JPMorgan Chase Invests $5 Billion in Defense Startups in First Year

JPMorgan Chase said Monday that the bank has invested $5 billion in startups during the first year of its U.S. security and resiliency initiative. The investments put JPMorgan halfway toward the $10 billion target over a decade that the bank announced last year. The faster-than-expected pace indicates that JPMorgan is finding plentiful opportunities in emerging defense, manufacturing and supply chain firms. Co-president Doug Petno said JPMorgan may expand the startup investment program beyond the initial dollar amount. Most of the investments have not yet been disclosed.

JPMorgan has taken direct stakes in defense-related startups Hadrian and Castelion. In August, JPMorgan helped lead a $1.4 billion funding round for Hadrian, which builds automated factories producing parts for the defense, aerospace and maritime sectors. Hadrian's founder said a California factory operated by Hadrian has 10 robots for every human employee. JPMorgan also participated that month in a $1 billion funding round for Castelion. Castelion is developing a relatively low-cost hypersonic missile called Blackbeard as the company's flagship product. Former SpaceX engineers founded Castelion in late 2022.

Former Berkshire Hathaway executive Todd Combs leads the JPMorgan group responsible for startup investments. Combs, a former JPMorgan board member, reports directly to CEO Jamie Dimon. Petno praised Combs for quickly starting the work and investing in interesting companies. Combs said Monday that the group's approach is to find generational companies and partner with those companies for the long term. Combs said putting more than $5 billion to work in the first year shows how many exceptional businesses are strengthening critical supply chains. Petno said early venture-stage advanced manufacturing companies have found ways to build capabilities in the U.S. rather than relying on overseas trading partners.

Wars in Ukraine and the Middle East, along with trade disputes with China, have threatened energy and key component supplies for U.S. industries and defense. Those threats prompted Dimon to create the initiative a year ago. Dimon put Petno in charge of the overall investment project. Petno is widely seen as one of two key possible successors to Dimon. The project covers supply chains, defense and manufacturing, as well as frontier technologies, pharmaceuticals and health technology.

JPMorgan's billions of dollars in direct investments in nascent companies depart from the bank's usual role as a lender and adviser. Startup investments can be relatively risky bets on unproven technologies. JPMorgan had moved away from taking startup stakes before the defense initiative. JPMorgan spun off private equity business One Equity Partners more than a decade ago.

JPMorgan said the bank has separately financed and facilitated more than $230 billion in transactions during the initiative's first year for industries supporting U.S. national interests. That part of the initiative targets $1.5 trillion in activity over 10 years. Former investment banking co-head Jay Horine leads that part of the project. JPMorgan built a team of about three dozen bankers, supported by hundreds more across the firm, as the bank expanded the initiative to Europe and Canada. Petno said bankers are mapping distribution lines for products including submarines, missiles and aircraft to identify suppliers lacking capital or capacity to meet rising demand. Petno said JPMorgan regularly communicates with the U.S. Department of Defense and Department of Commerce about government needs.