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The Renaissance of Energy
The Renaissance of Energy
Authored by Sean Maher of Third Gear Investments and edited by Marc J. Sharpe for TFOA
Over the past fifteen years, the energy industry has experienced significant challenges, which yield compelling opportunities today…
The Global Financial Crisis triggered a flood of capital into the market, ultimately hurting the returns on capital for energy investments due to their long-lived, capital-intensive nature. Over time, the shortcomings of spending on high-decline shale were seen and Returns on Invested Capital (ROIC) fell by nearly 2000 bps (20%) over the 2006-2019 period. As ROIC dwindled, mainstream investors retreated, further deepening the challenges by 2020.
Source: Third Gear Investments, Factset
As ROIC fell, generalist investors shunned energy companies, and these capital-intensive businesses could not secure development capital.[1] Over time, the fiscal situation worsened, investor apathy increased, and in 2020, capital disappeared; this forced additional bankruptcies, dividend cuts, and significant layoffs to self-fund ongoing operations.
However, the industry shifted its focus, prioritizing returns over asset growth, leading to a “Renaissance of Energy.” Despite these positive changes, many outside the sector remained oblivious. But the numbers speak for themselves. The industry is now making steady progress, and the increasing Free Cash Flow (FCF) to energy is undeniable evidence of this evolution.
Source: Third Gear Investments, Bloomberg
Efficiency, Optimization, and Technology
Contrary to popular belief, OPEC’s decision to increase production in 2014 was not targeted at U.S. shale but at large investment programs that required high commodity prices ($100/bbl+) to justify their significant capital investment and long gestation periods (5-7+ years to first production). OPEC’s strategy led to financial strains across all energy sub-sectors as investment was slashed in every vertical. However, this gave rise to a new era focused on capital discipline and resource optimization (i.e., inventory management and cost efficiency).
In 2020, there was a further reallocation of capital towards renewable electrification as many investors left traditional energy for more compelling narratives around renewables; clearly, a material change in behavior was underway.
However, what hasn’t changed is the notion that investors should embrace (and prioritize) companies generating tangible free cash flows, especially with rising capital costs and inflationary pressures, to earn a positive return on their investment. Investors should also recognize that traditional hydrocarbon producers contribute significantly to developing emerging technologies due to their financial strength, engineering expertise, and asset mix, allowing for commerciality and scalability assessments.
These alternative energy investments are in addition to traditional energy companies enabling global economic growth as they maintain investment in the fuels that power 93% of electricity demand today while working to improve (reduce) their carbon emissions. Hydrocarbon companies have traditionally focused on asset growth, but now they are increasingly prioritizing improved returns; efficiency and technology are potential ways to improve the company’s margins and environmental footprint simultaneously.
For example, heat loss accounts for approximately 25% of the lost energy supply, making resource optimization a top priority for industry (and the global economy). New technologies are promising, but old technologies are still the easiest path to improved energy supply and a lower carbon footprint. The hydrocarbon industry is investing more in resource optimization, which will help to maintain and enhance hydrocarbon supply. That said, demand continues to rise, with OPEC forecasting 105.2 MMBD in Q4 2024 (up 3% from the current 102 MMBD) and 110 MMBD in 2030; and supply growth will be challenged to meet this demand over the next 5-7 years due to insufficient investment. As such, we also need new sources of incremental electricity supply to support future demand needs. Therefore, the energy renaissance is an exciting time for industry, and we all hope for a cleaner, more efficient energy future.
The world will unlikely abandon any source of hydrocarbons for electric power generation for decades; this is an evolution of energy, not a transition from hydrocarbons. It is essential to appreciate this narrative because as energy consumption per person grows, it is not being met with improved efficiency elsewhere. Therefore, while the percentage growth rate of a specific energy source may slow, it is still growing on an absolute basis. Javon’s Paradox supports the narrative: efficiency enables one to use more of what they have, not to use less due to efficiency gains.
Hydrocarbons are the building blocks of consumer society, and nearly 60% of global end-use products have no alternative to hydrocarbons. Natural gas, propane, ethane, and butane demand is expected to grow approximately 5% annually over the next decade. With ~1.2 billion people entering the middle class by 2030 and nearly 3 billion in energy poverty, demand for all energy sources will continue to grow.
