Not many people have heard of the Defense Advanced Research Projects Agency, DARPA for short, much less know what it does. But this little-known government agency was created by the Department of Defense in the late 1950s to ensure the U.S. military’s technical superiority. Even more interesting to investors, it also controls about $3 billion in research funds that act like seed capital that is strategically distributed to the private sector in hopes of creating technological breakthroughs that can be put to use by the military.

As the Chief Strategist of Game-Changing Stocks, I’m always on the lookout for “the next big thing.” That’s why it’s a no-brainer to look through DARPA’s current projects and ideas for potential blockbusters.

#-ad_banner-#The agency tends to be the ground floor operation for broader Department of Defense goals, and if you can find a trend in new project ideas, you can get a good sense of companies that are worth following as they develop their technologies and bring a product to the market. This is kind of intel I live for.

But what makes this angle unique is that these breakthrough companies hired by DARPA offer a more defensive play than similar businesses. In this uncertain economy, it’s very helpful to have a stable, reliable partner like the U.S. government. Uncle Sam is picking up the tab for the project they’re working on — pretty nice if you’re a small company!

Below, I’ve highlighted a few technologies I’ve found looking through DARPA’s files that look like ground-breaking ideas if all goes according to plan. While it can take considerable time to take a new idea from “lab to fab” (laboratory to fabrication), the companies below already have a good start in their respective fields.

• Neovision2: An effective military operation demands superior intelligence — both human intelligence (called “HUMINT”) and signals intelligence (“SIGINT”), the latter meaning radar and satellites. While the SIGINT problem has been solved by dozens of orbiting satellites, it’s not perfect because the data still has to be analyzed and can never be as precise as human observers. But that mission is highly risky.

What the Pentagon wants from contractor Evolved Machines is a sensor that mimics HUMINT, one that can see and instantly interpret what’s going on, identifying threats and convey that information in real-time to battlefield commanders. “Integration of recent developments in the understanding of the mammalian visual pathway with advances in microelectronics,” DARPA says, “will lead to the production of new revolutionary capabilities from the ground to the sky that will provide a new level of situational awareness for the warfighter.”

• Blood Pharming: Blood used in combat zones is donated in the United States and is usually up against its expiration date (about 28 days) by the time it ships, let alone by the time it might be used. So the military wants to be able to produce transfusable universal red blood cells that can be grown in an automated, portable cell culture. In other words, one guy in the platoon wears a backpack that can grow blood. The company building this system is Cleveland-based Arteriocyte.
   
• Programmable Matter: One minute it’s a flat sheet, the next it’s an aircraft wing, a bridge or a sniper tower. It’s part of a DARPA project being carried out by scientists at Harvard and MIT to use “smart” materials that can fold themselves into certain shapes upon command. The robotics experts who did the study created a segmented resin-fiberglass composite sheet capable of folding itself into an airplane or a boat. They recently published their findings in the Proceedings of the National Academy of Sciences. To see a video of the programmable matter in action check out this link.

Those are just three of my favorite projects. But the fact is that DARPA has its hands in dozens of ideas at once. It is without a doubt the most interesting venture capital shop I’ve ever run across. And their backing also serves to make the companies it invests in more defensive tech plays, given that they are working on new and unproven ideas.

Action to Take –> But why am I sharing this? After all — the entities mentioned above are private; they don’t trade on the open market.

That’s why I’m finding these ideas now. When you’re looking for the next big thing, it means going off the beaten path for your ideas. I’ll continue to watch these — and other — companies that are associated with DARPA. If and when they go public, I’ll be ready. And by being early to the game, I’m assured of being among the first investors in a game-changing company.

The point is, these are the kind of places successful, long-term growth investors need to look for the next game-changers… even if the profits aren’t able to be made right now.

P.S. While many of the projects DARPA funds are headed by tiny private companies, there is a handful of small public companies working with the Department of Defense. I uncovered seven of these cutting-edge companies in a recent issue of Game-Changing Stocks. To learn more about this advisory, including the 10 financial surprises I think are coming in 2011, read this memo.