The Pentagon’s Office of Strategic Capital focuses on “deep tech” startups through the SBIC initiative

Artificial intelligence and technology

Artificial intelligence and technology (Getty Images)

WASHINGTON – Two months after its founding, the Pentagon Strategic Capital Office (OSC) The office manager said today that he is looking at ways to increase capital flows and market participation in areas of deep technology — things like artificial intelligence, biotechnology and quantum computing — and is developing his first investment strategy.

“How do we give these tech entrepreneurs the chance to take what they have [science and technology] In products and services that not only support the national security mission, but also greater economic prosperity? said Jason Rathje, who was a guest speaker at today’s meeting Defense Innovation Council. “Well, the Strategic Capital Office is considering two new strategies to help align and expand private investment in support of national security.”

These two strategies are corporatism, in which the government “We simply partner with private capital providers to co-invest in new technology efforts to help scale the business where we help scale the technology,” Rathje said, and a “more modern strategy” for the Department of Defense: leverage.

“Leverage is changing the economics of deep tech investments,” Rathje said. “Essentially what leverage does is it reduces the cost of capital, and for private investors to make the required patient capital investments in the sizes required to invest in deep tech companies.”

The Pentagon created OSC last December in an effort to help bridge “Death Valley,” Where innovative technologies fail to transform into actual record programs, through the development and implementation of “proven partnership strategies to shape and expand investment in critical technologies,” the DoD said in a statement. note. While the OSC and the Defense Innovation Council are separate entities, they share a similar focus on leveraging private industry to drive innovation within the department.

“OSC was founded primarily to give the Department of Defense a new tool in our existing competition because today the United States is … in a global competition to be a world leader in emerging and critical technologies,” said Rathje. “Technology areas like semiconductors, advanced materials, and biotechnology are just as important as those defensive technologies that we consider — like hypersonics and directed energy — these are the areas of technology that we spend billions of dollars on.” [science and technology] Financing… winning this race is really vital to national security and economic prosperity.”

In December, the office launched its first program activity, the Small Business Investment Corporation (SBIC) Biotechnologies Initiative through the office’s partnership with the Small Business Administration. Rathje said the SBIC program has already helped create new investment opportunities in early-stage deep tech companies.

“The way this program works now is that it takes advantage of what’s called the Federal Credit Program … where other departments and agencies use government loans and loan guarantees to increase areas of technology and societal sectors that we think are important to invest more in,” he said. .

Rathje added that the OSC will begin accepting applications for the SBIC initiative by the summer and is willing to “license our first funds” for the program this year. The office also plans to publish its first investment strategy, which will assess critical technology areas for “capital availability as well as liquidity opportunities.”

“What this does is it really helps us channel and direct these tools to invest in the areas of these technology sectors that require this source of capital the most,” he said.

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