Australia is up with the best in the science of quantum computing, with the leaders, the scientists and the results. But new approaches are needed to address deficiencies in its defence and intelligence technology.

In a time of highly uncertain geopolitics, power balances are changing, and Australia must deepen, strengthen and add to its capabilities in advanced technologies. Much of the technology Australia requires to sustain its sovereignty comes from overseas industry, particularly from the US. This applies to advanced materials and the cyber and space domains, but the rapidly growing field of artificial intelligence and related technology, especially cloud computing, is likely to be the most urgent.

Australia’s investment in research and development as a proportion of GDP is uncompetitively low.

While there are many small, bright spots across advanced technologies, support for start-up companies that can grow at the cutting edge of new developments is desperately needed. Quantum and AI, and AI’s applications, are being developed in companies that are not part of Australia’s traditional network of defence technology partners, licensors and suppliers. For example, Amazon Web Services, one of the biggest global players in AI, is recruiting in Australia for its rapidly growing defence services activities.

About 20 years ago, the US Central Intelligence Agency established In-Q-Tel ^[1], a venture capital entity through which it could invest in, support and partly guide the development of new technologies into new industries. Unlike a traditional venture capital entity, In-Q-Tel was built with a deep strength in technological expertise and links to government agencies. This enables it to understand more deeply the science and technology in which it’s investing and to guide start-ups towards customers. These burgeoning firms are required to be ‘multi-customer’ companies and not just suppliers to the US Defense Department. In-Q-Tel has helped launch many successful companies, including Palantir Technologies, Cloudera and Spotfire. An office in Sydney identifies potential Australian and British investee companies.

Another overseas model is the UK’s National Security Strategic Investment Fund. Its ‘parent’ is the British Business Bank, an arm of the UK government, and it was established to invest in advanced dual-use technologies.

Australia needs an equivalent agency—perhaps an ‘Oz Strategic Fund’ or ‘Oz-Q-Tel’. It could be modelled on In-Q-Tel, with a government sponsor in intelligence and defence, a panel of experts to support it technically and a strong board drawn from industry leaders, government, civil society and research providers. To be credible, the board must consist of current leaders, not former politicians or retired military officers. Only with top people who can work with leaders in every field will the agency achieve the levels of cooperation with industry and institutions that characterise In-Q-Tel.

The agency needs scale, with at least $2 billion invested in tranches of $650 million each in 2022, 2025 and 2027, and strong co-investment from Australian and venture capital firms from our Five Eyes intelligence-sharing partners.

Existing funds such as the Next Generation Technologies Fund don’t have the purpose, the backing or the focus that an Oz-Q-Tel would provide.

We support recent suggestions that Australia develop its own version of DARPA ^[2] (the US Defense Advanced Research Projects Agency), but such an agency would not be a venture capital firm, as we propose.

As China’s armed forces and high-tech capabilities continue to grow, Australia can’t rely on having a technological advantage over any potential regional adversary. Other strategies of asymmetric warfare must take over. Offensive cyber and autonomous systems are examples and quantum computing may be another. We believe these technologies can be most effectively brought out of the lab for national security purposes by venture capital in a strategic investment fund.

The full benefits of AI and related technologies will disappear if we take too long to act. Without our own agency, the commercial benefits of much of Australia’s innovation in autonomous systems, translation of state-of-the-art technology to the Australian Defence Force, and richer mindsets in our not-for-profit research providers will be lost overseas via In-Q-Tel.

This would leave the ADF less competitive in modern warfare, with its deep-tech innovation system falling further behind and the possibility of rapid development by start-ups (sorely needed in defence) being lost. Australia will become a technology taker not a technology maker, which will limit access to the best defence technology, and we will see productivity continue to fall or flatline.

Objections to using government funding as risk capital must be overcome by open debate among innovators. Evidence from the US is that venture capital has become an essential driver of economic value. In 2015, public companies that received venture capital backing accounted for 20% of the market capitalisation and 44% of the R&D spending of US public companies.

Carriage of an Oz-Q-Tel would lie with the relevant minister. There might be an expectation that the host agency would be the Defence Science and Technology Group in the Defence Department, but that group’s mandate would be distorted by such a large and focused subsidiary. Moreover, the remit of the new entity’s board would be broader because intelligence agencies and Australian industry would be customers equal in importance to the armed forces. A team of investment professionals would run the company, reporting through its minister. A similar team runs Main Sequence, which manages the CSIRO’s innovation fund.

These ideas have had wide discussion within the defence science and technology community. They complement work being undertaken by DST Group’s science translation team on the utility of venture capital in this sphere.

We think the time is ripe for full-scale implementation.