Source: Enterprise Products
Renewables will not ‘democratize’ energy overnight, as the power sector has struggled with integrating intermittent forms of electricity. Therefore, the global market will continue to rely on natural gas, coal, and nuclear to accommodate imbalances from weather seasonality.
Source: IEA, World Bank, Third Gear Investments
Energy security, reliability, and affordability are fundamental rights for the global population; they drive points 1-3 of the UN Sustainable Development Goals. In the IEA (International Energy Agency) Outlook of December 2022, 775 million people globally lack access to electricity, equivalent to the populations of the US and EU. This number is expected to increase through 2025, primarily in Africa and Oceania, where population growth is highest.[2]
Source: IEA, World Bank, Third Gear Investments
By 2050, Asia and Africa will comprise 80% of the global population, while North America and Europe will only represent 11.7%. Incremental energy demand will come from these regions rather than the US and Europe.
Source: All data per World Bank, 2012, Data illustration per Grace Newton, Department of Geography, University of Illinois, 2016
Global energy consumption has nearly tripled since 1971, from 230 EJ to 608 EJ in 2019. Coal demand saw its market share go from 26.1% to 26.8%; in absolute terms, coal generated 60 EJ of power in 1971 and nearly 162 EJ in 2019 – more than triple.
When one contemplates the future of crude oil, natural gas, and natural gas liquids, to paraphrase Mark Twain: “It seems as though the tale of [their] demise is greatly exaggerated.” Unfortunately, energy investment in these hydrocarbons has fallen significantly, with current global upstream capex at less than half the levels of 2012-2014 (while crude oil prices are at the same levels), and with no signs of increases ahead, capital discipline is the new mantra in the oil patch and returns on invested capital are rising.
Source: Third Gear Investments, Bloomberg, RBC
Fortunately, global markets have become increasingly comfortable with natural gas as a transition fuel. Still, propane, butane, ethane, and crude oil will also play an essential part in improving the energy security, affordability, and reliability of global electricity demand and HDI (human development index) improvement. For example, the IEA forecasts that propane, butane, and ethane will see demand growth of nearly 5% annually through 2030. Without significant new sources of supply, prices will rise, which benefits margins and delivers more free cash flow.
The growth in natural gas liquids demand is supported by the massive growth emerging from the Midland and Delaware Basins in the Permian. The US is well endowed with natural resources, and these molecules are evacuated through the US Gulf Coast midstream and export facilities. The US is now the largest exporter of NGLs globally.
Source: Grand View Research
The value of traditional energy, as viewed from the lens of public equities, is likely understated. This is especially true when considering the immense economic costs of ramping up production to satisfy current demand. Over the past decade, the global economy has been flooded with inexpensive energy — a consequence of over $500 billion in lost investor capital. However, management teams are increasingly zeroing in on enhancing their Return on Capital Employed (ROCE). This is a crucial determinant of valuation in the capital markets. Current forward estimates suggest that energy may be undervalued by approximately 35-40% compared to its peers, especially considering the ROCE. And this assessment may be conservative due to three main reasons:
- Supply growth is decelerating, whereas demand continues to climb.
- Energy companies have significantly improved their leverage ratios, leading to superior earnings quality and reduced volatility.
- Increasing capital discipline and industry consolidation will compel companies to maximize their existing resources.
Source: Bloomberg
The near-term future suggests a rise in hydrocarbon prices, given that supply is expected to lag demand. Inventories, when adjusted for demand, are at historic lows. Until a short while ago, OPEC was producing at its peak capacity. Many OPEC+ nations are yet to fulfill their designated quotas. Throughout 2022, Russian crude oil and other products flowed continuously into China and India. The US Strategic Petroleum Reserve introduced an additional 750 MBD into the market during the same period. This was concurrent with a withdrawal of nearly two million barrels a day of demand from the market, attributed to China’s zero-COVID policy; both factors have since reversed.
The recent cut by OPEC, spearheaded by Saudi Arabia, reflects strategic foresight. They recognize the peril of halting hydrocarbon investments in the US. If prices stagnate between $60-$70 for a prolonged period, it’s likely to deter producers from investing. Given the ever-increasing global demand, this would hasten the natural decline of fields and pose a more significant challenge in just a few years. With Saudi Arabia at the helm, OPEC+ isn’t merely playing the game; they’re strategizing several steps in advance.
Of critical note is India’s looming surge in demand. Although lagging behind China by approximately 15 years, India has a population of 440 million below 18. This promises a sharp spike in demand over the next decade. Yet, there are no ready resources to counterbalance this anticipated near 10% hike in global demand.
