Cybersecurity Startups Poised For Growth as Two Bills Aim To Streamline Federal Contracting

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By Alexander S. Radus.

Cybersecurity solutions are in high demand and investors are betting on startups for high returns. In the past six years, high growth emerging companies in this space have received a total of $9 billion in venture capital funding, according to the National Venture Capital Association.

But while the private sector has rapidly adopted the solutions that cybersecurity startups develop, the federal government has been missing out on these innovations due to its cumbersome and confusing procurement process.

According to industry insiders, by the time an innovator wins a government contract, the cybersecurity needs have often evolved, requiring products to be adjusted to stay effective.

Now two bills pending in Congress are designed to remedy that.

Both bills were approved by the House Committee on Homeland Security and later passed by the House. They are currently awaiting action by the Senate. Together, they aim to jumpstart a prohibitively slow and complex procurement process for innovative cybersecurity technologies.

Rep. John Ratcliffe (R-TX), Chairman of the Subcommittee on Cybersecurity, Infrastructure Protection and Security Technologies, introduced the Leveraging Emerging Technologies Act of 2016 and the Support for Rapid Innovation Act of 2016.

The Leveraging Emerging Technologies Act of 2016 directs the Department of Homeland Security (DHS) to address homeland security needs by engaging with “innovative and emerging technology developers and firms, including technology-based small businesses and startup ventures.”

Specifically, the bill requires the DHS to develop a strategy to engage small businesses and startup ventures developing new security technologies, including by:

  • ensuring that innovative and emerging technologies can be included in current and future federal procurement contracts;
  • coordinating with venture investors, particularly those funding small businesses and startup ventures, to assist with commercializing innovative and emerging technologies; and
  • addressing existing barriers to small businesses and startup ventures in the Federal Government’s acquisition process.

The Support for Rapid Innovation Act of 2016 expands the Homeland Security Act’s rudimentary framework that already encourages joint federal-private sector efforts to develop and acquire cybersecurity technology.

Specifically, the DHS, through oversight from the Under Secretary for Science and Technology, would be required to engage in partnerships and commercialization that “introduce new cybersecurity technologies throughout the homeland security enterprise.”

The Under Secretary is required to coordinate activities with the heads of other relevant federal departments and agencies, as well as industry and academia.

The Under Secretary must also:

  • support projects through their full life cycles, including research and development;
  • identify mature technologies that address existing or imminent cybersecurity gaps in public or private information systems;
  • identify and support necessary improvements identified during pilot programs and testing;
  • introduce new cybersecurity technologies through partnerships and commercialization; and
  • target federally funded cybersecurity research that demonstrates a high probability of successful commercialization and will impact public or private information systems.

Nimble startups are well-positioned to address the ever-changing cybersecurity landscape. And the rapid deployment of venture funding into this space attests to the demand for innovative solutions.

It remains to be seen whether these bills, if ultimately signed into law, can make the Federal Government faster on its feet and able to benefit from — and provide support to — private sector innovation.

Alexander S. Radus is an associate in the Corporate Department at Fox Rothschild LLP with a practice that emphasizes entity formation and growth, mergers and acquisitions, franchising, and seed, angel and venture capital. Fox Rothschild is a national firm with more than 700 attorneys in 22 offices coast to coast.


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