US Government Warned of Adversarial Capital Investment Threat

The Silicon Valley Defense Group (SVDG) has raised concerns about the lack of innovation from large corporations in developing new products and engaging with startups. Despite exceptions like Lockheed Martin Ventures, RTX Ventures, BAH Ventures, and SAIC Ventures, traditional industry players are incentivized to focus on shareholder returns rather than driving technological advancements.

This is a problem because non-traditional companies are where most true innovations emerge, while traditional players have the expertise to develop and scale technology for government use. SVDG believes that both parts of the ecosystem need to work together to provide ingenuity, agility, and scale for Emerging Tech Readiness (ETR).

The group is also concerned about the lack of transparency in government funding, making it difficult for new and non-traditional companies to navigate contracts. Senator John McCain commissioned SVDG in 2015 to improve the Department of Defense’s collaboration with Silicon Valley. Since then, SVDG has been working towards building an ETR ecosystem, with a focus on increasing federal funding for emerging tech companies and enhancing contracting transparency and efficiency.

Concerns:

1. Adversarial capital: The increasing influence of less patriotic or democratically-minded investors may compromise national security interests.
2. Lack of dynamism from large corporations: Traditional primes and system integrators are not investing enough in organic new product development or engaging with startups, hindering ETR.
3. Opaque government funding: Insufficient transparency in government awards and contracts makes it difficult for non-traditional companies and venture capitalists to navigate the landscape.

Watch items:

1. The scope of adversarial capital investments and potential solutions
2. The state of play between traditional and non-traditional players in the Ecosystem
3. Government funding transparency and reporting metrics

Policy recommendations:

1. Increase federal funding and diversification: Allocate more funds to emerging technology companies beyond dominant players like SpaceX, exploring dedicated budgets for innovative hedge programs.
2. Enhance contracting transparency and efficiency: Mandate detailed reporting and tracking of federal awards, simplify the contracting process, and hold government components accountable for transparency.

The SVDG’s mission is to build a functional ETR Ecosystem, ensuring an enduring advantage in the techno-security competition. By addressing these concerns and implementing policy recommendations, we can promote innovation, agility, and scale in emerging technologies, ultimately strengthening national security.