November 4, 2015 | by Chris Bing
On the edge of D.C., quietly tucked within the boroughs of Chevy Chase, Md., sits a unique private investment firm by the name of Enlightenment Capital. While the firm’s headquarters are modest—ordinary, compact and house a staff of less than five—Enlightenment Capital, led by Devin Talbott and Pierre Chao, continues to grow its influence on the D.C. area’s private defense apparatus.
In an interview with DC Inno, Talbott said that almost all of the first fund had been committed. But with 9 portfolio companies in tow, 14 investments made, and an expanding presence, the 39-year-old managing partner promised he’s just getting started.
Enlightenment Capital specializes in making smart bets between $5 million and $20 million on aerospace, defense and government services (ADG) companies. Previous investments have included both equity and debt options. To this point, the firm’s speciality industries are cybersecurity, aviation logistics, big data and satellite network technology.
“ADG is an industry that requires staying power and conviction. It generally lacks the turbo charged growth of commercial tech that appeals to VC. ADG tends to be more steady state and stable, with pockets of growth, which is what we find attractive,” Talbott described.
Importantly, D.C. is never going to be like Silicon Valley, per Talbott, because the government is here—“that’s our competitive advantage.” Though there will be crossover between the commercial and federal realms, he explained, a majority of the area’s tech scene will forever lean on the affluence of government-related entities.
Among others, one of Enlightenment Capital’s most interesting early investors is current D.C. United head soccer coach Ben Olsen.
The famous D.C. coach, Talbott tells DC Inno, is an old friend that he met through a graduate school roommate. Since Talbott’s university years and Olsen’s rookie contract, the two have remained friends. “He is just a buddy. When you start a business, you need the support of your friends and family. He [Olsen] supported me very early on by becoming an investor,” Talbott said.
He joked, “I try to return the favor by rooting for DC United and grooming my six year old son to play for him one day.”
The Greater Washington, D.C. area boasts a more than billion dollar security complex, led by legacy brands like Northrup Grumman and Lockheed Martin. And though these companies are typically thought of in the context of national security, they’ve also birthed an ecosystem of innovative, young and more agile companies, locally, made up of repeat executives and entrepreneurs. As with any prominent technology landscape—see Silicon Valley—a “pollination effect” is common.
In broad strokes, Enlightenment Capital focuses on this new demographic, many of whom develop technology that caters to the needs of both federal and commercial clients. A good example of a model investment company for Enlightenment Capital is Peter Thiel’s Palantir, who are capable of offering advantageous data analytics software, individually customized for specific clients.
Talbott explained that his firm has been “very active in the data analytics and information processing, access and assurance space.” He expects those and cyber technologies to continue to be a focus. Commercial aerospace, however, is heated right now, and thus expensive.
Enlightenment Capital’s managing partner added “because we are not a venture capital firm, we also have the ability to look at stable, lower growth businesses.”
The firm’s board of advisors is stacked with retired Department of Defense chiefs, defense policy gurus, prominent defense investors and a former director of the National Counterterrorism Center (NCTC). 40-year military veteran General James Cartwright, formerly a vice chairman of the joint chiefs of staff, and Kenneth Krieg, U.S. Under Secretary of Defense for Acquisition, Technology and Logistics from 2005-2007, are on the board.
Chao, Talbott’s senior and partner at Enlightenment, is a decorated and well respected former Wall Street analyst and longtime aerospace defense insider. He previously led a policy analysis team at the Center for Strategic and International Studies (CSIS), a Washington, D.C.-based non-partisan think tank. Chao also co-founded Arlington, Va.-based Renaissance Strategic Advisors (RSAdvisors), which is involved in ADG investment research, in January 2008 four years prior to beginning Enlightenment Capital.
Talbott, at the age of 39, is already a seasoned, 10-year ADG investor. The Georgetown alum and D.C. native began his career with The Carlyle Group, a global hedge fund in D.C., as an associate. He then moved on to work with Lazard as a merger and acquisitions specialist before being recruited by The Cohen Group.
In 2006, Talbott would join NYC-based D.E. Shaw, a global investment and tech development firm, to carve out the organization’s ADG investment division. This led to a close connection with a number of companies back home, in the D.C. area. 2012 provided an opportunity to reconnect with a number of close contacts and to form a joint venture.
In October, Enlightenment Capital entered into a strategic partnership with Republic Capital Access (RCA), a provider of U.S. Government contract financing. RCA defines its services as a mix between bank credit and a “traditional factoring relationship.” RCA essentially bids for federal contracts on the behalf of clients while allowing these companies to pay off the debt either over time or in direct equity. It's unclear exactly how the two organizations employ a fuzed offering, but it's likely that RCA financing acts as an auxiliary option/service for the portfolio.