Pentagon officials on Wednesday detailed the new virtual “Trusted Capital Marketplace,” (TCM) which aims to bolster opportunities for U.S. venture capital (VC) firms to invest in emerging defense technologies and root out foreign investors from adversarial nations.
The new digital market platform, which officially launched in December, already has 128 companies onboard and around 30 vetted capital providers, officials told reporters.
“We are really hoping to diversify our Defense Industrial Base to bring on a lot of non-traditional companies to work with us. And this is a fantastic way for those companies to not only identify themselves to the Department of Defense but really almost get into an almost speed dating app with all kinds of capital providers that are very interested in finding those innovation providers for the department’s critical technologies,” Ellen Lord, the Pentagon’s top acquisition official, said during the Wednesday press briefing.
The new TCM digital marketplace will function like a “speed dating app,” according to Lord, connecting companies offering ideas across 27 technology sectors with VC firms, such as Acorn Growth Companies and Veritas Capital.
“Trusted Capital works by providing opportunities for trusted financial institutions and qualifying companies to explore mutually beneficial partnerships in support of national security goals,” Lord said. “We are really hoping to diversify our Defense Industrial Base to bring on a lot of non-traditional companies to work with us.”
Lord said the pandemic has highlighted the growing risk of foreign investors, specifically from China, targeting U.S. companies in need of quick cash.
In the first four months of 2020 alone, Lord cited data that China had invested $4.5 billion in companies in the U.S. and allied partner nations.
“Many small and medium-sized companies in the DIB are vulnerable to adversarial capital, so we need to make sure companies can stay in business without losing their intellectual property,” Lord said. “Economic security can be undermined by the acquisition of companies in the defense and dual-use sectors by entities that are U.S.-based but are actually owned or controlled by adversarial foreign entities.”
Katie Arrington, the Pentagon’s chief information security officer for acquisition and sustainment, said all participants on the TCM platform must go through a rigorous vetting process before joining the system, to include “anything on the company from who is working on the board, where their financing has come from, legal issues, etc.”