Pentagon Buys Into High-Tech Firm, Will Share Future Profits

The Pentagon said Monday that it has made a $4-million investment in a small Santa Clara, Calif., high-technology company in return for a share of any future profits and a non-voting seat on its board of directors.

The investment is the first step in a unique experiment being launched by the Defense Advanced Research Projects Agency (DARPA), the Pentagon’s research and development arm, and will expand that agency’s role in cultivating domestic industries involved in critical technologies.

In November, Congress greatly expanded DARPA’s mandate, enabling it to act more like a venture capital firm and in so doing to help pick critical companies and technologies. Previous efforts already have sparked a debate over what role the government should play in picking winners and losers.

The investment in Gazelle Microcircuits Inc., a supplier of gallium arsenide chips used in electronic and military applications, represents the first time DARPA will receive a percentage of the profits. In return for its $4-million, DARPA will get royalties from any products developed with the funds or payments calculated on the appreciation of Gazelle’s stock.