OODA Loop – Venture Capital National Security Investment for American Competitiveness: New Mexico’s $100M Pledge to AFF’s Frontier Fund I
New Mexico Pledges $100 Million to Back First Vehicle of America’s Frontier Fund
As reported by Rob James at the WSJ:
The state’s commitment anchors AFF’s first fund to back companies in industries strategically important to the U.S., among them, microelectronics, chip manufacturing, AI, and others.
The New Mexico State Investment Council has committed $100 million to a new venture-capital fund focused on advanced technologies that support U.S. strategic and economic interests.
On Tuesday, the council’s investment committee approved its commitment to America’s Frontier Fund‘s first vehicle, Frontier Fund I LP. The council directs investments from the state’s sovereign-wealth fund, which has roughly $34 billion in assets.
The newly formed nonprofit’s inaugural fund will invest in “frontier technologies” considered “vital to the long-term economic prosperity and national security” of the country, according to a council staff report. Target sectors include microelectronics and semiconductors, advanced manufacturing, artificial intelligence, new energy sources, synthetic biology, and quantum sciences.
The fund’s first investment will be constructing Roadrunner Studios in Albuquerque, N.M., as a for-profit venture complex to link technology, talent, and capital with local businesses, according to the staff report. Roadrunner will also “serve as the hub of a nationwide virtual Silicon Valley” connecting other U.S. scientific and business centers, said Gilman Louie, America’s Frontier Fund co-founder and chief executive, in a presentation at the council’s meeting Tuesday.
AFF considers New Mexico “well-positioned to become a leading regional center of excellence for frontier technology due to its federal labs, universities, entrepreneurial network, and skilled workforce,” the staff report said.
The firm aims to raise $500 million for the new fund and expects to hold a first close in next year’s second quarter, according to people familiar with the matter. About two-thirds of commitments to the pool are expected to come from public investors such as the New Mexico sovereign fund, with the rest from private investors.
AFF and its new fund have drawn high-profile backers. PayPal co-founder Peter Thiel and Eric Schmidt, former chief executive officer of Google, have supported the firm. AFF’s board members include Sam Palmisano, former CEO of International Business Machines Corp. , while Mr. Louie is a former chief of In-Q-Tel, an investment firm backed by the Central Intelligence Agency to develop technologies that serve national security.
The firm aims to use Frontier Fund I to back around 40 companies, mainly by acquiring minority positions, the people said. Frontier charges a 2% management fee while 100% of fund carried interest, or the manager’s share of investment profits will go to AFF rather than any of the general partners involved, although the firm’s employees are paid based partly on the performance of its investments.
For its part, the New Mexico council has been looking to increase its exposure to early-stage businesses ever since a review of its investments in November 2019, Chris Cassidy, the council’s director of private equity, said during the meeting.
Another goal the council has pursued is to invest with major venture-capital firms that can help New Mexico startups mature, in turn growing the universe of companies in which later-stage fund managers based in the state can invest.
The sovereign-wealth fund has a program through which it invests in New Mexico-focused managers. These managers “love the opportunities they are seeing, but they ideally want to see more,” Mr. Cassidy said.
New Mexico is home to several tech research hubs, including the Los Alamos National Laboratory and the University of New Mexico. Yet the state received just $131 million of venture capital funding last year out of $280 billion spent nationally, according to AFF figures.
Speaking at The Wall Street Journal’s CIO Network summit in September, Edlyn Levine, a co-founder and chief science officer of America’s Frontier Fund, said a key priority for the U.S. is building a robust domestic chip-manufacturing industry.
“Two guys in a garage is great,” but scaling that idea into a business requires access to multibillion-dollar facilities, she said. (1)
Further OODA Loop Resources
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- Research and analysis on the Global Computer Chip Supply Chain Disruption, the Chips Act, and the Chips and Science Act.
- The OODA Network on Deep Tech and the Valley of Death.
