Booz Allen is eyeing these 4 defense-tech fields for investment
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Investors are betting billions of dollars that the world of defense tech is a gold mine, despite the Pentagon's reputation for sluggish purchases and arcane regulations.
Why it matters: That conviction is fostering fresh ideas and market competition, forcing longtime kingpins to adapt.
- Without bullish investors, there'd be no neo-primes. And every time those new players win a big contract, the excitement grows.
Driving the news: Booz Allen Hamilton is tripling its venture capital commitment, up to $300 million, with plans to make 20-25 deals over the next five years.
The intrigue: Brian MacCarthy, managing partner at Booz Allen Ventures, told Axios he doesn't see the other venture funds pouring into the defense-tech space as competition. "We're actually all aligned to work together," he said.
- Instead, the pressure stems from China. Scores of unmanned systems, long-range missiles and laser weapons were trotted out in early September for Xi Jinping's military procession.
- "That's the index," MacCarthy said. "They don't care about winners and losers. They're going to use their entire ecosystem to help" the People's Liberation Army.
State of play: Four areas are of particular interest to MacCarthy and Booz Allen CFO Matt Calderone, the pair said in a recent interview.
- Frontline manufacturing, disconnected from the typical supply chain
- Command and control for the space domain
- Quantum
- Simulated worlds and digital test ranges
What they're saying: "When we announced the fund in 2022, it was unique from our vantage point because we were putting our money where our mouth was, to see if our thesis was right," MacCarthy said.
- "We saw a lot of patterns, where all these companies were building phenomenal tech," he said. "But they were still struggling to get past what we call the LRIP phase, or the low-rate initial production phase, into major programs."
Catch up quick: Booz Allen has backed more than a dozen companies since 2022, including defense-tech hotshots Firestorm Labs, Hidden Level, Second Front and Scout AI.
Threat level: Motivating the decisions and pace is an international "race for technical superiority, but not just in the lab," according to Calderone.
- "It's got to be fielded. And that is where we provide extraordinary value. We understand — deeply — the very unique mission needs and technical needs of the warfighter," he said.
- "The question is: How do you get stuff in people's hands in the next 12-18 months that's of value?"
Zoom out: The U.S. Army in September launched Fuze, a trying-and-buying model inspired by venture capitalists.
- In a past life, Army Secretary Dan Driscoll was COO at a $200 million VC fund.
Go deeper: Booz Allen CEO: Defense tech has a "three-timeframe problem"
