Technology, Innovation and Great Power Competition,TIGPC, Gordian knot Center, DIME-FIL, department of defense, dod, intlpol 340, joe felter, ms&e296, raj shah, stanford, Steve Blank, Army Venture capital

1. Army Venture Capital Initiative
ORIGINAL PROBLEM STATEMENT
The gap between U.S. and Chinese military innovation is
rapidly closing and poses a threat to U.S. military
dominance specifically in the Indo-Pacific Region.
In order to maintain our capability gap, the U.S. needs to
reevaluate and improve its public venture capital
economic relationship with companies that have
potential for dual-use technologies which can play a vital
role in leading U.S. military innovation.
FINAL PROBLEM STATEMENT
The gap between U.S. and Chinese military capabilities is
rapidly closing and poses a threat to U.S. military
dominance in the Indo-Pacific Region.
In order to maintain our capability gap, the DoD needs to
reevaluate and improve its funding strategies and
partnerships with mid-stage private companies that have
potential for dual-use technologies, which will play a vital
role in catalyzing U.S. military innovation.
Team 1 – Interviews: 54
Leopold van den Daele
BA Product Design ‘24
Sophia Danielpour
BA Economics ‘24
Joshua Vanderlip
GSB MSx ‘21
Andy Yakulis
GSB MSx ‘22

2. 2
Sclerotic AVCI
design:
beholden to too
many interests
Private vs
Public Sector:
AVCI 2.0 is
doomed to fail
Unfair Adv:
What is AVCI’s
unfair
advantage?
Value Prop:
AVCI’s DoD
connections
and culture
Need Found:
B-C stage,
Partnerships &
Support
Functional
Ecosystem:
Afwerx, DIU, all
promote DI
Advisory
Boards:
empowering
management
team
Bureaucratic
Overreach: Can
AVCI ever really
be lean?
Incentives: Who
is running this
and why?
What’s at stake?
System wide
inertia: Difficult
to enact durable
change
Andy
Sophia
L
e
o
p
o
l
d
Joshua
Real Potential:
AVCI as an
unprecedented
opportunity
Ineffectual
management
structure:
Crowded
The right
stage?: Seed
and Series A or
B-C?
Management
workaround:
Incentives and
structures
redesigned
Management
receives Carry:
restructures
incentives
Stage Pivot:
Series A-C
It’s a culture
question: Mil
should adopt
VC’s lean
structure
Potential
workaround:
Incentive and
management
structure
Identified
Investment
Thesis:
Incentivize
Innovation
AVCI Team Journey Map
Fall 2021
Management
Structure and
conflicts of
interest:
Potentially
Peter’s Recs:
Apolitical and
helpful moving
forward
Tax Incentives:
Promotes tier 1
VC firm
engagement
Identification of
Relevant
Investment
Stage: Later
stage?
Team
Assumed Tested Applied
Management
Redesign: AVCI
structural
workarounds
Intricacy and
Incentives:
systems needs
redesign
Team Journey Map

3. 3
Understanding the Problem: Great Power Concerns Require Innovation
• The U.S. has ventured into a new era of competition with
its adversaries, namely Russia and China, fought in
cyberspace and in the economic and acquisition domains.
• Now, more than any other era in history, the United States
must rally its innovation base to maintain its edge and, in
some areas, keep pace with its adversaries.
• Chinese technology innovation is advancing rapidly and
may outpace the United States if it does not take drastic
measures to incentivize innovation.
The Sputnik moment has passed.

