For Lockheed's venture fund, the investment is only the beginning

Whether a large aerospace-and-defense prime or systems integrator, many government contractors have adopted an approach of technology scouting to bring agencies innovations from outside the traditional ecosystem.

This shift in both strategy and mindset is an example of how the pyramid of innovation has largely flipped from being mostly government-driven to private sector-shaped, largely by venture capital and other investors looking for the next hot technology or company.

At our WT Power Breakfast Wednesday, Lockheed Martin Ventures chief Chris Moran explained how through this strategic investment arm, the world’s largest defense company scouts for companies in the commercial arena that make the type of fast-advancing technologies their customers are also looking for and demanding.

Lockheed ventures organization not only makes financial backings of early-stage companies to help shape and guide them alongside their other investors, but also works to link those companies with Lockheed’s almost 54,000 engineers worldwide, business relationships and supply chain.

“The dirty little secret of venture investing is that the investment itself is the tip of the iceberg,” Moran said. “Now you’re linked to this company for probably the next five years.”

What happens over those next five years after Lockheed Martin Ventures invests in a company? Lockheed can have a position on that company’s board of directors but for the most part takes an observer seat, Moran said. Either way, Lockheed participates in the board meetings and builds dialogue and relationships with the other investors.

Then there is the work to get interest in and spread that technology within Lockheed itself. Moran said he spends roughly half of his time with Lockheed colleagues to find out the problems they are working on and potential technology solutions that could arise from a Ventures-backed company.

“We constantly, constantly promote their technology inside the company,” Moran said. “My team meets every single month with all the business area leaders (and) technology leaders. We talk about the portfolio, we talk about the companies that we’ve invested in.”

The Lockheed Martin Ventures organization got a big boost last summer when the corporation doubled the fund from $100 million to $200 million with plans to focus that added capital on emerging companies in areas such as sensor technology, autonomy, artificial intelligence and cybersecurity.

Against a wider backdrop of broad innovation happening in the commercial sector, Moran said these four technologies in particular are the fastest-moving technologies right now in what he described as typically a “very-fad driven” Silicon Valley.

Silicon Valley’s fast-changing nature, how marketing-driven it is and the broader commercial technology ecosystem that sees high rates of failure is always front-of-mind for Lockheed’s ventures organization.

There are “a lot of dead bodies” in Silicon Valley that represent businesses who do not last but not because of the technology, Moran said.

“It seems like only the good news makes it across the country because Silicon Valley is more than anything a region of failure… 90 percent of the companies that start die,” Moran said. “You only hear about the ones that were successful.”

But failure is inherent in innovation and any form of progress, which is how Moran's organization thinks through its investment strategy. As Moran pointed out, companies can learn just as much from failures in either looking to advance a technology or overall business.

“On the way to those successes, you have to figure out ways to fail in small ways and economical ways or timely ways that increase the level of learning and rate of learning to ultimately provide mission success,” Moran said.