The army is trying to revive its venture capital branch
Written by Jackson Barnett
The Department of the Army is seeking to revitalize its in-house venture capital firm, the Army Venture Capital Corporation (AVCC), which was created by Congress in 2002 but lay dormant for 10 years without funding.
The company now has a new chief executive, Jake Chapman, who spoke to FedScoop during his first interview. Chapman is still working to get congressional funding to invest in startups, but if he gets $50 million to $100 million, he says the Army Venture Capital Corporation could be a key part of putting more startups and of emerging technologies in the hands of the troops.
“I think our organization can play in that liminal space where there’s a product that works, and there’s a buyer but most [venture capital firms] won’t hit the business, but we could step in and say okay, we’ll bridge you for the next 18 months to two years until this deal is done,” Chapman told FedScoop.
The first iteration of the Army Venture Capital Corporation (AVCC) was a failure, investing in companies that flopped during the 2008 recession and failing to build the goodwill it needed in the Valley to be a partner in confidence. Or at least that’s Chapman’s diagnosis and exactly what he wants to avoid.
“The first ten years weren’t very successful from a financial standpoint,” Chapman said. “The military around 2002 didn’t really know what was going on in venture capital.”
Chapman said he brings the kind of experience the Army needs to succeed this time around. He is a lawyer by training and has run venture capital firms in the valley focusing on “deep tech” like aerospace and biotechnology.
“The number of people who have watched the defense technology space carefully… is a small group of people. I am one of them,” he said.
The problem for many startups wanting to work in defense is that the money is relatively easy to come by in small, short bursts, but major contracts take years to land. Without big deals in hand, venture capitalists are often reluctant to bet on a company that wants to work with the military. This dynamic has often driven startups to focus on commercial customers who can bring them revenue.
Chapman’s solution: Give startups a few million dollars to signal to investors that the military is really interested. The power of the AVCC will be in the “signal” they send to the investment community with their money. Couple its investments with a strong network in the valley, Chapman says the AVCC can be a vital part of bridging the so-called valley of death.
In addition to bridge financing, Chapman wants the AVCC to focus on deterring antagonistic capital from funds with ties to countries like China and Russia and doing what he calls “ecosystem mapping.” , or the creation of datasets on startups and private funds that want to work. with DOD.
“We want to push and pull technology in the department,” he said.
Chapman has over a decade of experience in the Valley working with venture capital investments, his work gives him the perspective of what venture capitalists need to hear from companies looking to invest. a new round of funding.
His move from the commercial world to DOD was largely driven by a desire to apply his skills to sets of national security issues. His father and family members served in the military, and he felt his skills could be better applied to funding the technology needed to win the next war.
“I think one of the best ways to do that is to invest in national security technology,” he said.
Chapman continues to work to build support for the organization. Although the AVCC authorities remain on the books, she has no money. He hopes to recruit six people to help him run the shop, but so far his top priority is lobbying Congress for money.
He said he saw support from both sides of the aisle and from Chambers for the idea. Similar initiatives have been raised to allocate $100 million to an “innovation” fund.
“This is a totally unique tool in the DOD tool set and it would be a shame to let it go,” he said.