Dcode Capital raises $50M fund to bridge startups and federal government – ​​TechCrunch


The US federal government needs better technology, but implementing new systems is more complex than nuclear launch codes. The internal process of creating new technologies is moving at a slow enough pace to ensure that the government stays behind the commercial sector. While startups could serve as a lifeline for innovation, the process of securing a government contract is thorny and time-consuming. Dcode wants to help.

Over the past six years, Dcode has helped expedite the government procurement process for more than 100 companies – which are already generating commercial revenue – resulting in over $200 million in federal contracts. Now the women-led organization is raising funds to invest in some of them as well.

But first, let’s take a step back. The idea for Dcode was born in 2016 when Meagan Metzger and Meg Vorland were hooked up by mutual friends and met over drinks to talk about their common gripe: how hard it was to integrate good technologies outside of government. Vorland and Metzger knew the struggle of opposite sides: Metzger had experience at an IT consulting firm facing the government, while Vorland worked alongside the chief operating officer of the Small Business Administration.

“As we talked about the pitfalls and both of us banged our heads against the wall from inside and outside, we realized that we could add a lot of value by coming together to solve these big challenges for the tech industry and government,” Vorland told TechCrunch. “It was literally love at first sight in a way. We both had the intensity, the spirit and the experience that we thought would be very complementary.

However, Dcode is not a typical acceleration program. It’s independent of the scene — as it’s more focused on a company’s potential for government than its size — and it doesn’t take equity stakes or offer financing. But a new fund will change that.

“As we were building the accelerator program, companies would come and ask if we could invest in their cycles because we’re so helpful,” Metzger said. “We didn’t want to be distracted because fundraising is a full-time job. We reached a high point where demand was so high from our portfolio. »

In 2019, they officially launched Dcode Capital and brought in Rebecca Gevalt – who already worked at Dcode and had spent years working with In-Q-Tel, a program that serves as the venture arm of the defense industry – as the third general partner. Dcode Capital started with a network of angel investors as a first step to prove the thesis. Now he is raising his first fund.

Dcode Capital is currently raising $50 million for its first fund to invest in startups with the goal of helping them land government contracts. The company writes $1 million to $2 million checks to companies at the Series B stage or later — when companies are more likely to be successful in landing a government client, Gevalt said. The company is not looking to support government or govtech-focused companies, but rather startups that are already experiencing commercial success.

Dcode Capital has already made two investments, one of which is Tamr, a company that breaks down data silos by using machine learning to combine datasets to make them easier to use. Tamr could be a huge boon to the federal government — which isn’t allowed to delete data — but can also help other areas filled with unstructured data, like healthcare and insurance.

Although Dcode Capital cannot be a substantial backer of its portfolio companies due to its small check sizes at the stage it invests, it hopes to have an outsized impact through its knowledge of the introduction of the technology in government, which most VCs can’t offer.

“We have this methodology and such insight and who is going to do well in the market and who is going to struggle,” Vorland said. “We hope to deliver a lot strategically and tactically to generate revenue as well.”

Gevalt added that now is the time to invest in this area as several branches of government, from the Air Force to the Department of Defense, have stepped up their seed funding programs. Also, the calls to fix the government’s tech issues are getting louder and have started coming from bigwigs inside. Also, trying to sell to a customer whose budget is insulated from current market conditions doesn’t hurt.

“Government tends to be a good place to sell in economic uncertainty,” Gevalt said. “The government will continue to buy. Given the market conditions, the government is a good place for these companies.

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