As terrorist bombs go off around the globe, it’s no surprise that technologies that could help foil such threats continue to attract steady venture capital investment. The latest bet is on a product called Wide Area Voice Environment (WAVE), which lets unrelated communications devices like CB radios, mobile phones, and personal computers communicate using Internet protocol. An investment group including Ignition Partners and Core Capital Partners last week plowed $9 million into a first round of funding for WAVE’s maker, Seattle-based Twisted Pair Solutions.
Twisted Pair, which launched seven years ago, is working on solutions that allow military and first responders—even those with incompatible communications gear—to talk to one another. The product is currently in use by the 101st Airborne in Iraq. But Tom Wheeler, a partner at Core Capital, sees potential commercial spin-offs. For instance, WAVE could be used to tie together communications between shipping traffic, port security, and the trucker that comes to pick up the load—all using formerly disconnected systems without having to replace their existing equipment. “In a lot of ways this is the classic military to commercial kind of model,” Mr. Wheeler says. “There’s a sizable market for this kind of transformational technology.”
Mr. Wheeler notes that while Twisted Pair is not yet a profitable company, it’s doing a “nice business,” and is likely a few quarters away from seeing black ink. “This round is for the purpose of helping them expand their reach,” Mr. Wheeler says. “They’re doing a very good job in this space, and this should help them go beyond public safety and the military, and reach into other target markets, like retail, financial services, and transportation.”
Venture capitalists began investing in homeland security as early as 2002, shortly after the 9/11 attacks, which caused the U.S. government to back companies with technologies that could strengthen U.S. infrastructure against terrorist attacks.
The funding for Twisted Pair echoes other recent bets by venture capitalists in homeland security. In early September, Herndon, Virginia-based Command Information, which advises business and government on IPv6—a protocol aimed at improving information security and the use of wireless devices—raised $20 million in a second round. The investment came as federal agencies face a 2008 deadline to make their systems comply with IPv6. That round was raised by the Homeland Security Fund of new investor Paladin Capital Group of Washington, D.C., with participation by previous investors The Carlyle Group, also of D.C., and Novak Biddle Venture Partners of Bethesda, Maryland.
Similarly, Battelle Ventures and L Capital Group recently backed Hi-G-Tek, a maker of smart tags that can be used to secure and track shipping containers as well as report break-ins and other information.
Why the focus on homeland security? Because there’s a market for it, and often, a market where government contracts for tests and trials can bring the company further along in its development pipeline. That mitigates risk to VCs, and allows them to bet their money on a product that’s proven, or close to it. “VCs are trying to find technologies they think are ripe for the marketplace, but haven’t been commercialized,” says Hi-G-Tek CEO Larry Blue. “If they see commercial potential, like they do with us, they go for it.”
Contact the writer:SWolfe@RedHerring.com
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