The Defense Department announced today creation of the Office of Strategic Capital, or OSC. The new office is meant to ensure that technologies under development right now or in the future, which may be critical to U.S. military requirements, are able to get the funding they need to make it to market.
"Next-generation biotechnology and quantum science often require long-term financing to bridge the so called 'valley of death' between the laboratory and full-scale production," Pentagon Press Secretary Air Force Brig. Gen. Pat Ryder said during a briefing today. "These technology companies also suffer from a limited supply of longtime-horizon 'patient capital,' which results in an inability to transition technology into military capabilities, even for technologies developed with the help of federal research grants or contracts."
The OSC was stood up by Secretary of Defense Lloyd J. Austin III, and aims to help find funding to ensure companies who are developing technology that may one day be used to support the nation's defense, are able to bring that technology to maturity and then into full-scale production. Included among the types of technologies the OSC is interested are those that would typically have mostly commercial interest and not be purchased directly by the department, but which would enable future defense capabilities.
The OSC is not unique in its mission, Ryder said. Other innovation organizations within the department, such as the Defense Advanced Research Projects Agency, also known as DARPA, and the Defense Innovation Unit are also working to support the development of critical technologies.
"OSC aims to scale investments between science and technology-focused organizations, such as DARPA, and commercially-oriented organizations such as the Defense Innovation Unit, by increasing the capital available to critical technology companies to help them reach scale production," Ryder said.
The OSC aims to be different in how it provides support, Ryder said, and is investigating the use of non-acquisition-based finance tools, such as loans and loan guarantees.
"Given the fact that the department relies on advanced technology for a lot of the capabilities we need to stay competitive, this gives us another capability to work with investors and to work with industry to ensure that programs that otherwise may not be funded, or may not be attractive to investors, can be funded in a way that gets them across ... the so-called 'valley of death,'" Ryder said. "It gives us another tool in the toolkit to be able to ensure that we can stay competitive against our strategic competitors, like China and Russia."