Valuation & Market Leadership: Both Are Improving
The S&P Energy composite will represent nearly 10-13% of S&P EPS in 2023-2025 but is a mere 4.8% of the S&P 500. Ten (technology) companies in the S&P 500 currently represent 34% of the total market capitalization and trade at an average 50x P/E multiple. Energy multiples have contracted over the past decade, while technology multiples have expanded significantly. A notable change of leadership is emerging.
Source: Bloomberg, Wolfe Research
Public energy equities are expected to deliver industry-leading returns on capital, which should drive multiple expansion and improve valuation. As the market adapts to the new paradigm, the outlook for all hydrocarbon prices is higher. Importantly, for the energy investor, this demand has been increasingly met by US Shale – the Permian Basin – and the US Gulf Coast. If management discipline continues, it should drive improved valuation in the equity markets, and the Renaissance of Energy will be at hand.
Source: Bloomberg, Third Gear Investments
Electrification is a cornerstone in our transition to a low-carbon economy, with every energy source holding a pivotal role in this transformation. Renewable electricity is on an impressive growth trajectory. Yet renewables account for a mere 7% of global energy consumption. The projected surge in electricity demand will dwarf the forecasted growth of renewables. Princeton University predicts a 43% increase in electricity demand in the US by 2035 – electricity demand has been flat for 20 years, but AI, Cloud Computing, and EVs are dramatically changing that.
Source: Princeton University, REPEAT Study
A modest 2% uptick in global energy demand would necessitate renewable power generation equal to roughly 30% of the existing infrastructure. Therefore, the Energy Renaissance needs to be holistic and encompassing – an “All-of-the-Above” stance. However, staying financially grounded, operationally pragmatic, and commercially realistic.
An “All-of-the-Above” Approach Should Provide Energy Stability, Reliability, and Affordability.
In conclusion, the exponential growth in global energy demand will compel the world economy to incorporate more nuclear and renewable sources while acknowledging the indispensable role of hydrocarbons. As a stable and consistent energy foundation, hydrocarbons fuel both emerging economies and the progress of developing nations. Their significance in our future energy landscape remains undeniable.
Source: EIA
Strategic investments in energy companies and new technologies, primed for scaling and commercialization, are essential to satiate this burgeoning demand. Traditional energy companies have often been in the crosshairs of environmental concerns and greenhouse gas emissions. Yet, the undervaluation they face in the market currently offers an attractive prospect for investing in these vital hydrocarbon companies as they work to improve their environmental footprint.
[1] Importantly, as shown later in the white paper, E&P companies had already begun to adopt discipline by reducing capital spending.
[2] Africa’s population is growing at approximately 2.5% per year versus Europe’s 0.06% and North America’s 0.62% (including Mexico’s).
The Role of Family Office Capital in National Security
The Role of Family Office Capital in National Security
Authored by Nick Fisher and edited by Marc J. Sharpe
Context
This white paper outlines the strategic importance of private capital investment in the US and Western defense and national security sectors and invites family office investors to consider the significant impact and potential returns of such investments.
“The last man lives in a world without conflict or danger, without passion or excitement, without love or hate. He lives in a world without history.”
– Francis Fukuyama, The End of History and the Last Man
Executive Summary
In today’s rapidly evolving geopolitical landscape, the United States and her Western Allies face an imperative need to enhance the collective Defense Industrial Base (DIB). While government funding plays a crucial role, it alone cannot sustain the significant expenditures required to maintain a robust and innovative defense and national security sector, notably at this juncture of history with increasing geopolitical challenges and emerging budgetary constraints. To that end, a significant generational opportunity exists for family office private capital to bridge this gap, providing a strategic advantage to the US and Allies in strengthening the ‘Arsenal of Democracy’.
Global National Defense Spending ($ Billion)
Current challenges in defense and national security funding include:
- Capital Market Constraints: Environmental, Social, and Governance (ESG) guidelines have limited access to critical funds. Furthermore, the consolidation of capital markets and a lack of defense sector-specific knowledge has restricted investment in related sectors.
- Economic Volatility: Recent economic disruptions, such as the collapse of Silicon Valley’s primary lender, and rising interest rates, have led to a retrenchment in the venture capital ecosystem, negatively impacting funding availability.
