Defending Capital: Exploring Venture and Debt Approaches

**Innovations in Defense: The Relationship Between Defense and Capital**

Welcome to the *Foreign Rocks Podcast on Strategy, Defense, and Foreign Affairs*. I’m Ryan Evans, the founder of War on the Rocks. In this episode, we dive into the fascinating world of the defense industrial base and its connection to capital. Whether you’re a policymaker, founder, technologist, in finance, or a defense acquisitions professional, this episode is a must-listen.

Joining me for this conversation are Dan Gwak, Managing Partner at Point72 Private Investments, and James Parker, one of the founders of Leonid. These experts bring their unique perspectives to discuss the future defense industrial base and its relationship with capital.

Both Dan and James have extensive backgrounds in finance and the defense industry. Dan’s experience at strategic venture firm incatel and James’ engineering background in the Marine Corps give them valuable insights into the defense tech industry.

James, who leads Leonid, a company that lends money to defense contract companies, shares the challenges and opportunities in this niche market. Banks typically shy away from providing capital to companies with defense contracts due to the uncertainty involved. By buying government invoices and providing factoring services, Leonid solves the cash flow problem faced by defense companies.

However, James and his team realized that these companies were more interested in making investments to grow their businesses rather than just solving short-term cash flow issues. They recognized that one of the primary concerns for banks was the government’s 30-day cancellation right on contracts. To gain conviction and provide investments, Leonid conducted extensive research on government contract cancellations.

Their findings were remarkable – contracts by number only get canceled about one percent a year. Moreover, the one percent that do get canceled account for 97.1 percent of the total contracted proceeds before termination. In their niche of small and medium-sized businesses focused on national security contracts, the default rate is as low as 0.012 percent. This data provides valuable insights into the stability and reliability of government contracts for investors.

This conversation sheds light on the complex relationship between defense and capital, offering valuable perspectives for anyone interested in this growing industry.

**Keywords/Tags:** defense industrial base, capital, defense acquisitions, finance, defense contracts


– [Foreign Rocks Podcast on Strategy Defense and Foreign Affairs](

**Full Transcript:**
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In the first of a series of conversations on the topic of the defense industrial base and capital, Ryan is joined by Dan Gwak of Point72 and James Parker of Leonid. If you’re a policymaker, founder, technologist, in finance, or a defense acquisitions professional this is a must-listen episode.

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