The Defense Department, in partnership with the Small Business Administration (SBA), has launched a groundbreaking investment initiative aimed at accelerating technology innovation in fields critical to U.S. national security. Through the Small Business Investment Company Critical Technology (SBICCT) initiative, over $2.8 billion will flow into innovative startups and small businesses focused on essential technologies, including microelectronics, space technology, advanced computing, and artificial intelligence.
The first cohort of 13 licensed funds under this initiative can now access government-backed loans from the SBA to fuel investments in companies within these priority areas. Each participating fund can borrow up to $175 million, with a flexible repayment structure that defers loan payments until returns are realized. This makes it financially viable for investors to support high-cost industries often underfunded by traditional venture capital.
Launched in 2022 by Secretary of Defense Lloyd Austin and SBA Administrator Isabel Casillas Guzman, the SBICCT initiative was built on the established SBIC program in 1958, which has a long legacy of fostering U.S. technology growth. This historic program, responsible for funding early innovators like Fairchild Semiconductor and Intel, channels capital to private investors instead of businesses directly, encouraging risk-taking in costlier industries by offsetting financial burdens. Since its inception, the SBIC program has invested over $130 billion, supporting almost 200,000 small businesses.
According to DoD’s Office of Strategic Capital Director Jason Rathje, the new initiative lowers the cost barrier for investors, especially in semiconductors requiring significant initial investment. By reducing financial risk, the SBICCT initiative aims to shift capital towards areas critical to national security that typically struggle with later-stage funding.
Complementing existing Small Business Innovation Research (SBIR) loans that target early-stage projects, the SBIC program supports later-stage growth, helping companies overcome the “valley of death” — a critical period when many businesses fail to scale from lab to market. Additionally, companies can access debt financing through SBICCT, offering flexibility beyond venture capital backing alone.
The program conducts quarterly application rounds, with a deadline of November 15. It seeks to attract additional investment, building on the interest of over 100 existing funds. With these new investments, the initiative aims to direct over $4 billion into 1,700 portfolio companies, laying the groundwork for the next generation of U.S. technological innovation in defense-critical sectors.