- Chinese Military Civil Fusion (MCF): China has successfully integrated civilian innovations into military applications at a rapid pace, leveraging fewer barriers between civilian and defense sectors. This strategy has given China a competitive edge in developing advanced military capabilities.
Despite these challenges, private capital markets in the US, with $4.5 trillion in private funds (McKinsey Global Private Markets Review 2023), hold immense potential to enhance defense and national security capabilities. Strategic deployment of these resources can address capability shortfalls, fund technological advancements, and support transformation efforts across the sector. Family offices have a key role to play here by funding projects with flexible, patient, and sophisticated capital.
Key investment areas where family office capital can have the greatest impact include:
- Technological Innovation: Funding cutting-edge technologies that can be quickly integrated into defense applications and fielded with the warfighter.
- Dual-Use Technologies: Investing in commercial technologies with military applications, such as drones and satellites.
- Early-Stage and Lower Middle Market Enterprises: Supporting critically underfunded sectors that drive commercialization of innovation and enable fielding of new capabilities. This is particularly relevant to hardware manufacturing businesses ranging from sensors and weapons systems to energy storage and advanced materials.
The intersection of current geopolitical, capital markets, government, and investor conditions present a clear opportunity for family office capital to play a transformative role in defense and national security. By providing the necessary funding, private investors can support critical innovations, enhance the US’s strategic capabilities, and achieve attractive returns.
The Current State
The United States and Western allies, in particular the UK and Australia (AUKUS trilateral agreement), are engaged in a strategic competition on a global scale that threatens Western hegemony. The post-WW2 and Cold War peace dividends that delivered relative stability throughout the second half of the 20th century and much of the first quarter of the 21st century have been exhausted. The West has now re-entered a period of geopolitical instability where peer or near peer competitors struggle for dominance over their desired spheres of influence. The emerging global landscape, driven in large part by changing economic and demographic conditions, underscores the end of ‘Pax Americana’ unipolarity established in the wake of World War II and the shift to multipolarity global power dynamics.
Note: G7 includes United States, United Kingdom, Canada, France, Germany, Italy, Japan
Note: Old BRICS includes Brazil, Russia, India, China, and South Africa
Note: Remaining BRICS includes Russia, China, Iran, India, Brazil, South Africa, Argentina, Saudi Arabia, Egypt, Ethiopia, and United Arab Emirates Source: The World Bank. (2023, February 8). GDP, PPP (current international $)
While, for a variety of geopolitical, sociological, societal, and economic reasons, this is unlikely to result in a direct kinetic conflict between the main protagonists, it is of critical importance to our collective national security that we are prepared to deter and, if necessary, defend against the threats posed.
Note: Adversary includes China, Russia, and Iran.
Note: See above prior graphics for constituent definitions of AUKUS, Remaining BRICS, and BRICS+.
Source: Stockholm International Peace Research Institute (SIPRI). “Trends in World Military Expenditure, 2022.” SIPRI, 2022
Leaving aside issues of root secular causes, the Russian invasion of Ukraine, alongside the Iranian instigated and backed proxy war in Gaza that threatens to spread into Lebanon, all concurrent to the growing tensions in the South China Sea, clearly highlight the multi-theatre challenges faced by the West. The strategic purpose of these actions reaches far beyond the apparent tactical objectives. While Vladimir Putin may portray himself as a modern-day Katherine the Great, emulating the second partition of Poland (1793) and reincorporating something akin to the 9th Century Kyivan Rus territory into the Russian Federation. In reality, his “Special Military Operation” represented to him a seemingly low risk opportunity to test the resolve of the West by applying pressure to NATO and the EU.
Similarly, the Iranian backed proxy war in the Middle East, notably bringing together previously adversarial Shia (Hezbollah) and Sunni (Hamas) factions in a common cause of attacking Israel, has less to do with securing a homeland for the Palestinian people and more to do with stress testing the resolve of the Western leaning Gulf Cooperation Council (GCC), discrediting Israel in the eyes of Western allies, and derailing the strategically important Abraham Accords.
Beyond these kinetic conflicts, and arguably of greater significance, is the Chinese led low intensity probing and challenging of Western influence that can be seen across the globe. These activities range from deniable actions, such as deployment of adversarial capital into Western innovation ecosystems, cyber-attacks and influence operations, to more overtly state sponsored acts of economic warfare and saber rattling (e.g., Spratly Islands, Papua New Guinea, Solomon Islands, etc.) in their attempts to subjugate their near abroad.
