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Inside The IQT Playbook: Five Keys To Successful Public-Private Tech Partnerships

Oct. 26, 2023

Getting innovative and impactful commercial technologies into the hands of government agencies is a mission whose importance is growing exponentially. Globe-spanning challenges, including tackling climate change and dealing with future pandemics, require new ways of thinking and new capabilities inside the public sector. The same holds true for the crucial task of ensuring national security in the new era of Great Power competition that’s rapidly reshaping geopolitics. America’s adversaries are constantly blurring the lines between military and economic power, including by actively harnessing commercial technologies to achieve their strategic goals. More public-private partnerships that transfer leading-edge private-sector innovations into the hands of the U.S. and its allies are urgently needed to counter this development.

Yet, worryingly, there’s a deep chasm between parts of the startup community and parts of the public sector in America. Some entrepreneurs still believe government’s reputation for being too slow and too bureaucratic means it should be shunned as a customer; and in some quarters in government, there’s still a belief that startups are too risky and inflexible to be reliable partners.

These mindsets need to change fast if we’re to make progress on all of the complex challenges outlined above. So how can we encourage public-private tech partnerships more broadly to better support our national security and future economic prosperity?

There’s no simple answer to that vital question: it’s going to take a concerted effort on multiple fronts. But one powerful way to help bridge the chasm is to share frameworks for creating successful public-private tech collaboration more widely—and that’s where IQT has a unique perspective to offer. Set up as an independent nonprofit in 1999, the organization has spent more than two decades helping startups adapt their technologies for use by the U.S. national security community. From this deep experience, we’ve evolved a number of keys to success that have been central to IQT’s expansion into a global strategic investing platform that now reviews over 1,000 startups a year and is a trusted partner of numerous government agencies.

There are five of these keys, which we collectively refer to as the IQT Playbook. While they are derived from IQT’s work in the national security domain, we believe they are broadly applicable to other areas of government keen to leverage innovative commercial technologies.

Key #1: Three-Way Envisioning.

The first crucial key to successfully bridging the public-private divide is learning to see things from three fundamentally different perspectives: those of government agencies, startups, and venture capitalists.

On the government front, you need to understand how agencies select and use technology to enable their missions, how they ingest it, and how approvals and budgeting cycles work. When it comes to startups, you need to appreciate that they are funded on 12-to-18-month cycles and are under constant pressure to show progress within those timeframes—and that they need a viable path to sell products to customers, so projects that don’t have a clear route to a purchase are challenging for them. They also look for partners who can be flexible. For instance, a purchase order made the last day of a quarter rather than the first day of the following quarter could help a startup make payroll for its employees.

Venture capital firms also have their own motivations. They routinely compete with one another for deals and then encourage their portfolio companies to generate revenue fast enough to attract fresh capital via future funding rounds. And they have a very low tolerance for anything that diverts a startup from its product roadmap.

All too often, public-private collaborations fail because the partners involved don’t make enough of an effort to see things from others’ perspectives. That’s why it’s important for all parties to make a real effort to understand these different worlds—hence Three-Way Envisioning. At IQT, we’re fortunate to have people who have spent time in each of these ecosystems, which helps the organization act as a ‘translation layer’ between them.

Staying with the theme of envisioning, another key to public-private tech transfer success is having a shared view of how a technology domain is evolving, which is what the second fundamental pillar of the IQT Playbook helps create.

Key #2: Architectural Thinking.

Venture firms often produce market maps that categorize players in different segments of an industry with a view to identifying companies that could potentially deliver outsized financial returns. IQT takes a very different approach. Its ‘technology architectures’ go deeper, aiming to understand the foundational technologies for a particular application and how that application can help a government agency achieve its mission.

These architectures—which span everything from alternative payments to energy, and from advanced manufacturing to high-performance computing—have become IQT’s primary tool for engaging with the public sector. They spark conversations that help us work out the technological gaps that government partners have and where startups could potentially help address them. Our Commercial Space Architecture is a great example of the effectiveness of this approach. Developed in 2015, it highlighted the potential of the field at a time when the notion of ‘privatizing’ space was generally viewed with skepticism, including in government. The architecture conveyed IQT’s vision of how the commercial space landscape might evolve and triggered numerous conversations about where startups’ technologies could help agencies advance their missions.

Armed with this feedback, IQT began investing in the field, boldly going where few investors had gone before. The result has been a series of success stories such as Capella Space, an early-stage company IQT invested in. Our technology architecture had highlighted the potential of satellite-mounted synthetic aperture radar, or SAR, which can collect earth observation data in all-weather conditions 24 hours a day, unlike optical satellite imagery which requires daylight and no cloud cover. As evidence of mission impact from this investment, Capella’s satellites have been tasked by their customers thousands of times since the war in Ukraine began, providing important real-time access to what’s happening on the ground.

Whether you are a startup or a government agency, you need to find a systematic way to have in-depth conversations with potential partners about where technologies are heading and how dual-use commercial technologies could help plug gaps in capabilities. It’s also crucial to engage in the third of the IQT Playbook’s five keys to public-private success.

