State a fertile field for cyber startups
Talent from NSA, other agencies lures investors and entrepreneurs to Maryland
Zuly Gonzalez and Beau Adkins worked in the digital trenches at the National Security Agency for more than a decade.
Gonzalez designed computer protection systems and Adkins figured out how to penetrate such barriers. Their light bulb moment came when they decided to apply their expertise to the commercial sector and founded their company, Light Point Security.
“We kind of melded both his offensive mindset of hacking and attacking and my mindset of defending. He knew how easy it was to hack and get into networks,” Gonzalez said. “So we basically thought about what would it take to really stop Beau from getting into a computer.”
Numerous businesses in Maryland’s growing cybersecurity industry were founded by former government workers or government contractors, and count such workers among their current and prospective employees.
The state’s proximity to Washington and its concentration of federal workers, especially those working in intelligence, security or defense roles, has created a valuable pipeline for cybersecurity companies.
In addition to the NSA, which eavesdrops on communications around the world, Maryland is home to the military’s U.S. Cyber Command, which, like the NSA, is at Fort Meade; the National Institute of Standards and Technology’s National Cybersecurity Center of Excellence in Rockville; and Lockheed Martin’s NexGen Cyber & Innovation Center in Gaithersburg.
The state hosts about 11,280 information technology businesses and an industry workforce of nearly 116,570, according to the state Commerce Department.
As Maryland strives to establishes itself as a hub for technology companies, these government workers-turned-entrepreneurs are key to building up the state’s ranks of promising startup companies, strengthening its reputation in cybersecurity and attracting more venture capital funding.
“It’s almost harder to come up with a startup that isn’t led by someone who has worked at Fort Meade or one of the other federal agencies or the military,” said Ken McCreedy, director of cybersecurity and aerospace at the Maryland Department of Commerce. “The best and the brightest in the world in cybersecurity are right here in Maryland. For those of them that have an entrepreneurial spark, they find this a fertile area to grow their company.”
But despite their technology chops, most entrepreneurs coming out of the government sector have never led, let alone launched, a business. To take full advantage of their potential, Maryland must be ready to meet their technical expertise with the resources required to build a business out of an idea, said Bob Ackerman, a Silicon Valley venture capitalist who last year co-founded a startup studio called DataTribe in Fulton dedicated to commercializing technology developed within the federal government.
“When you pull folks out of these labs, they’re absolutely the best and brightest technically,” Ackerman said. “They’ve never built a business.”
Guy Filippelli had a clear idea of what he wanted to accomplish with his new company, RedOwl Analytics, a Baltimore firm that specializes in using behavior analytics for security.
As an Army intelligence officer following the Sept. 11 attacks, Filippelli ran software development teams for the military and developed tools that allowed the military and the NSA to sift through all the information they were collecting in war zones to identify threats. With RedOwl, Filippelli wanted to develop a way for commercial organizations to similarly sift through the noise and find the threats.
But Filippelli quickly learned that his military training was both a help and a hindrance — driving him through the tough spots of launching a company, while he spins his wheels at other times.
“In the military you’re taught to never quit, never turn back,” he said. “In reality, on the business side, sometimes you have to make a decision to not pursue that line of business or let that person go.”
And while Filippelli knew the technology side of his business inside and out, he was less comfortable with such crucial business tenets as marketing and sales.
“To me the secret, if there is a secret, is being able to balance knowing your strengths and appreciating those gaps, hiring to fill those gaps,” he said.
Investors are catching on to the opportunity for cyber innovation in Maryland.
Ackerman put down roots in Maryland, establishing DataTribe after noting that the area had a high concentration of skilled security workers, less competition and a lower cost of living than Silicon Valley, and few people investing in the industry on a large scale.
“It’s a green field market, it’s a frontier,” Ackerman said. “That’s the opportunity — to be on the ground floor of creating this ecosystem.”
DataTribe is designed to draw out technology and talent from federal agencies to create new cyber companies.
Entrepreneurs accepted into DataTribe’s program move into the organization’s Fulton office, where over the next year they get help with every aspect of building a company, from drafting a business plan to establishing a marketing strategy.
The goal is for the companies to leave the program ready to go after — and receive — venture capital funding, possibly from Ackerman’s firm Allegis Capital.
EN|VEIL, which develops encryption software, is among the first companies to participate in DataTribe.
The company’s founder, Ellison Anne Williams, spent 12 years at the NSA and the Johns Hopkins University Applied Physics Laboratory developing algorithms for largescale analytics systems.
She built EN|VEIL around a single algorithm from a system she spent more than a year designing for the federal government. The product encrypts data across a system rather than building a wall around it.
If Maryland wants to reap the benefits of bright minds such as Williams’, Ackerman said, it must step up to the plate, especially when it comes to helping companies land funding.
McCreedy, of the Commerce Department, agreed.
The department pushed this year for a bill that would have changed the terms of the state’s cybersecurity investment incentive tax credit, to encourage more investing in young companies, but the legislation did not make it out of committee.
The tax credit program, which is in place through June 2019, allows small Maryland cyber companies to apply for a tax credit worth 33 percent of any investment under $255,000 that they receive. The update would have given the tax credit to investors, instead of the startups.
McCreedy said he also wants the state to find ways to encourage more private investing by Maryland’s wealthiest residents.
“If we could get that population to take an interest in the innovation space and make investments in these kinds of companies, that would be a powerful thing,” McCreedy said.
Ron Gula now finds himself on the other end of the pipeline. Gula, who served in the Air Force and worked as an analyst for the NSA, co-founded Tenable Network Security in 2002 and helped grow it to a leading cybersecurity firm that counts among its clients such major brands as MasterCard, Adidas and Microsoft.
After leaving the company in 2016, Gula and his wife, Cyndi, set to work investing in other startups in the Mid-Atlantic.
Earlier this year, the Gulas gave their fund a name, Gula Tech Adventures, in an effort to draw attention to the role successful entrepreneurs can play in helping bring up others.
“We really want to see more former CEOs, executives, people who know how to do it, be proactive. There’s a large base of angels here, but it’s hard to find them,” Gula said. “We’re hoping to sort of be an example of what you can do in the region once you’ve gotten successful.”
Zuly Gonzalez started cybersecurity company Light Point Security with co-founder Beau Adkins after working for the National Security Agency.