Key to countering these threats is the clear national strategic imperative to develop a robust and broad DIB across the Western allies but, in particular, domestically in the US. The current DIB has proven to be insufficient to meet the equipment, technology, and munitions needs required for a potentially protracted conflict across multiple theaters. Western government funding simply cannot sustain ever increasing expenditure needs and therefore suitable private capital resources are needed to amplify government spending, increase manufacturing capacity and foster innovation.
Military Civil Fusion (MCF)
In China, and to a lesser extent Russia and Iran, the government is scaling proven ideas into deployable systems at lower cost and with a velocity that is orders of magnitude faster than the US and other Western allies (which are bound by the conventions of traditional defense procurement). China, in particular, is actively utilizing Military Civil Fusion (MCF) programs and strategies to develop the most technologically advanced military in the world. A key part of MCF is the elimination of barriers between civilian R&D, commercial activities, capital markets, the military, and the defense industrial sectors.
China is implementing this strategy, not only through its own R&D efforts, but also by acquiring and diverting the world’s cutting-edge technologies, including through nefarious means, to achieve commercial and military dominance. To further enable this strategy, China has deployed ever increasing quantities of state funds to rapidly establish and develop its industrial base more broadly. In doing so, China has aggressively secured raw materials from primary industries across the Global South and allies of convenience, such as Russia, Iran, and North Korea, creating a vast sphere of influence, controlled largely by the creation of financial dependency on the Chinese State. Chinese, or Chinese proxy, control of a large proportion of the world’s natural resources, combined with a disproportionate concentration of processing capabilities in China, has created a significant advantage for Chinese manufacturers with the added benefit of creating market control and supply chain dependencies that adversely impact many Western industries, including our critical defense sector.
MCF is key to China’s developing a “world class military” by mid-21st century while also deploying commercial technologies globally that provide unrivaled information and actionable intelligence on competitors and adversaries critical to advancing its regional and global ambitions[1]. China is systematically reorganizing Chinese industry to ensure that new innovations simultaneously advance economic and military development, leveraging its growing GDP to expand its defense industrial sector.
Conversely, over the past thirty years US and broader AUKUS policies led to boom-bust cycles of defense spending and drastic consolidation of the largest defense contractors, which has impaired the legacy of Western military innovation.
The Counterbalance, a Critical Need for Private Investment
Key industry insiders are aware of the need for private capital to address US and AUKUS objectives and have become increasingly frustrated with the lack of progress and the persistent funding gap. “VCs are critical to this,” Joseph Felter, director of the Gordian Knot Center for National Security Innovation at Stanford University urged recently, before suggesting commercial investment in US defense was “incomparable” to that of China. Thomas Tull, founder, and chairman of the US Innovative Technology Fund, has said, “We can stand around and complain, but every day we do nothing, we are losing ground on our adversaries.” David Spirk, senior counselor at Palantir and former USSOCOM Chief Data Officer added, “If we can’t slow them down, we can accelerate ourselves.” At the AUKUS level this sentiment was echoed and emphasized by former Australian Prime Minister and incumbent Ambassador to the United States, Dr. Kevin Rudd, who in October 2023 publicly called for the Australian superannuation funds to begin investing a portion of their $2.5 trillion to support the expansion of the defense space across the AUKUS alliance, stating to a joint US Australian defense centric audience in Washington, D.C., that “the time for seminaring (sic.) is over, the time for action is now!”
“A dollar can do more damage than a bullet.”
– Major General Gary Harrell, Former Delta Force Commander
Recent initiatives, such as the formation of the Office of Strategic Capital within the Pentagon to ensure that the US maintains its technological superiority and secures its DIB against current and future threats, have helped define the capital need; however sufficient sources of capital continue to lag.
Notwithstanding the urgent and growing demand for capital, with expected asymmetric returns, private capital, in addition to credit capital, are simply not proceeding apace in providing adequate funding to the landscape. In part, this is due to idiosyncrasies in government contracting structures; confounded by expanding and restrictive investing promulgations prohibiting most institutional investors (which practically includes all investment funds, private equity, and venture capital sources) from investing in many defense asset classes. These circumstances, when taken together with the shifting global conflict matrix, the evolution of warfighting to increasingly be reliant on technology, the profound increase in the deployment of dual-use commercial technologies, and lessons learned in recent conflicts, have created a unique market window for family offices to step in and take a leading position.
