DoD unveils investment strategy for its Office of Strategic Capital

WASHINGTON — The Defense Department is requesting $144 million for the Office of Strategic Capital, created to help bring private investment to companies developing dual-use technologies with both commercial and national security applications.

In an investment strategy released March 8, the Pentagon identified space services, artificial intelligence and cybersecurity among its priorities for attracting private capital.

Defense Secretary Lloyd Austin launched the Office of Strategic Capital in December 2022. But the program thus far has been stuck in limbo due to a lack of congressional authorization to make loans and actual funding. The OSC wants to use financial tools like loan guarantees to spur commercial investment. 

Congress has now authorized the OSC, and DoD is seeking $144 million for the program in fiscal year 2025. The funding is included in the budget proposal the Pentagon sent to Congress March 11.

Financing tools

With financing tools like loan guarantees — which essentially protect private investors against potential losses — the OSC aims to boost tech firms that typically shun government work. By focusing on dual-use technologies with broader applications beyond the military, the Pentagon believes it can entice investors seeking returns on their money as well as strategic capabilities.

Priority investment areas outlined in the strategy include space technologies as well as artificial intelligence, cybersecurity, energy storage, semiconductors, autonomous systems, biotechnology, quantum computing and advanced materials.

The OSC plans to work with other government agencies that use financial instruments to fuel technology development, such as the Small Business Administration’s Office of Investment and Innovation. That office runs the Small Business Investment Company (SBIC) program for early-stage investment in key technology areas.

Impact in supply chains

Investment tools such as government-backed loans and DoD backing for SBIC investors can have a significant impact in defense and space sectors’ supply chains where there are concerns about availability of key components, said industry consultant Mandy Vaughn, a member of the National Space Council’s User Advisory Group.

“They are working through various authorities to be able to make and enable meaningful investments into critical technology areas,” Vaughn told SpaceNews. 

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