4. 4
Sclerotic AVCI
design:
beholden to too
many interests
Private vs
Public Sector:
AVCI 2.0 is
doomed to fail
Unfair Adv:
What is AVCI’s
unfair
advantage?
Value Prop:
AVCI’s DoD
connections
and culture
Need Found:
B-C stage,
Partnerships &
Support
Advisory
Boards:
empowering
management
team
Bureaucratic
Overreach: Can
AVCI ever really
be lean?
Incentives: Who
is running this
and why?
What’s at stake?
System wide
inertia: Difficult
to enact durable
change
Andy
Sophia
L
e
o
p
o
l
d
Joshua
Real Potential:
AVCI as an
unprecedented
opportunity
Ineffectual
management
structure:
Crowded
The right
stage?: Seed
and Series A or
B-C?
Management
workaround:
Incentives and
structures
redesigned
Management
receives Carry:
restructures
incentives
Stage Pivot:
Series A-C
It’s a culture
question: Mil
should adopt
VC’s lean
structure
Potential
workaround:
Incentive and
management
structure
Identified
Investment
Thesis:
Incentivize
Innovation
AVCI Team Journey Map
Fall 2021
Management
Structure and
conflicts of
interest:
Potentially
Peter’s Recs:
Apolitical and
helpful moving
forward
Tax Incentives:
Promotes tier 1
VC firm
engagement
Team
Assumed Tested Applied
Management
Redesign: AVCI
structural
workarounds
Intricacy and
Incentives:
systems needs
redesign
Team Journey Map: First Major Discovery: DoD’s innovation ecosystem
Identification of
Relevant
Investment
Stage: Later
stage?
Functional
Ecosystem:
Afwerx, DIU, all
promote DI

5. 5
First Major Discovery: DoD’s Innovation Ecosystem is Fatally Flawed
• Small business DoD innovation is misaligned with the goal of maintaining
competitive military advantage: un-enticing investment check size, an archaic and
risk averse DoD acquisitions ecosystem, and a fear of the loss of intellectual
property.
• Venture Capital (VC) firms do not want to invest in solely DoD-only companies:
investment returns face speed and risk levels that are unacceptable.
• DoD attempts to spur innovation have merely created a system of innovation
tourism, almost exclusively focused on early-stage ventures.
• The Defense Primes are best suited for the procurement of large material solutions,
not innovative technology, and they have a systemic choke on R&D funding through
ineffective requirements based “innovation”.

6. 6
Defense Acquisitions… A “Boil the Ocean Problem”

7. 7
Sclerotic AVCI
design:
beholden to too
many interests
Private vs
Public Sector:
AVCI 2.0 is
doomed to fail
Unfair Adv:
What is AVCI’s
unfair
advantage?
Value Prop:
AVCI’s DoD
connections
and culture
Functional
Ecosystem:
Afwerx, DIU, all
promote DI
Advisory
Boards:
empowering
management
team
Bureaucratic
Overreach: Can
AVCI ever really
be lean?
Incentives: Who
is running this
and why?
What’s at stake?
System wide
inertia: Difficult
to enact durable
change
Andy
Sophia
L
e
o
p
o
l
d
Joshua
Real Potential:
AVCI as an
unprecedented
opportunity
Ineffectual
management
structure:
Crowded
The right
stage?: Seed
and Series A or
B-C?
Management
workaround:
Incentives and
structures
redesigned
Management
receives Carry:
restructures
incentives
Stage Pivot:
Series A-C
Identified
Investment
Thesis:
Incentivize
Innovation
AVCI Team Journey Map
Fall 2021
Management
Structure and
conflicts of
interest:
Potentially
Peter’s Recs:
Apolitical and
helpful moving
forward
Tax Incentives:
Promotes tier 1
VC firm
engagement
Identification of
Relevant
Investment
Stage: Later
stage?
Team
Assumed Tested Applied
Management
Redesign: AVCI
structural
workarounds
Intricacy and
Incentives:
systems needs
redesign
Team Journey Map: Second Major Discovery: Uncovering AVCI “1.0”
Potential
workaround:
Incentive and
management
structure
It’s a culture
question: Mil
should adopt
VC’s lean
structure
Need Found:
B-C stage,
Partnerships &
Support

8. 8
Second Major Discovery: Uncovering AVCI “1.0”
● 2002 NDAA Section 8150 authorized an Army Venture Capital Arm
○ OnPoint Technologies was founded as a non-profit, managed by for-profit VC Firm,
Arsenal Venture Partners
○ US Army was the “Strategic Investor”
● Communications and Electronics Command (CECOM) served as:
○ Principle interface with AVCI
○ Admin and Contracting Support
● 2002: $25.4 Million // 2003: $12.6 Million // 2004: $10 Million
○ Investments intended to provide: “The Service’s continued need for new power
and energy solutions”
Could the Army Venture Capital Initiative be a solution despite the ghosts of the past?

