The Pentagon’s strategic capital office will focus its 2025 investments on 15 industry segments it thinks could most support U.S. national security needs, including spacecraft, microelectronics materials and manufacturing and biochemicals.
The office released its fiscal 2025 investment strategy Thursday, offering a snapshot of its priorities for the coming year.
“Investments will be prioritized based on their national security impacts, defined as those that provide the United States and/or its allies and partners with robust competitive advantage relative to strategic competitors,” the document states.
Defense Secretary Lloyd Austin established the Office of Strategic Capital in 2022 to help direct private sector capital to defense technologies. The following year, Congress gave the organization authority to offer loans and loan guarantees to companies.
OSC has since been busy making use of those authorities. It announced last October it would provide $1 billion in direct loans to firms that make in-demand defense component technologies. The goal is to help companies that fund the construction of equipment needed to scale production across 31 critical defense technologies.
In late October, the office announced it approved 13 private funds to participate in the first round of its Small Business Investment Company Critical Technology Initiative, or SBICCT. The effort aims to draw private capital to companies working in those same defense-relevant technology areas, according to OSC Director Jason Rathje.
“The ‘so-what’ of this program is it allows us to incentivize the capital markets to start investing more into our critical technology areas because it changes the return profile,” he told reporters in October.
In fiscal 2025, OSC will focus its work on those new financial products with an emphasis on more than a dozen industry segments that are of particular interest to DOD. These include areas like biomanufacturing, hydrogen generation and storage, autonomous vehicles and robots and sensor hardware.
Its strategy also lays out a framework for prioritizing near-, mid- and long-term investment.
Over the next three years, the office sees its financial products helping to minimize dependencies and “chokepoints” by investing in diverse technology, supply sources and capital.
Further out, in the two- to seven-year timeframe, OSC envisions playing a role in helping scale U.S. and allied production through targeted investments. Five to 15 years out, it sees its services helping to not only develop technologies but also commercialize them into “sustainable enterprises,” according to the strategy.
“Here, the potential impact of OSC’s financial products includes the acceleration of growth of nascent industries through fund-focused investment programs, such as the SBICCT Initiative, which lower the cost of capital to invest in technology areas that require patient capital,” the document states.
Courtney Albon is C4ISRNET’s space and emerging technology reporter. She has covered the U.S. military since 2012, with a focus on the Air Force and Space Force. She has reported on some of the Defense Department’s most significant acquisition, budget and policy challenges.
