The Defense Department’s new Office of Strategic Capital (OSC) has stood up its first program designed to leverage private capital to help drive investment in critical technologies for national defense that frequently are being overlooked in favor of areas where returns can be generated more quickly such as e-commerce, the OSC chief said last Friday.

The first program is aimed at creating long-term capital for investment funds to invest in the critical technologies that DoD has identified.

The Small Business Investment Company (SBIC) Critical Technology Initiative (CTI) will “provide loan guarantees to investors to raise debt to match with private capital, where that total investment fund–thee government-backed debt and the private capital—invests in critical technology companies,” Jason Rathje, director of the OSC, said during an event hosted by the Center for Strategic and International Studies Defense-Industrial Initiatives Group.

The OSC is leveraging an SBIC managed by the Small Business Administration because DoD currently doesn’t have authority to operate its own federal credit program, Rathje said. This is the first time in more than 40 years that DoD has had access to an SBIC, he said.

The department will be working with Congress to obtain authorities to help it better manage OSC’s efforts, Rathje said.

Semiconductors, which DoD doesn’t typically purchase but are widely used in defense goods, are an area where OSC would “crowd-in” capital, Rathje said. Some of the critical technology areas identified by DoD include quantum science, microelectronics, direct energy, hypersonics, future generation wireless, and advanced materials.

The government’s use of SBICs is not new. Rathje said the first one was established in the late 1950s in response to the former Soviet Union’s launch of the Sputnik satellite, beating the U.S. to space and startling the country, which in turn drove investments in space, defense, science and engineering.

In 1970s, when then Cray Computer Corp. was struggling to raise capital as it was developing supercomputers it was three SBICs that came to the rescue, Rathje said. SBICs helped “birth” venture capital, he said, highlighting eventual investments in early technology stalwarts such as Microsoft [MSFT], Intel Corp. [INTC] and Sun Microsystems, which is now part of Oracle [ORCL].

The OSC was a year in the making but stood up officially in early December with the primary goal being to bring in large amounts of private capital to finance work around the DoD’s critical technology areas to eventually get them out of basic research and into defense products.

In addition to initially leveraging an SBA SBIC, other OSC programs that are planned this year include a loan program initiative modeled after the Energy Department’s Loan Program Office to provide loan guarantees to companies that are scaling critical technologies, a Transition Acceleration Program Activity that marries DoD research and development contract funds with private investment to create larger investments that align to medium-term DoD procurement needs, and a technology scouting effort with a non-profit organization focused on international companies that are developing critical technologies.