San Fran Bay Area Firms Tap the Deep Draw of Homeland Security Market

Four years after Sept. 11, 2001, Bay Area technology companies have secured millions of dollars in funding to produce new technologies to protect the nation from future terrorist attacks. They range from machines that automatically detect airborne pathogens like anthrax to systems that move passengers through airport check points faster and more efficiently.

The once overlooked, tiny security technology market has exploded into a multibillion-dollar industry. International spending on homeland security -- including the U.S. Department of Homeland Security, the private sector and foreign governments -- is expected to reach $42.4 billion this year, according to calculations by the Civitas Group, a consulting firm specializing in homeland security.

But Bay Area businesses still face hurdles: a bureaucratic maze as they seek grants and contracts; protests about privacy rights; a government slow to make up its mind; and much more competition than before. For some start-ups, they've found more success doing business in other countries than with Uncle Sam. And many of the dollars spent so far have gone toward hiring more employees, not to improving technology.

"In 2001, it was a sprint. In 2005, it's a marathon," said Grant Evans, CEO of Sunnyvale-based A4Vision Inc., which develops 3D facial recognition technology. "People thought it'd be 'ka-ching, ka-ching.' (But) you need to keep running and you have to pace yourself."

A4Vision began about five years in Russia with 3D technology, but no real purpose. It considered applying the technology to help doctors with plastic surgery, but decided to pursue the security technology market after Sept. 11.

A4Vision's system takes a picture of a person's face, transforming it in just a few seconds into thousands of points that look like a mesh grid molded around the face. It measures the key features: the length of the nose, the width between the eyes, the curve of the cheekbone, then stores the data, along with the 3D image, into a database. In less than a second, a person passing through a security checkpoint can have their face scanned and their identification checked.

"This type of technology is 'Beam-me-up-Scotty,' 'Star Trek' stuff," Evans said. It is so exact, he added, that it can tell the difference between identical twins and catch a person wearing a mask.

Nevertheless, A4Vision faces daunting competition, including other types of biometric technology, or technology that uses characteristics such as fingerprints, the iris and voice patterns.. The startup landed a $1.6 million contract with the Department of Defense in a joint project with Unisys, and its machines are in use to protect employee-only areas at the Dallas/Fort Worth International Airport and the Salt Lake City International Airport. But with nearly a dozen formidable competitors, by Evans' count, A4Vision has also lost out on some contract bids.

Ask SafeView Inc. CEO Rick Rowe where its systems have been shipped and he'll rattle off a list of countries: Japan, Holland, Israel, Mexico, Amsterdam, and soon Japan, Spain, Singapore, Thailand and India.

Conspicuously missing from the list is the United States, even though SafeView's technology was originally developed out of a government laboratory and funded by the Federal Aviation Administration. Shortly after Sept. 11, Santa Clara-based SafeView licensed holographic imaging technology from the Pacific Northwest National Laboratory and applied it to a portal system. It resembles the metal detectors that passengers step through at airport security checkpoints, but instead of detecting metal, it takes a picture of the person, identifying whether the person is carrying a concealed gun, bomb or other weapons.

The machine, which can check up to 420 people per hour, compared with 120 to 180 people per hour through the metal detectors at most airports, is in use right now in Iraq by the U.S. military. It has also been tested by some federal agencies, and SafeView is hopeful that it will find a home in the mainland as well. But critics continue to raise privacy concerns and plans to roll it out have stalled.

"Other governments sit down and figure out what they're going to do and do it, but in the U.S., we tend to argue about the right way to do it," Rowe said.

GE Security's Homeland Protection Business, which is an investor in SafeView, is tackling the big picture of security check points as it lobbies legislators and the Transportation Security Administration. It developed a "check point of the future," which integrates a series of machines it has both developed and bought, such as its $900 million acquisition last year of Newark-based InVision Technologies, maker of luggage bomb detection machines.

In one version of its vision, passengers would step through a portal that uses technology to detect tell-tale traces of weapons or drugs, a machine developed by GE that currently is in use right now at the Boston Logan International Airport. If the machine senses something suspicious on a passenger, the passenger could be sent through another portal, the one developed by SafeView.

Led out of GE's Newark offices, the company is also trying to shrink the luggage bomb detection machines originally created by InVision, so that they can be used for purses and carry-on bags. After Sept. 11, InVision had been one of only two companies certified to supply airports with machines to check luggage for explosives, using medical CT-scan technology. It won millions of dollars in government contracts, its machines installed in the majority of the nation's metropolitan airports, including San Francisco International Airport, Oakland International Airport and Mineta San Jose International Airport.

But now as that market reaches saturation, GE is shifting its focus to checkpoint security. It believes it can make checkpoints safer and more efficient, reducing the number of employees needed, one of the main costs in the current budget. "We are chomping at the bit to see the full fruition of the check point of the future," said Michael Cavanaugh, chief market officer of homeland protection at GE.

For Pleasanton-based Microfluidic Systems, the demand is more immediate. To keep tabs on air quality, the government currently relies on technicians to collect air samples and test them in a laboratory.

Microfluidic landed two contracts totaling about $7 million from the Department of Homeland Security to develop machines that check the air automatically. One acts like a smoke detector for airborne pathogens, alerting people quickly that something suspicious is in the air. Another operates on a slower timetable, to analyze and identify just what is in the air. If all goes well, the machines could be deployed in about five years, but the company is under pressure to produce results faster.

"It's a pretty aggressive technology development program," said CEO Allen Northrup. "There is pressure to replace (the current method). The cost is real, every day."

The good news is that government, on local, state and federal levels, has made strides, as have businesses seeking to protect their offices and employees. They are laying the groundwork, buying the appropriate hardware and software that support the new technologies. Pleasanton's Documentum, a subsidiary of EMC, has seen a burgeoning business supplying its software to help store, manage and search through reams of surveillance video. CompuDyne Corp.'s Public Safety and Justice unit, headquartered in Fremont, has sold software to local municipalities like Union City, Fremont and Hayward, which helps dispatch police officers, firefighters and other emergency workers and aid them in analyzing clues and sifting through data.

"That's the only thing holding up new technology, you need to get the infrastructure in place," said Niloo Howe, principal at Paladin Capital Group, a venture capital firm whose roster includes former CIA director James Woolsey and Lt. Gen. Kenneth Minihan, former director of the National Security Agency. Howe, an investor in SafeView, sits on the company's board. "People need to figure out what their plan is. ... The good news is it only needs to happen once."

What's the bad news? Most experts agree that new technology is being developed rapidly, but not being deployed enough. The current technology "is inadequate to the job," said Duron Pely, vice president at Homeland Security Research Corp. "This market is in transition from existing technology that is mediocre at best to (something) more developed."

The Homeland Security Research Corp. estimates the U.S. homeland security market will grow from $23 billion this year to $43 billion by 2009.

"People should feel good we've made progress," Cavanaugh, of GE Security, said. "We've made day to day life safer. (But) we could always be safer and we're going to work very hard to make it safer."

(c) 2005 Associated Press