While limited sources of investment and liquidity are available to large, well-established players in the target markets, early-stage and lower middle market enterprises represent a critical, severely capital starved element of the defense and national security ecosystem. Combined, these factors catalyze an opportune investing environment with an established prime contractor landscape providing viable exit opportunities. Considering the historical and prevailing geopolitical, market, government, and investor conditions, there exists a clear and present opportunity to provide deeply needed private capital with reasonably predictable attractive investor returns. Knowledgeable investors working closely with government (US / AUKUS) and understanding the needs and the landscape, can deliver flexible private capital to mitigate the identified challenges and generate attractive investor returns.
Government Response and Opportunity Landscape
The US, along with its AUKUS partners, is implementing significant changes to its defense acquisition processes to address critical needs and maintain technological superiority. These efforts aim to modernize, diversify, and build resilience into the DIB while attracting new commercial partners to the Department of Defense (DoD).
Key initiatives include:
- Small Business Focus: The DoD is required to award at least 23% of its contracts to small businesses, with prime contract awards to small businesses now exceeding $80 billion annually. Other agencies involved in these efforts include the Department of Energy, Department of Homeland Security, and various other agencies/branches.
- Innovation Programs: The DoD has established various innovation hubs and programs, such as the Rapid Defense Experimentation Reserve, Defense Innovation Unit, AFWERX, SOFWERX, NavalX, Army Futures Command, and the Chief Digital and Artificial Intelligence Office.
- SBIR/STTR Programs: These programs stimulate technological innovation by directing contracts to small businesses for R&D, promoting commercialization of technology beyond core defense markets. They offer a beneficial structure allowing companies to retain commercial ownership of developed technologies.
- New Funding Initiatives: Recently introduced programs include:
- Office of Strategic Capital (OSC): Provides financial assistance to critical defense technology companies for scaling up operations.
- Defense Innovation Unit (DIU): Identifies and supports the development of commercial technologies with defense applications.
- Established Programs:
- Defense Advanced Research Projects Agency (DARPA): Focuses on innovative technologies for national security.
- In-Q-Tel: The Intelligence Community’s venture capital arm, investing in innovative technologies.
- DoD Manufacturing Technology Program (DMTP): Supports US defense companies in adopting new manufacturing technologies.
These initiatives create various direct and comingled investment opportunities that offer attractive prospective returns for family office investors within the defense and dual-use sectors. Focus areas include:
- Seed / Venture: Over the past decade a robust ecosystem of defense and national security technology centric venture firms have emerged, many led by Veterans, seeking to deliver innovative capability into the hands of the warfighter on an expedited basis. These range significantly in scale and focus from the deeply technical (e.g., Razors Edge), to the highly sector specific (e.g., Veteran Ventures), and the more generic but with an interest in the sector (e.g., Crosslink).
- Venture Debt: A multitude of non-sector specific venture debt providers operate in this sector (e.g., SVB) alongside a variety of factoring businesses, however a gap exists in the market for the provision of government contract underwritten credit solutions aimed at providing non / less dilutive capital options to high growth, venture backed technology companies scaling to deliver against government needs.
- Late Venture / Early Growth Equity: A small number of DoD centric late-stage venture / early-stage growth funds operate in the market (e.g., Shield Capital) and are largely focused on emerging technologies graduating from specific DoD funded initiatives such as DIU. Opportunities also exist to invest alongside the government through equity and convertible debt placements into companies benefiting from scale up SBIR Phase III awards designed to bring capital intensive technologies into service. Beyond this there is a value-added follow-on investment need to bring capital paired with sector specific acquisition expertise in support of companies that have made initial inroads into the DoD but are yet to scale, this is the domain of a number of niche funds.
- Credit: At the larger end of the market credit funds alongside traditional banks are active but in the lower middle market there is a significant opportunity for contract-backed financing, with an estimated $20B private credit market capital gap supporting recipients of $335B in US government prime contract awards to small businesses. A number of new funds are seeking to fill this void.
Despite these efforts, there remains an insufficient amount of private capital addressing strategic national security initiatives. The defense ecosystem represents a significant opportunity for family offices to fund high-growth investments in companies that have secured early government contracts and are looking to scale.
[1] Chinese Communist Party (“CCP”) articulated goals during 19th National Congress of the CCP, held on October 2017
