DOD creates office to enhance investments in tech vital to national security

The Defense Department has established a new unit to help connect companies developing “critical technologies vital to national security” with private capital funding, according to a press release from the department on Thursday. 

DOD said that the new Office of Strategic Capital—or OSC—will help ensure that technologies “such as advanced materials, next-generation biotechnology and quantum science” receive the long-term funding they need “to bridge the gap between the laboratory and full-scale production.” 

The new unit will serve as DOD’s hub for facilitating connections between relevant technology companies and private capital providers, while also helping to counter “non-market actions by strategic competitors that use U.S. capital markets to advance their own technology goals.”

"We are in a global competition for leadership in critical technologies, and the Office of Strategic Capital will help us win that competition and build enduring national security advantages," Defense Secretary Lloyd Austin said in a statement. "By working with the private capital markets and by partnering with our federal colleagues, OSC will address investment gaps and add a new tool to the department's investment toolbox." 

DOD also noted that, unlike other federal offices that “rely on grants and contracts to deploy capital,” OSC “is investigating the use of non-acquisition-based tools, such as loans and loan guarantees” to dole out investments. 

OSC’s establishment comes as the federal government continues to explore ways of harnessing private sector technologies to offset the competitive threat posed by China. In a Dec. 1 memo to senior Pentagon leadership announcing OSC’s creation, Austin said that—as outlined in the National Defense Strategy—DOD must “develop and rapidly scale technologies critical to our defense.”

“As today private sector capital is the dominant funding resource for technology development, we can build enduring advantages through engagement with trusted private capital that is focused on critical technology areas for the Department of Defense,” Austin added.

The new OSC website says the unit was established “with the mission to develop, integrate and implement proven partnered capital strategies to shape and scale investment in critical technologies.” It adds that OSC will broadly focus on two areas, including identifying and prioritizing critical technologies for DOD and then funding investments in those technologies. 

“To accomplish this, the OSC will partner with private capital providers and other federal agencies to employ investment vehicles that have proven successful in other United States government contexts,” the website added. 

OSC, which is housed within the Office of the Undersecretary of Defense for Research and Engineering, will also have an advisory council to “advise and assist” on pertinent matters, according to Austin’s memo. 

While DOD has already established several internal offices to support and enhance its relationship with private sector innovators—such as the Defense Advanced Research Projects Agency and the Defense Innovation Unit—the department said OSC will work to “scale investments” between its existing units by “increasing the capital available to critical technology companies to help them reach scaled production.”