U.S.DepartmentofDefense INVESTMENTSTRATEGY FORTHEOFFICEOFSTRATEGICCAPITAL FiscalYear2024 DistributionStatementA.Approvedforpublicrelease:distributionisunlimited. Thispageintentionallyleftblank Foreword TheUnitedStatesisinaglobalcompetitionforleadershipincriticaltechnologies.Today,privatecapitalfinancesthesignificantmajorityofthecriticaltechnologyandsupplychainsneededbytheDepartmentofDefense.Consequently,privatecapitalisavitalresourcefortheDepartmentandakeysourceofU.S.comparativeadvantageintechnologycompetition.Therefore,workingwithcapitalprovidersisanationalsecurityimperative. IestablishedtheOfficeofStrategicCapitalinDecember2022toworkwithprivatecapitalproviderstobuildenduringnationalsecurityadvantages.ThisofficewillattractprivatesectorinvestmentincriticaltechnologyareasandsupplychainsthatsupportnationalsecuritytoensurethattechnologydevelopedinAmericabenefitsAmerica.Bypartneringwithourfederalcolleaguestoworkwithcapitalproviders,theOfficeofStrategicCapitalwilladdtoolstotheDepartmentofDefense’sinvestmenttoolbox.TheOfficeofStrategicCapitalwillalsoworkinconcertwithouralliesandpartnerstoenableproductionandsustainment.OSCisacrucialelementofongoingDepartmentofDefenseeffortstosupportresilient,diversesupplychains. ThroughOSC,theDepartmentofDefensewillengagewithandenhancetheUnitedStates’significantnationaladvantagesincapitalmarkets,technologydevelopment,andcommitmenttomarketcompetition.Incontrasttoglobalcompetitorsthatcoerceandcontrolinvestorsandcompanies,theUnitedStateshasanunmatchedabilitytoinviteandempowerthosewhoseektocontributetooursharedsecurity.ThisInvestmentStrategyfortheOfficeofStrategicCapitaldescribesnewwaysthattheDepartmentofDefensewillworkwithcapitalprovidersandcompaniestostrengthencriticalsupplychainsfornationalsecurity.Together,wecanworktowardsensuringthattheUnitedStatesmaintainsitstechnologicaladvantages. LloydJ.AustinIIISecretaryofDefense FY2024InvestmentStrategyfortheOfficeofStrategicCapitali UnitedStatesDepartmentofDefense Contents 1ExecutiveSummary 2OverviewandMissionoftheOfficeofStrategicCapital 4GuidingCriticalTechnologyFrameworkfortheInvestmentStrategyfortheOfficeofStrategicCapital 8InvestmentPrioritizationApproach 10InitialPriorityAreasfortheFirstOSCProgramActivity:SBICCriticalTechnologiesInitiative 11Conclusion 12AppendixA:CriticalTechnologyAreas 15AppendixB:FederalCreditPrograms 16AppendixC:Methodology ExecutiveSummary ThemissionoftheOfficeofStrategicCapital(OSC)istoattractandscaleprivatecapitaltotechnologiescriticaltothenationalsecurityoftheUnitedStates.OSC’sinitialemphasisisonusingloansandloanguaranteesinpartnershipwithotherfederaldepartmentsandagenciestocrowdincapitalforcomponent-leveltechnologies. TheInvestmentStrategyfortheOfficeofStrategicCapitalprovidestheframeworktoidentifyinitialpriorityareasforOSCinFY24.Aninvestmentthesisforinvestorswillbeforthcoming. OSCisuniquebutcomplementarytoexistingDoDeffortsthroughthecombinationofthreeprimaryareasofemphasis.Whilenotanexhaustivelist,theseareasinclude: 1.Components(notcapabilities) 2.Finance(notinnovation) 3.Lending(notspending) TheInvestmentStrategyfortheOfficeofStrategicCapitalfocusesonstrategiccapitalneedswherepublicsupportisrequiredtoattractprivateinvestment,especiallyforcriticalcomponenttechnologiesnotalwaysaddressedbydirectprocurement.Specifically,OSCfocusesoncomponent-leveltechnologieswithbroadcommercialapplicationthatarealsorelevanttothenationalsecurityoftheUnitedStatesanditsalliesandpartners.Thefinancialapproachesdescribedherearecosteffectiveandefficientbecauseloansandloanguaranteesrequirerepaymentfromborrowers,minimizingtherequiredamountoffederally-appropriatedfunds.Whencomplementedwithprivatecapital,thesestrategiccapitalinvestmentswillcreateamultipliereffectfortotalcapitalinvestedinnationalsecurityinterests.Newpartnershipsandapproacheswillstrengthenthediverse,resilientsupplychainsneededforbuildingandmaintainingenduringtechnologicaladvantages. ThisInvestmentStrategyoutlinestheframeworkthattheDoDusestoidentifywheretousefinancialtoolsavailabletoOSCandfederalpartners,explainstheapproachtoprioritizeareasforinvestment,andliststheinitialpriorityindustrieswhereOSCwilldirectitsattentioninfiscalyear2024.ThefirstprogramactivityavailabletoOSC,inpartnershipwiththeSmallBusinessAdministration,willextendloanguaranteestolicensedfundsforinvestmentsincriticalcomponenttechnologies. InitialPriorityAreasfortheFirstOSCProgramActivity:SBICCriticalTechnologiesInitiative Priorityareas(andtheirrelatedCriticalTechnologyAreas)forthefirstOSCprogramactivity:theSmallBusinessInvestmentCompanyCriticalTechnologiesInitiative.Thesepriorityareasareintendedtobebroadenoughforinvestorstotakeaportfolioapproachbutnarrowenoughtoincreaseinvestmentinkeyindustries.OSCwillannouncepriorityareasforadditionalprogramactivitiesastheybecomeavailable. •NanomaterialsandMetamaterials(AdvancedMaterials)•Materials(Microelectronics) •Bioenergetics(Biotechnology)•Quantumcomputing(QuantumScience) •Syntheticbiology(Biotechnology)•Quantumsecurity(QuantumScience) •OpenRAN(FutureGand5G)•Quant