The Defense Department's fledgling Office of Strategic Capital has released its first investment strategy intended to "catalyze" private investment in technology industries deemed critical to national security.
“The Investment Strategy presents a guiding framework for OSC programs to complement existing DOD and U.S. government programs,” DOD said in a statement. “It also addresses how OSC determined which technology areas to prioritize for its initial program activities, based on rigorous analysis of national security applications, U.S. market competitiveness, and capital needs for critical technology industries.”
Defense Secretary Lloyd Austin, who announced the creation of OSC in December 2022, said today the strategy “will leverage America's core advantages in innovation and free enterprise to strengthen our industrial base and invest in tech areas that are critical for national security."
The investment strategy identifies the initial priority areas for the first OSC’s Small Business Administration Small Business Investment Company Critical Technologies (SBICCT) Initiative, which pairs sources of private capital with federally guaranteed loans aimed at boosting investment in DOD's high-priority tech areas.
“The Investment Strategy for the Office of Strategic Capital focuses on strategic capital needs where public support is required to attract private investment, especially for critical component technologies not always addressed by direct procurement,” the strategy states. “Specifically, OSC focuses on component-level technologies with broad commercial application that are also relevant to the national security of the United States and its allies and partners.”
The strategy identifies OSC's initial technology priorities for private sector investment as:
- nanomaterials and metamaterials (advanced materials)
- bioenergetics (biotechnology),
- synthetic biology (biotechnology),
- open radio access networks (futureG and 5G),
- sensor hardware (integrated sensing and cyber),
- assembly, testing, and packaging (microelectronics),
- materials (microelectronics),
- quantum computing (quantum science),
- quantum security (quantum science),
- quantum sensing (quantum science),
- battery storage (renewable energy generation and storage),
- space-enabled services and equipment (space technology).
“The priority areas, as determined through the prioritization approach, are intended to be focused enough to increase investment in key industries and supply chains, but broad enough to enable investors to take a portfolio approach to critical technology investments,” according to the strategy.
The document states that OSC intends to announce additional priority areas for other program activities in the future, the SBIC Critical Technologies Initiative being only the first tranche.
“This Investment Strategy describes how capital providers and companies can partner with DOD in new ways for both national security and economic security,” the document states.
The strategy is also a call to potential investors.
“Those interested in working with OSC may include providers of bank debt, venture debt, venture capital, growth equity, and other investors,” the document states. “Priority areas, investment terms and conditions, and instruction for how to participate will be provided separately for each program activity as it becomes available.”