“The biggest company you’ve never heard of” acquired by major military contractor you’ve heard of

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Screen Shot 2015-05-13 at 1.52.37 PMLast week, one of the biggest names in military-intelligence contracting, SAIC (Science Applications International Corporation) acquired “the biggest [military-intelligence] company you’ve never heard of,” Scitor, for $ 790 million.

That quote about Scitor was told by a former NSA officer to investigative journalist Tim Shorrock, author of the definitive book on the military-intelligence complex, “Spies For Hire: The Secret World of Intelligence Outsourcing”. In the press release, SAIC describes its newest acquisition as “a leading national security provider focused on classified US Air Force and intelligence community programs,” with annual revenues of $ 600 million.

Scitor is headquartered in Reston, Virginia, a few miles from SAIC’s headquarters, just across the Potomac from every military-intel contractors’ favorite feeding trough. But Scitor runs a large operation center in Sunnyvale, just a few blocks from Moffett Field.

In a recent post, Shorrock describes the secretive Scitor’s business:

“Since its founding in 1979, Scitor has done extensive work for the CIA’s Directorate of Science and Technology and its Office of Technical Services, the secretive unit that develops the gadgets, weapons and disguises used by spies. Some of Scitor’s contracts for the CIA have involved building and maintaining small satellites used in signals and electronic intelligence.”

One such intelligence gadget produced via Scitor’s Sunnyvale operation—a 175-foot, V-shaped helium Near Space Maneuvering Vehicle drone, the “Ascender,” designed to hover 120,000 feet above the earth to conduct surveillance and communications operations.

According to Shorrock, Scitor is also heavily involved in the Afghanistan war. One intelligence contractor on Scitor’s payroll in Afghanistan was Erin Simpson, who today heads Caerus, the private intelligence contractor founded by the guru of the Obama Administration’s counterinsurgency strategy, David Kilcullen. In other words, Scitor is as connected as it gets in the world of private military-intel contracting.

For SAIC, which recently split into two firms—Leidos, which took most of the military-intelligence contracts, and the new SAIC, which focused on IT and infrastructure—the Scitor acquisition represents “quite a prize,” in Shorrock’s words: a return to the original core business. With Scitor, it’s as if SAIC’s split created two contractor heads, rather than two different business operations.

This merely scratches the surface of one of the biggest Silicon Valley firms you’ve never heard of. And it serves as a reminder that Silicon Valley is a pure creation of the US government military-intelligence complex, a relationship that today’s tech heroes would rather we all forgot—a relationship embedded in Santa Clara County’s genetic coding, no matter how well those secrets are kept.

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Cybereason gets $25 million from an odd pair: consumer-focused Spark and defense contractor Lockheed Martin

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Cybereason, a cybersecurity company based in Cambridge, MA, just announced that it has raised $ 25 million from a group of investors including Spark Capital and Lockheed Martin, along with prior backer CRV.

You’re probably thinking, “Well, that’s odd. How can one company draw interest from one of the more well-known consumer Internet investment firms AND the guys who make fighter jets and missiles?’

It’s because with all the recent data breaches involving everyone from large corporate entities like Target and Sony to startups like Slack, IT security has not only become a mainstream and potentially lucrative investment opportunity; it also addresses threats to the day-to-day operations of almost any organization — private or governmental — storing data on the cloud or on private servers.

For many VC firms, the interest in cybersecurity startups makes sense as a way to balance the types of risks within their portfolio. From what I’ve been told, the security space is a safe bet for the time being that allows firms to mitigate the potential damage more risky investments can have on the returns of a given fund.

The reasoning is that cyber attacks are only going to become more prevalent as data and other information continue to be stored on computer systems and cloud platforms. This creates an enormous opportunity for a large, differentiated group of companies — some that offer services to meet a single security need and others that provide a full suite of threat detection and prevention products –to make an impact in the space.

There are going to be a handful of winners in the cyber security industry, including many companies that are already established like FireEye and Symantec. But longtime players may also share the throne with upstarts like Cybereason.

For Spark, a firm best known for being an early backer of Twitter, Tumblr, RunKeeper, and Warby Parker, hedging on cybersecurity allows it to withstand risks that won’t pan out — Jelly, anyone? — while taking leaps of faith on moonshot companies like Oculus VR.

But the interest for a company like Lockheed Martin, which has been linked with China-associated hacking breaches in the past, goes beyond the potential financial returns.

Cybereason differentiates itself in the growing cybersecurity market by combining both “white hat” security experts — those, according to CEO Lior Div, who have never been malicious black hat hackers and have been working for the “good guys” all their lives — and expert big data and information analysts.

“We took the challenge to build a technology from the ground up that allows us to look through different types of information, process it in real-time, and then decide whether someone is under attack or not, and, on top of that, to tell you the full story of that attack,” Div said when asked what separates his company from others in the space.

With veterans of both the highly-regarded Israeli intelligence system and three-letter U.S. agencies like the NSA and CIA on its team, Cybereason has already proven its worth for one unnamed defense contractor. As Div explained, Cybereason was the only security vendor to prove and show the full story of a “super sensitive” cyber attack on the unnamed company.

“For us, it was a huge proof of value in a very short manner of time,” said Div.

Cybereason initially connected with Lockheed as a potential customer. But once the company ran the security tools through a barrage of stress tests, Lockheed came back seeking to partner and invest in the cybersecurity company.

“They tested the product, and they came back and said that this is the only product that can provide the volume of protection that Lockheed wanted,” Div said. “Those stories signal that there is something very unique about the implementation of our approach and the value that a customer can expect.”

When asked if there was concern about having too close a relationship with an organization like Lockheed Martin that is so connected to the military industrial complex, Div explained that the partnership is a huge opportunity, but one of many. According to the CEO, Cybereason has three soon-to-be announced partnerships with businesses that are completely outside of the military and intelligence space.

That’s where the company sees value in investors like Spark and CRV.

“We truly believe that there is a huge opportunity for us to build a company that can disrupt the way that people think about cyber operations and how to protect themselves from the different types of attacks we are seeing today,” Div said.

With a growing foothold in the intelligence and military contractor space and the potential to play a key role in how startups and larger consumer companies protect data, Cybereason may end up being much more than a “safe bet” for investors.

[illustration by Brad Jonas]

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