support DeVenCI must reapply through a subsequent solicitation and again undergo the competitive selection process. 3. Preconditions to Which VCs Must Agree 3.1 Willingness to Perform Voluntary Work • Selected VCs must state in writing that they will voluntarily and gratuitously commit time and effort in support of DeVenCI activities. In general, the time required will be no more than a few days per calendar year. • Selected VCs must be willing to focus their efforts on: (1) participation in discussions about industry best practices and operations; (2) participation as needed in DeVenCI technology and concept workshops, such as meeting with DoD users to help understand needs and new technology opportunities; and (3) participation in special projects related to their specific areas of expertise, such as meetings related to their portfolio companies. • Selected VCs must render their services and expertise as individual consultants whose work and opinions will not be under the direct supervision of the DoD. • Selected VCs must be aware of, and acknowledge in writing, that their participation in DeVenCI does not in any way imply that they, their firms, their portfolio companies, or any other contacts that they have mediated will receive contracts from the DoD or any other federal agency for products or services. 3.2 Disclosure of Information Selected VCs must disclose the items listed below. • Membership in any of the various venture capital associations (e.g., National Venture Capital Association). • Existing or prior direct business or close personal relationships with senior DoD personnel. • Existing or prior indirect business relationships with companies, consortia, or boards of directors providing advice or products to the DoD. • Financial or other business relationships with emerging technology companies recommended to participate in DeVenCI sponsored activities Defense Venture Catalyst Initiative (DeVenCI) –2– Timestamp: 0607201125
  3. 3. Process and Criteria for Selecting Defense Venture Catalyst Initiative Consultants 3.3 Standards of Conduct Additional information on the required conduct of consultants can be found in the DeVenCI Standards of Conduct, which is available from the web site at http://DeVenCI.dtic.mil. 4. Assessment of Applicants Consultants will be selected based on a wide range of criteria that center around ensuring that the DoD will obtain timely, unbiased recommendations on DoD-relevant emerging technologies and technology companies. The final weighting of the various criteria will be determined by the selection committee, and may vary based on the relevant technology areas for which an applicant is being considered. 4.1 Preferred Types of Venture Capital Firms The first preference for selection is VCs who are members of private venture capital firms with no affiliation to a financial institution. The second preference is for VCs who are members of venture capital firms that are affiliates or subsidiaries of commercial banks, investment banks, or insurance companies that make investments on behalf of outside investors, or on behalf of clients of the parent firm. 4.2 Restrictions on Types of Venture Capital Firms An application will be rejected automatically if it is from a VC whose firm is a subsidiary of a non-financial industrial corporation and makes investments on behalf of the parent company. While these firms play a vital role in promoting emerging technologies, they are unsuitable sources for DeVenCI consultants because their selection could be construed as providing their parent companies with an unfair competitive advantage. Applications from VCs whose firms specialize only in seed funding are strongly discouraged from applying. Applicants from seed funding firms are considered incompatible with the DeVenCI focus on finding products for near-term insertion into DoD programs. 4.3 Size and Financial Assets of Venture Capital Firms While applicants may be from venture capital firms of any size, the importance of finding consultants with broad access into the private sector means that larger venture capital firms will typically be rated higher in the assessment process. Important exceptions to this statement include: (1) smaller firms with track records of broad expertise and success, and (2) niche-area firms with deep domain knowledge of technologies that are initially little known to the DoD, but which after evaluation, prove to be of strong interest. Examples of size and financial assets measures that indicate good reach include: • Capital assets of at least $1.5B • Portfolio size of at least 30 companies in technology areas of interest to the DoD. Defense Venture Catalyst Initiative (DeVenCI) –3– Timestamp: 0607201125
