When the government is the client (some things to keep in mind)

Five years ago, Google walked away from a Pentagon government contract because thousands of employees protested that its technology could be used for deadly drone targeting . Today, however, Silicon Valley has far fewer qualms developing technology for the US Department of Defense.

So said four investors - Trae Stephens of Founders Fund, Bilal Zuberi of Lux Capital, Raj Shah of Shield Capital and Steve Bowsher, longtime chairman of In-Q-Tel - speaking at a kick-off event for veterans today in San Francisco. Says Shah of the change in attitude he has personally observed: "The number of companies, founders and entrepreneurs interested in broader national security - I've never seen it at this level."

Bowsher argued that Silicon Valley's "reluctance to work with the [Department of Defense] and the intelligence community" was always "overblown," adding that in his 16 years with In-Q -Tel, which is the CIA's venture capital fund, his team met with about 1,000 companies each year and only "five to ten turned us down, saying they weren't interested in working with clients that we represent".

We'll have more on the TechCrunch+ panel, but we wanted to share parts of our conversation that focused on things to consider when selling to the US government, given that founders with commercial clients may think increasingly trying to sell their products and applications to the US military. (This is especially true for AI, cybersecurity, and automation startups.)

We've talked with investors, for example, about mission drift, which is how a startup that starts working with the government can make sure it doesn't spend most of its time responding to government needs due to new demands — and ignoring previous commercial clients in the process.

Here, Trae Stephens - who also co-founded Anduril, a maker of autonomous weapons systems that has aggressively courted business from government agencies since its early days - said this kind of incremental shift in focus is "exactly what makes it difficult to do both [meet the needs of civilian businesses and government] at an early stage.”

He said that "many of the programs that [allow founders to] do early business with the Department of Defense require some, like, DoD-ization of your product for that use case. "

While In-Q-Tel supported Anduril early on, for which Stephens said he was grateful, he offered that many companies that receive government money, including through his Small Business Innovation Research (SBIR) program, "end up building all of these very specific workflow steps that take them away from the business activities needed to make 'the business really work.'" (Stephens also noted that very few teams can exclusively hunt the military, as Anduril did, because it "takes so long to go into production with the DoD that you have to be able to raise, basically, an infinite amount of start-up dollars; otherwise , the business will die." )

Similarly, we asked how so-called dual-use companies manage their intellectual property rights once they start selling to the government. For example, you can imagine a scenario where a technology helps the NSA identify certain types of people who make certain types of calls, and although there are commercial applications for that technology, the government does not want it be disclosed to adversaries. Is there a way to fix this in advance, we wondered?

Here, there was no simple answer other than: get the right help and do it as fast as possible.

Zuberi told a cautionary tale centered on one of Lux's portfolio companies. Said Zuberi: “I have a company that received a $100,000 [National Science Foundation] grant. Two guys started it in my office. I didn't give it much thought; I thought it was good to have on their CV. Then they started doing a Series B raise, and one of the [interested] companies is doing due diligence on what other contracts [the team might] have, and there was a clause in that NSF grant that said, "Hey, if the government needs [what you're building], we can use it." So we had to wait six months while we negotiated with [someone] at the NSF who didn't care to get it back. I would have paid them double the amount of the grant just to make it disappear, but they said "No, you can't do that, we can't go back." Then you can run into trouble.

Again, we'll have more on this discussion soon, including AI in military applications; we learned a lot — I hope you did too.