Alternative Funding Mechanisms in Review

The Department of Defense (DOD) has become concerned that critical technologies are insufficiently capitalized to support national security. A review of global private capital investment shows that investors have been allocating resources toward software-heavy capabilities, such as e-commerce and software as a service, leaving funding gaps for critical components and capabilities where investors perceive greater risk. DOD’s new Office of Strategic Capital (OSC) was set up to address this challenge by catalyzing investments in cutting-edge technologies to support the development and maturation of critical components and capabilities. To do this, OSC aims to go beyond direct contract and grant funding to leverage various financing tools used by U.S. government agencies outside DOD. This report provides an overview of these alternative funding mechanisms. By examining these financing tools and their ongoing use, DOD may better prepare to effectively leverage alternative financing toward national security aims.

This report was made possible by the generous support of the Office of Strategic Capital.