For The AUKUS Defense Investor Network, The Origin Of Money Is King

The more we can encourage open communication, the better poised we will be to win the war on tech

Heather Jo Richman

February 27, 2024

Defending the homeland can take on many meanings. With a background in both government and private capital, I am very familiar with the tech startup world as well as the unique space occupied by those rarefied companies that keep our military on the cutting edge of technology. I know how valuable new technology is and I know the money fueling some of that technology is not always coming from the friendliest of sources. Identifying these adversarial investors and the money they bring to cash-hungry U.S.and allied startups is critical to protecting the homeland and our intellectual property.

That was the impetus for creating the AUKUS Defense Investor Network (DIN) focused on the security partnership among Australia, the UK and the U.S. (AUKUS). The AUKUS DIN, launched in 2023, has two objectives. One is to gather leading private capital investors who share a commitment to investing in companies developing technologies that enhance defense and national security, including cyber, AI, quantum, hypersonics and more. The other is fixed on exposing and reducing nefarious investment into the defense innovation marketplace. 

We appreciate that we stand at a major tipping point in our history. The face of war is changing, encompassing numerous facets of everyday life, and demanding engagement across sectors and among common citizens. The AUKUS DIN is a way to reach across allies while simultaneously reaching across the electorate, venture, entrepreneurial and startup communities to strengthen our capacity through awareness. We are providing a pathway for people to put their current work toward strengthening national security.

I recently spent an hour with Marshall Kosloff on his podcast, The Realignment, where we did a deep dive into defense technology, the growing dangers lurking for the uninitiated, and the ample opportunities to wear a patriotic hat in the innovation and investment arenas. We broke down the purpose of the AUKUS DIN to not only enhance technological innovation and collaboration between startups, makers and allied governments, but also as a way to dissuade and efficiently reveal the “dirty money” that has sadly become pervasive in this context.

Adversarial capital, and why it matters

The AUKUS DIN is more than a network; it’s a dedicated group of investors that take the time to educate themselves to make investment decisions through a national security lens. There are no dues, and it is not funded by any entity, including the government. Importantly, the DIN brings together investors that we know run “clean” funds, meaning they contain no adversarial foreign limited partners (LPs). The impetus of this network began in 2019 when the Committee on Foreign Investment in the US (CFIUS) began reacting to an influx of funding flooding Silicon Valley. From 2010-2018, at least $22 billion in foreign, adversarial investments reached American tech innovators. I believe that figure is a conservative estimate and is far below the actual figure. America’s enemies were, and still are, putting large investments into American companies while stealing intellectual property. This is dangerous, and it needs to stop. As work goes on at the federal level to strengthen the Foreign Investment Risk Review Modernization Act (FIRRMA), which modernizes CFIUS to address these threats, AUKUS DIN is working privately to bolster the converted, cross-collaborative and cross-allied effort to curtail adversarial capital.

‘We’re just asking you to not do bad for your country’

The U.S. Government monitors 37 countries of special concern in regards to investing, with a heightened focus on the “big four,” also known as China, Iran, North Korea and Russia, who we believe are working to undermine the U.S. and our allies. Having identified these countries, we then work to educate investors to understand their process as well as explore the unintended consequences in the investment process. The goal is to help venture-backed startups avoid triggering CFIUS review, which can take the better part of a year, during which a startup’s hands are tied, and can thus destroy the potential and fabric of a company. 

Part of what we do is find investment problems and work to solve them rather than ignore or put Band-Aids on them. We’re holding people’s feet to the fire about taking adversarial capital or compromised funds while also putting the onus on investors to show that they’re clean and know who their IPs belong to. At AUKUS DIN, we like to say, “We’re not asking you to do good for your country. We’re just asking you to not do bad for your country.” An admittedly low bar, but if we can shut off the firehose to the nefarious capital, we are taking a very important first step.

How a collaborative approach slows the bleeding

The AUKUS DIN focuses on three like-minded countries – Australia, the UK and the U.S. –  coming together to figure out how best to ensure the best capabilities, technologies and cleanest investment gets into the hands of each country and its closest allied nations. The more we can engage with our national security apparatus and encourage open communication, the better poised we will be to win the war on tech. For now, the AUKUS DIN is the only place where we can have open, honest conversations to find out what the investment community is comfortable doing, and how to build a mechanism that encompasses national security.

We have been seeing horrific things happening in the world globally over the past few years. We also know unfriendly companies have been acquiring and perfecting technology that could further destabilize the world. I’m trying to help build a pathway that can increase funding from “clean” investors and reduce inherent risks in a global marketplace. We want to enable investors to invest in promising capabilities that might make our countries stronger, that might make our children safer, and that will help our allies. The AUKUS DIN is doing that holistically.

Visit the timestamps below to hear more about my other topics of discussion with Kosloff here:

8:39 - “Fail fast” is a favorite term in Silicon Valley, but I prefer to think of it as speeding up the pace of learning through iteration. This is a concept that has wings in the military.

10:56 - The Silicon Valley of Death, vs. the Government Valley of Death for startups

14:05 - Dual-use technology has a commercial and military application, but the order of which comes first is changing.

15:11 - Why our government needs a big prod to move faster  

19:21 - How the energy and the military worlds collide - in a positive way

36:17 - Innovation at the speed of trust - why prime contractors often get the prize

40:29 - DIU’s contribution to mission acceleration.

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