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Watch Where the Money’s Going: An Inside Look at the DOD’s Latest Innovation Venture

The Office of Strategic Capital was stood up in December of last year, marking a decisive move by the Department of Defense to direct financial support to the technology industry. OSC is particularly interested in funding projects and organizations related to “advanced materials, next-generation biotechnology and quantum computing,” per reporting from Washington Technology.

“In order to advance technologies to help the United States win this global competition, we need to find better ways to partner with private capital providers to increase capital flows to those areas that are otherwise less opportunistic than the top technology areas we see private capital flowing towards today,” said Jason Rathje, director of OSC. Rathje was part of the flagship team behind AFWERX, the Air Force’s innovation-focused program.

Rathje will be the morning keynote speaker at the Potomac Officers Club’s Budget and Priorities Summit on Oct. 17. Register now to attend this informative in-person event, which will provide countless opportunities to converse and trade insights with peers, mingle with the expert speakers and learn about how the U.S. government is going to spend its precious resources in the coming year.

OSC’s first major initiative was announced in March: a team-up with the Small Business Administration dubbed the Small Business Investment Company. As one would expect from its title, SBIC is designed to stir up capital interest in technology. It will ideally assist organizations with fewer opportunities and advantages to cross the technological “valley of death,” the commonly referenced, impeding middle zone between a tool’s development stage and its manufacturing and implementation stages.

“That approach that we’re taking with the SBIC program is one where we’re trying to increase the investment to crowd-in private capital, create patient capital investment funds, prioritizing those areas that are investing into things that have large applications like semiconductors, but aren’t necessarily going directly to the things we buy,” Rathje explained at the Center for Strategic and International Studies seminar where he introduced the small business venture.

Rathje stressed the notion of patient capital — investments that take time to pay off — as crucial to “high capital intensive industries and hardware.” Deep tech, he said, is much pricier and more financially demanding than software.

Recently, the OSC has come under scrutiny. Massachusetts Sen. Elizabeth Warren penned a letter to Under Secretary of Defense for Research and Engineering Heidi Shyu in July expressing concern about how the office’s necessarily hand-in-glove relationship with commercial entities could create an imbalance of priorities for the DOD.

The consultants OSC has brought on, Warren feels, have a potentially unfairly advantageous amount of access to information on DOD decision-making as well as have their interests be valued and considered too heavily.

“The OSC appears to be providing these consultants an opportunity to refresh their rolodexes without having appropriate guardrails in place to protect the public interest,” Warren stated.

Rathje has commented that the OSC is still in its nascent form, despite the fact that the office was in gestation for about a year before its December launch.

“Internal to the Department, we are doing everything we can that [is] within the bounds of our existing authorities…We are building our investment strategy, we are building our governance fora, we are building the structural piping inside of DoD to make this real…. What we are doing outside of that [is] interagency partnerships,” the executive said.

Want to hear more from Rathje on the future of the Office of Strategic Capital and how it plans to give a leg up to companies in the private sector, thus bolstering the efficiency of tech innovation’s path to making a difference in national security? Register and attend the Potomac Officers Club’s Budget and Priorities Summit. In addition to Rathje, this Oct. 17 symposium will gather some of the government’s most important minds for other fascinating keynote speeches and panels.

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