Key #3: Q-Brainstorming.

It’s very tempting to take a pre-baked technological solution from the private sector and try to apply it directly to a government agency’s problem. But this approach to public-private partnerships often leads to failure because a company ends up trying to force the technological equivalent of a square peg into a round hole. Instead, businesses need to constantly embrace and encourage creativity when adapting commercial products for government use, an approach we’ve dubbed Q-Brainstorming. The Q here—and the one in IQT’s name—are a nod to the character in the James Bond movies whose team is responsible for dreaming up the exotic gadgets that 007 uses.

A couple of examples help illustrate Q-Brainstorming in action. Early in my time at IQT, I came across a company that had created a tool to ‘program’ magnets to make them do unusual things, like hovering or only separating if twisted in a certain way. The company’s founder had come up with the concept when he was trying to build toys to teach his grandkids about science and hadn’t thought about whether they would be useful for the public sector. IQT helped the company brainstorm several potential tradecraft applications with government partners and ended up investing in the business to develop them.

Similarly, in 2015 IQT invested in a company that had developed an analytical platform for cryptocurrencies at a time when most people couldn’t tell you what Bitcoin or blockchains were. To win over skeptics (including inside IQT!), my team had outlined a vision for how the technology could give government partners a significant advantage over adversaries and had even developed a blockchain architecture to show how the tech would fit into the broader crypto ecosystem. The team was right on the (digital) money with its brainstorming and the company has since delivered significant impact to the public sector.

Of course, brainstorming how commercial technologies can be adapted for public-sector use is great for the government. But there are limits here, which is why the next key to public-private partnership success in the IQT Playbook is so important.

Key #4: Two-Way Winning.

The magnet company mentioned above didn’t just gain a government customer by adapting its technology; it also modified the tech based on feedback from this customer, which helped it go on to sell its magnets to large consumer companies. In the case of the blockchain-analytics company, working with IQT’s government partners enabled it to subsequently win business across the public sector and to expand its commercial offering.

These are examples of Two-Way Winning in action: development work for the public side of the partnership benefits companies on the commercial side too. All too often, products for government use are adapted to the point where they are no longer of interest to other customers and that can lead businesses to maintain them as a separate product line, which makes it easier to decide not to maintain investment in that line and let it fall behind the commercial version. So instead of a win-win outcome, the result is lose-lose!

The best way to avoid this is to ensure, where possible, that product lines don’t become forked. It helps to work within a startup’s existing product roadmap (which also reassures the firm’s investors—see key 1 above), potentially accelerating when something on the roadmap will be built and funding the additional effort needed.

IQT’s investment in Bounce Technologies is a case in point. The startup had developed a throwable camera which resembled a large softball with lenses on it. This could be used by law enforcement to see inside a room in a potentially dangerous situation so that a human didn’t have to go in without awareness. IQT talked to its government partners and concluded it could have great value to them with a few modifications. Bounce was already planning to make these changes but not in the near term, so IQT funded it to accelerate them. Our partners got an improved tool and Bounce saw commercial sales of its upgraded product increase and was able to target the defense market with it too.

Two-Way Winning plus the other keys here—Three-Way Envisioning, Architectural Thinking, and Q-Brainstorming—all reinforce one another when it comes to making public-private ventures a success. But putting all this effort in on both sides is only worth it if government customers end up ingesting and using the technology, which is the focus of the final foundational pillar of the IQT Playbook.

Key #5: Achieving Tech Adoption.

Although this key is the last on this list, companies should bear it in mind from the moment they start thinking of working with government. Successful partnerships are typically ones where public-sector customers are brought to the table early and kept engaged on an ongoing basis. IQT uses its deep understanding of government partners’ mission needs—clearly identified thanks to Architectural Thinking—to identify individuals responsible for tech implementation and they are the stakeholders at the table with us during an investment and product adaptation. The aim is to ensure plenty of opportunities for both sides to provide real-time feedback to one another, which helps partners work through the technical nuances that can make the difference between whether a product is eventually adopted or not.

Another vital step is to get a clear understanding as fast as possible of the hurdles to be negotiated in the adoption process. Three things can help a lot here. First, get a commercial product, in whatever form it exists, into the hands of stakeholders at the start of a development effort. This allows them to start playing with it and ignites a crucial dialogue on how to get it where it needs to go. Second, start conversations about pricing up front too because the government budgeting process is long and customers can’t begin it if they have no sense of what a product might end up costing. Third, make an enhanced product available long enough for a public-sector customer to do the necessary testing to see if it will work for its mission.

Some of these steps—like handing over a product early on that clearly doesn’t meet a partner’s needs—can seem counterintuitive, but in IQT’s nearly 25 years of experience they are essential to getting tech pulled through from the commercial market and into government use. And the more impactful commercial technologies that are actually used by the public sector, the greater the chance we have of successfully tackling those complex societal challenges highlighted at the beginning of this post. This has been IQT’s motivation since its creation and will continue to be its north star as it heads towards its quarter-century anniversary and beyond.

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