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DOD Office of Strategic Capital Will Soon Release its Investment Strategy

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The new office aims to bring private funding for critical technology in national security.

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DOD Office Strategic
Secretary of Defense Lloyd J. Austin III and SBA Administrator Isabella Casillas Guzman sign a letter of intent partnering SBA and DOD’s newly established Office of Strategic Capital on Dec. 3, 2022. Photo Credit: Chad McNeeley / DVIDS

The Pentagon’s new office created to attract private capital for innovative technologies will release its first investment strategy “in the coming months,” according to its Chief Strategy Officer Eric Volmar.

The Office of Strategic Capital, funding for which was earmarked in the President’s 2024 budget request, is also convening a governance forum to which the director of the new unit provides “investment priorities in the form of an investment prospectus.”

“We’re also convening OSC’s senior governance forum, the Strategic Capital Advisory Council. … It’s an effort to bring together the entire department to move on these new initiatives at the time. … It just couldn’t be more urgent,” Volmar said at NDIA’s Emerging Technologies for Defense conference Tuesday. “Stay tuned for this with the release of the initial OSC investment strategy in the coming months.”

While federal agencies have long used credit programs to participate in capital markets, the Defense Department has largely relied on grants and defense contracts to deploy capital. The Office of Strategic Capital, on the other hand, is unique as it seeks to use tools such as loans and loan guarantees, to increase capital flow and support critical technology businesses from early stages to full production.

The Office of Strategic Capital opened in December by launching its first Small Business Investment Company Critical Technologies (SBICCT) initiative designed to extend loans and loan guarantees to small businesses for innovative technologies toward national security.

The OSC’s funding model is currently being contended in Congress, where House and Senate appropriators differ on how funding would be executed.

While the President’s 2024 budget request included $99 million for the office, the Senate Appropriations Committee recently described the request to fund a loan guarantee program through the office as “unexecutable” in its appropriations bill.

Instead, the Senate’s proposal would allocate $20 million for the Advanced Defense Capabilities Pilot program. This public-private partnership would provide funding to defense industrial base firms based on guidelines from the Under Secretary of Defense for Acquisition and Sustainment.

Congress is currently in recess, but is expected to reconcile the House and Senate versions of the bill when it reconvenes Sept. 6.

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