- America’s Frontier Fund and the Quad Investor Network: In July, Cyberscoop.com reported on the launch of America’s Frontier Fund (AFF), which is an extraordinary public/private partnership and non-profit organization dedicated to America’s Great Power competitive advantage through global technology leadership in what some call “deep tech” or “frontier tech.” The initial Cyberscoop coverage suggested that the fund was dedicated to cybersecurity, but upon further research and analysis, the fund is designed for a much broader portfolio of technology investments. By all accounts, the AFF is serious business and a refreshing private sector commitment at scale – with tech industry heavyweights putting financial resources on the table along with the unique expertise of equally as impressive a roster of government policy experts.
- A Proactive National Technology Strategy in the Great Power Competition with China: The co-authors of a recent article in Foreign Affairs, America Could Lose the Tech Contest With China, Eric Schmidt, and Yll Bajraktari, are Chair and CEO of the Special Competitive Studies Project (SCSP), respectively. The SCSP “builds on the work of the National Security Commission on Artificial Intelligence (NSCAI), which ended its congressionally-mandated work in October 2021. NSCAI made recommendations to the President and Congress to “advance the development of artificial intelligence, machine learning and associated technologies to comprehensively address the national security and defense needs of the United States.” The author’s diagnosis of the root cause of the problem is aligned with the drivers behind the recent launch of America’s Frontier Fund and the Quad Investor Network (with which Eric Schmidt is also affiliated) and maps to many of the recent “Deep Tech” and “Valley of Death” discussions here at OODA Loop.
- CSET on China’s Advanced AI Research and the China AI “Watchboard” Pilot Program: We have integrated Center for Security and Emerging Technology (CSET) research into our OODA Loop research and analysis on topics ranging from artificial intelligence, dis- misinformation and information disorder (what we characterize as a crucial strategic need for National Cognitive Infrastructure Protection), technology talent retention, and the CHIPS Act. The recent CSET report “China’s Advanced AI Research: Monitoring China’s Paths to ‘General’ Artificial Intelligence “examines what paths to general AI are available in principle, as a prelude to describing work underway in China to realize that capability. The report authors also “preview a pilot program…as a starting point for China-focused indications and a warning watchboard…that will track China’s progress and provide timely alerts.”
- Mergeflow CEO and OODA Network Member Florian Wolf on “Small Data” (Part 2 of 2): In Part 1 of this interview, we checked in with Mergeflow CEO and OODA Network Member Florian Wolf about all things machine learning and small data. In Part 2, we continue the conversation with Florian spanning a wide range of topics, including the real-life lessons of machine learning innovation, the centrality of data, problem-solving over performance as the competitive advantage while developing ML systems, leading a team, what keeps him up at night, what he is tracking and what he is excited and hopeful about in the future.
- The September 2022 OODA Network Member Meeting: Dr. Bilyana Lilly Presents Research on Russian Information Warfare: The September call (held on Friday, September 16th) had a unique format, with Dr. Bilyana Lilly presenting to the OODA Network on the topic of Russian Information Warfare: Questions, Cases, Frameworks, and Conclusions – which is also the subject of her new book, Russian Information Warfare: Assault on Democracies in the Cyber Wild West.
- From AI Principles to AI Practice at a Global Scale: The MIT AI Policy Forum (AIPF) is a global initiative at The MIT Schwarzman College of Computing, which was launched in 2018. The Blackstone Group Chairman Stephen A. Schwarzman donated $350 million of the $1.1 billion of funding committed to the school, which is the “single largest investment in computing and AI by an American academic institution.” What sets the AIPF apart from all other organizations dedicated to AI research and policy is its commitment to global collaboration moving from AI principles to AI practice. The leadership at the AIPF is committed to making a tactical impact. In the last few years, the sheer amount of think tanks, government agencies, and academic institutions developing “high-level principles on the social and ethical issues” of AI started to feel like a perfect storm of analysis paralysis and scope creep. It is this transition from principles to practice with a sense of urgency, intervention, and action which sets the AIPF apart from all the other resources we have explored in our research and analysis of the future of AI. Simply put: It is time for a “Decide and Act” phase after the collective “Observe, Orient” analysis phase which has been applied to certain aspects of mission-critical social and ethical issues such as privacy, fairness, bias, transparency, and accountability. To echo the AIPF: “Now, it is time to take the next step.”
It should go without saying that tracking threats are critical to inform your actions. This includes reading our OODA Daily Pulse, which will give you insights into the nature of the threat and risks to business operations.
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