9. 9
First Organization of AVCI Had Deep Structural Issues
Fund & Check
Size
Poor
Management
Misaligned
Incentives
Flawed
Investment Focus
Lack of Oversight
& Guardrails
1 2 3 4 5

10. 10
Sclerotic AVCI
design:
beholden to too
many interests
Private vs
Public Sector:
AVCI 2.0 is
doomed to fail
Unfair Adv:
What is AVCI’s
unfair
advantage?
Value Prop:
AVCI’s DoD
connections
and culture
Need Found:
B-C stage,
Partnerships &
Support
Functional
Ecosystem:
Afwerx, DIU, all
promote DI
Advisory
Boards:
empowering
management
team
Bureaucratic
Overreach: Can
AVCI ever really
be lean?
Incentives: Who
is running this
and why?
What’s at stake?
System wide
inertia: Difficult
to enact durable
change
Andy
Sophia
L
e
o
p
o
l
d
Joshua
Real Potential:
AVCI as an
unprecedented
opportunity
Ineffectual
management
structure:
Crowded
The right
stage?: Seed
and Series A or
B-C?
Management
workaround:
Incentives and
structures
redesigned
Management
receives Carry:
restructures
incentives
Stage Pivot:
Series A-C
It’s a culture
question: Mil
should adopt
VC’s lean
structure
Potential
workaround:
Incentive and
management
structure
Identified
Investment
Thesis:
Incentivize
Innovation
AVCI Team Journey Map
Fall 2021
Management
Structure and
conflicts of
interest:
Potentially
Peter’s Recs:
Apolitical and
helpful moving
forward
Tax Incentives:
Promotes tier 1
VC firm
engagement
Identification of
Relevant
Investment
Stage: Later
stage?
Team
Assumed Tested Applied
Management
Redesign: AVCI
structural
workarounds
Team Journey Map: Refining a Solution
Intricacy and
Incentives:
systems needs
redesign

11. 11
AFTER
COUNTLESS
WHITEBOARD
SESSIONS

12. 12
Final Problem Statement
The gap between U.S. and Chinese military innovation and
capabilities is rapidly closing and poses a threat to U.S.
military dominance specifically in the Indo-Pacific Region.
In order to maintain our capability gap, the U.S. DoD needs to
reevaluate and improve its public venture capital economic
relationship funding strategies and partnerships with companies
with mid-stage private companies that have potential for
dual-use technologies which can play a vital role in leading , which
will play a vital role in catalyzing U.S. military innovation.

13. 13
Proposed New Structure for AVCI & Associated Recommendations
Board of Trustees
→ Advisory Board
ATWG Advises
Tech Roadmap
ASA(ALT) →
NVCA and DIN
Contracting Support:
CECOM → Army
Futures CMD
1 2 3 4

14. 14
Final Recommendation: Go All In on AVCI “2.0”
Reaffirm and Improve Authorities Through Renewed Congressional Support
Create a Competitive $750m AVCI Evergreen Fund
Invest in Mid-Stage Companies Creating Dual-Use Technologies
Empower and Incentivize the Management Team
Encourage Creation of Dedicated Sidecar Fund and Co-investing From Large Firms
Create a DoD Funded competitive 750m Venture Capital Evergreen Fund
focused on investing in mid-staged dual use technologies.
1
2
3
4
5

15. 15
DoD Wide Recommendations
Fund and Leverage AVCI 2.0 managed by 2nd Front, Inc via Army Futures
1
Encourage Larger Investments in Mid-Stage, Dual-Use Companies
2
Propose parallel 501(c)(3) Venture Capital Arms for Each Military Branch
3
Appropriately Fund and Encourage NSIC (DIU) to Use Existing Authorities
(2019 NDAA) For Equity Investing Similar to the AVCI Model
4

16. Questions?
Leopold van den Daele | Sophia Danielpour | Joshua Vanderlip | Andy Yakulis
November 30, 2021