Network of U.S. defense investors eyeing dual-use technologies
Over the years, steps were taken to better equip the U.S. military toward modernizing defense IT infrastructure in the face of cyber threats along with increased budget free from sequestration. Recently, a group of defense investors has been closely observing dual-use technologies that may be useful for the army. Inside Defense reports:
An informal group of U.S. investors tracking dual-use technologies of interest to the Pentagon has emerged over the past year.
The group of approximately 35 investors, referred to as the “defense investor network,” is following promising commercial technologies with potential military applications, according to Pete Newell, founder of BMNT.
BMNT’s non-profit arm, the Common Mission Project, coordinates the activities of the group, which Newell stressed is an informal network.
“They’re not paid by anybody, they’re not told by anybody they have to be there, but we hold the meetings and kind of gather the bodies in a room,” Newell told Inside Defense. “Amongst those 35, it’s $25 billion in dry capital to be expended on things.”
Newell declined to identify the participants or any potential deals they are discussing. He said the group has held three meetings over the past several months, with a fourth planned for January.
“There’s some good discussions,” Newell said. “We’re careful about expectations.”
The group’s meetings have involved organizations like the Defense Innovation Unit, which aims to contract with innovative commercial companies to meet various DOD requirements. DIU works with companies in sectors including artificial intelligence, cyber and space.
Tom Foldesi, DIU’s director of commercial engagement, confirmed DIU has participated in the network’s meetings.
“They’ve all been interesting conversations,” Foldesi said.
Trae Stephens, co-founder of of Anduril Industries and partner at Founders Fund, said he has also participated in the group’s meetings and found them to be a “useful forum.” Founders Fund is a Peter Thiel-backed venture capital firm, while Anduril is aiming to become a “next-generation” defense contractor.
“I think it’s important and useful for investors that are interested in the defense space to put their heads together and talk about the issues that they’re facing and also provide a useful forum for senior executives in the government to come out and meet with these investors to understand what their challenges are in deploying capital into the space,” Stephens said.
A recently released report from the Reagan Institute Task Force pointed to “optimizing and harnessing private-sector innovation” as one of four major challenges facing the United States in “strategic competition” with other countries, primarily China.
“As the U.S. innovation system evolved, a gulf opened between the [U.S. government] and the technology industries working in areas critical to economic and national security,” the report states. “This divide is further exacerbated by cultural friction and the Pentagon’s idiosyncratic, bureaucratic barriers to entry.”
But Foldesi said the defense investor network’s formation is evidence of the “increasing momentum” around efforts to more closely link commercial companies, venture capital and DOD.
“I do think we’re about to be on the path to a virtuous circle in this space around defense tech,” he said.