The U.S. federal government needs better tech, but implementing new systems is more complex than the nuclear launch codes. The internal process to build new tech moves at a slow enough pace to ensure the government remains behind the commercial sector. While startups could serve as a lifeline of innovation, the process to get a government contract is thorny and long. Dcode wants to help.

For the past six years, Dcode has helped speed up the government contract process for more than 100 companies — that are already generating commercial revenue — resulting in more than $200 million in federal contracts. Now, the women-led organization is raising a fund to invest in some of them, too.

But first, let’s take a step back. The idea for Dcode came about in 2016 when Meagan Metzger and Meg Vorland were connected by mutual friends and met for drinks to talk about their common gripe: how hard it was to get good outside tech into the government. Vorland and Metzger knew the struggle from opposite sides: Metzger had experience at a government-facing IT consulting firm, while Vorland worked alongside the COO at the Small Business Administration.

“As we talked about the pitfalls, and where we had both banged our heads against the wall from both the inside and outside, we realized we could add a lot of value getting together to solve these big challenges for the tech sector and government,” Vorland told TechCrunch. “It was literally love at first sight in a way. We both just had the intensity, spirit and background that we thought would be very complimentary.”

Dcode isn’t a typical accelerator program, though. It’s stage-agnostic — because it’s more focused on a company’s potential for the government than size — and it doesn’t take equity stakes or offer funding. But a new fund will change that.

“As we built the acceleration program, companies would come and ask us if we could invest in their rounds because we are so helpful,” Metzger said. “We didn’t want to get distracted because fundraising is a full-time job. We reached a peak point where the demand was just so high from our portfolio.”

In 2019, they formally launched Dcode Capital and tapped Rebecca Gevalt – who was already working at Dcode and had spent years working with In-Q-Tel, a program that serves as a venture arm of the defense sector – as the third general partner. Dcode Capital started with a network of angel investors at first to prove the thesis. Now, it’s raising its first fund.

Dcode Capital is currently raising $50 million for its debut fund to invest in startups with the goal of helping them secure government contracts. The firm writes $1 million to $2 million checks to companies at the Series B stage or later — when companies are more likely to successfully land a government customer, Gevalt said. The firm isn’t looking to back government-focused or govtech companies, but rather startups that are already commercially successful.

Dcode Capital has already made two investments, one of which is Tamr, a company that breaks down data silos using machine learning to combine datasets to make them easier to utilize. Tamr could be a huge asset to the federal government — which isn’t allowed to delete any data — but can also help other fields filled with unstructured data, like healthcare and insurance.

While Dcode Capital can’t be a substantial financial backer to its portfolio companies based on its small check sizes at the stage it invests at, it hopes to have an outsized impact with its knowledge of getting tech into the government, something most VCs can’t offer.

“We have this methodology and such great insight and who is going to do well in the market and who is going to struggle,” Vorland said. “We hope to provide a lot on the strategy side and tactical side to get to revenue as well.”

Gevalt added that now is a great time to be investing in this area because multiple branches of the government, from the Air Force to the Department of Defense, have been ramping up their startup funding programs. Plus, calls to fix the government’s tech issues are getting louder and have started coming from bigwigs inside. Also, trying to sell to a customer that has a budget insulated from the current market conditions doesn’t hurt.

“The government tends to be a good place to sell in economic uncertainty,” Gevalt said. “The government will continue to buy. Given market conditions, the government is a good place for these companies to be looking.”

Source: TechCrunch

Source: Cable

By Peter

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