  4. 4. Process and Criteria for Selecting Defense Venture Catalyst Initiative Consultants • Annual investment capacity of at least $200M. • At least 15 technology deals executed by the firm annually. • An average deal size of at least $6M. 4.4 Management of Portfolios To help support orderly evaluation of the relevance of a technology area, DeVenCI prefers that applicants are members of a venture capital firm that uses an explicit portfolio management model. The importance of this criterion is lessened if the firm can demonstrate a strong track record of success in their overall portfolio management. Other positive attributes include syndication, fund differentiation, and portfolio technology diversification. 4.5 Technical Expertise Applicants are expected to have direct, personal expertise in the technology areas for which they will provide advice. Technical experience of an applicant’s firm is of far less significance than the direct personal experience of the applicant. The first DeVenCI technology sector is Information Technology (IT). For IT, applicants should have expertise in areas such as information assurance, networks, wireless communications, enterprise software, application software, data and system management or Internet technologies. Additional technology sectors, such as biotechnology, energy, materials/nanotechnology and space, are expected to be pursued in the future. Consequently, familiarity or expertise in these other technology areas will be viewed favorably. 4.6 Experience and Track Record The single most important category for assessment of an application is their performance record on venture capital related issues. The desired experience categories are listed below. 4.6.1 Collaboration and Partnering In the initial DeVenCI experiment, the ability to work collaboratively across venture capital firms and companies proved to provide unexpectedly strong benefits not only for the DoD, but also for the companies themselves, as they discovered opportunities for creating combinations with greater market potential than was possible with their individual products in isolation. Therefore, examples of experience working openly and collaboratively with other VCs, companies, or DoD personnel in relatively unstructured environments will be viewed favorably. Additionally, partnering provides a focused tool for increasing both industry access and overall leverage, while making the private sector more aware of DoD opportunities and needs. Thus, examples of strong partnership relationships developed with other VCs and industry leaders also will be viewed favorably. Defense Venture Catalyst Initiative (DeVenCI) –4– Timestamp: 0607201125
  5. 5. Process and Criteria for Selecting Defense Venture Catalyst Initiative Consultants 4.6.2 Track Record of Successes Ideally, applicants should have a proven track record of funding startup companies from the post-seed phase through the mezzanine phase. Those whose firms have proven track records of full lifecycle company building, from seed phase through market dominance, will be considered the strongest candidates. Applicants should have specific examples of market successes, such as an historically strong and consistent commitment to investing in technology companies that attain the largest market share in rapidly growing markets. Specific successes in the following will be viewed favorably: • Launching high-growth technology companies. • Growing companies until they go public, or are merged or acquired. • Achieving a high internal rate of return for their firm or firms. 4.6.3 Management Management experience in areas such as those listed below will be viewed favorably. • A history of proven leadership and performance with partners. This generally means ten or more years of successful operating experience. • World-class strategic and operational guidance. VCs who take a hands-on approach with their investments and actively work with entrepreneurial management teams are of particular interest. • Commercial market sectors with needs similar to DoD. 4.6.4 DoD Experience and Relationships Prior experience with the DoD is desirable but is not required. It is far more important that the applicant have experience in specific technology areas with strong potential for DoD use. However, experience in areas such as those identified below will be viewed favorably. • Experience and comfort navigating the complex research, development and acquisition environments of DoD. • Access to facilities and resources to educate and guide small companies on DoD culture and how to do business with the Government. • Experience in transitioning and commercializing intellectual property from university and federal (especially DoD) laboratories. Defense Venture Catalyst Initiative (DeVenCI) –5– Timestamp: 0607201125
  6. 6. Process and Criteria for Selecting Defense Venture Catalyst Initiative Consultants 4.7 Geographic Location Since a broad geographic representation of the venture capital community is important, the selection process will include an assessment of the geographic areas represented by the final candidates. The goal of this assessment is to ensure that all regions with major concentrations of venture capital firms and emerging technology companies are adequately represented. 5. Success Criteria At the end of a two-year term, the success of a DeVenCI consultant will be assessed primarily in terms of how well they have done in identifying and facilitating the transfer of technologies that have made or are anticipated to make a recognizable difference in national defense. Success also will be assessed in terms of how well a VC has demonstrated through actions a willingness to help identify emerging companies, established companies, and industry leaders who can provide products, services, or expertise that help the DoD perform its mission, but who are not necessarily within the portfolios of their firms. Defense Venture Catalyst Initiative (DeVenCI) –6– Timestamp: 0607201125

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