NSA staffers rake in Silicon Valley cash

Former employees of the National Security Agency are becoming a hot commodity in Silicon Valley amid the tech industry’s battle against government surveillance.

Investors looking to ride the boom in cybersecurity are dangling big paydays in front of former NSA staffers, seeking to secure access to the insider knowledge they gained while working for the world’s most elite surveillance agency.

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With companies desperate to protect their networks against hackers, many tech executives say the best way to develop security products is to enlist the talents of people who have years of experience cracking through them.

“The stories he could tell,” venture capitalist Ray Rothrock recalled about his meetings with a former NSA employee who founded the start-up Area 1 Security. “They come with a perspective that nobody in Silicon Valley has.”

NSA alums are following the money, uprooting companies they founded on the East Coast for the deeper investment pools of California’s tech hub.

Early-stage funding for cyber start-ups was expected to nearly double for the second year in a row in 2014, topping $800 million, according to the research group PrivCo.

“Networks on the West Coast are quite substantial,” said Jay Kaplan, one of the former NSA employees behind Synack, a security firm that launched from Boston in May 2013 but soon packed up for the West Coast.

The move was “pretty key to gaining a foothold in the market,” Kaplan said. From the ability to “meet up regularly” with investors to the “plethora” of tech-savvy potential employees, Kaplan said he and his co-founders have “never looked back.”

Just last week, Synack revealed it had raised $25 million in Series B venture capital funding, nearly tripling the $9 million it brought it during Series A fundraising last year. The company’s revenue has grown 90 percent over the past year.

“I think it was a great decision,” Kaplan said of the move.

On the surface, Silicon Valley and the Beltway often appear at odds.

“[Venture capitalists] don’t like to fly to D.C. very often,” joked Rothrock,who backs multiple NSA alum-founded start-ups, including Synack.

Tensions between the tech industry and Washington have been running high since former contractor Edward Snowden leaked classified documents that disclosed the NSA was tapping into Google and Yahoo’s overseas cables to collect information stored on their data centers.

Those and numerous other revelations about the activities of the NSA have outraged technology executives, spurring a massive lobbying campaign aimed at curbing the agency’s activities.

NSA leaders also have a philosophically different approach to encryption than many in the tech and civil liberties community. NSA Director Adm. Michael Rogers advocates a legal framework that gives the government access to data, while companies like Apple are pursuing encryption that could lock out federal investigators.

“Sophisticated buyers understand that former employees of the NSA no longer work for the NSA,” said David Cowan, a partner with Bessemer Venture Partners who is managing at least four recent investments in NSA alum-backed cyber start-ups.

“You might be surprised that their politics represent the same spectrum as the rest of the population,” Cowan added. “There are people who love Snowden and there are people who hate Snowden.”

Regardless of their views on surveillance, the NSA staffers have reason to thank Snowden — the whistleblower’s disclosures about government surveillance have given their resumes cache.

It’s helped create “that imprimatur of the NSA brand,” said Rothrock, who is also CEO of his own security firm, RedSeal.

“If anything, the disclosures just give you additional credibility,” Kaplan said.

It became “a little bit easier to talk about this stuff,” he added. “In the past, people didn’t talk about it.”

For the ex-NSA crowd, war stories about working in the government provide something of a competitive advantage.

“If you talk to these guys,” Rothrock said, “you kind of get an edge.”

Several investors described NSA-trained entrepreneurs as “mission-focused,” a rare trait in California.

“Mission meaning, ‘We’re going to storm that hill,’ and the means by which you storm it is what they invent,” Rothrock said. “Whereas sometimes an entrepreneur just thinks a great product solves the problem.”

“It is so difficult to find that kind of expertise,” Cowan added.

With Silicon Valley seeking a bigger voice in politics, it increasingly has a need for former government hands with connections in Washington — something NSA employees can provide in spades.

“The people they know, the access they have; they know the chain of command at the NSA,” Rothrock said.

Former staffers who have founded start-ups in the Beltway say they are taking note of the opportunities out West.

“We actually considered moving out to Silicon Valley,” said Will Ackerly, an eight-year NSA vet who co-founded encryption firm Virtru in 2012.

The company decided to stay in D.C., because it draws on a mix of funders and hires mostly employees and contractors with NSA backgrounds, but Ackerly wouldn’t rule out a coastal switch.

“Never off the table,” he said.