Stanford Seminar - Silicon Valley & The U.S. Government: DoD’s Office of Strategic Capital

Office of Strategic Capital (OSC)

• OSC was established to attract and scale private capital in support of national security.
• The US government funds basic research and prototyping, but private capital is the dominant source of financing for commercialization and scale-up.
• Critical technology areas, such as semiconductors, renewable energy, and quantum computing, are not receiving sufficient private financing.
• Software industries and software-enabled industries receive more investment because they can return capital faster and have lower technical risk.
• There has been a decline in early-stage commercial investment in hardware-based industries due to their higher cost, longer time to generate returns, and less well-understood nature.
• OSC focuses on components, not capabilities, and uses lending, not spending, to support primarily commercial, non-federal industries.
• OSC collaborates with other government organizations like DARPA and DIU to identify promising technologies and support their transition to the defense sector.
• OSC's priority list for critical technologies is based on capital flows, capital intensity, and time to exit, rather than solely on national security considerations.
• OSC believes that providing loan programs is more effective than simply becoming a better buyer of technology, as it addresses supply chain issues and ensures secure access to critical components.
• OSC recognizes the importance of working with international allies and investors to leverage their expertise and resources in supporting critical technologies.
• OSC's focus is not limited to venture capital providers but encompasses the full capital stack.

Small Business Investment Company (SBIC) Program

• The SBIC program, created in 1958, provides government-backed loans to equity investors to make investments in areas of national security concern.
• The SBIC program helped to accelerate the growth of venture capital and funded companies like Intel and Sun Microsystems.
• The SBIC program provides government-backed loans to investors, which are then matched with private capital to invest in critical technology companies.
• The SBIC program has been around since 1958 and has not cost taxpayers any money in the last few decades.
• The Office of the Secretary of Defense (OSD) launched the SBIC's Critical Technologies Initiative to focus on investing in critical technology areas within the industrial base.
• The SBIC program is a scalable way to attract and scale private capital without costing taxpayers any money.
• Applications for the SBIC's Critical Technologies Initiative are open now.

Advice for Founders, Students, and Investors

• Continue pushing forward and advancing industries and research in a way that builds new industries and growth for the country.
• Consider government service in the technology, innovation, and national security space, as it is pervasive across the US government and offers diverse opportunities.
• Stanford graduates are encouraged to follow OSD for potential job opportunities in the future.