Berkshire Hathaway portfolio manager Todd Combs waits for the start of the Berkshire Hathaway Invest in Yourself 5K race sponsored by Brooks Sports, a Berkshire Hathaway company, on the sidelines of the Berkshire Hathaway shareholder meeting on Sunday, May 4, 2014 in Omaha, Nebraska, USA.
Daniel Acker/Bloomberg/Getty Images
JP Morgan Chase The company announced Monday that it invested $5 billion in startup investments in the first year of its U.S. security and resiliency initiative, a faster-than-expected pace and a sign that the bank sees rich opportunities in emerging defense, manufacturing and supply chain companies.
JPMorgan Co-President Doug Petno said in an interview with CNBC that the bank, which announced last year that it would invest $10 billion in startups over 10 years, may expand the program beyond that initial amount.
Todd Combs, former Berkshire Hathaway “We’ve really hit the ground running,” said Petno, who heads JPMorgan Group and is an executive responsible for investing in startups. “He’s done a great job and put us in some really interesting companies,” he added.
Most of these investments have not yet been disclosed, but the two known stakes seem to symbolize the project’s mission to strengthen companies needed in more dangerous and chaotic geopolitical times. JPMorgan, the nation’s largest bank by assets, has acquired direct stakes in defense startups Hadrian and Castellion.
JPMorgan CEO Jamie Dimon launched the initiative a year ago as wars in Ukraine and the Middle East and a trade dispute with China threaten the flow of energy and key components needed for U.S. industry and defense.
He has appointed Petno, who is widely seen as one of two possible successors, to be in charge of all investment projects. Mr. Combs is a former director of the bank and reports to Mr. Dimon.
The scope of projects extends beyond supply chain, defense and manufacturing to the frontier technology, pharmaceutical and health technology industries.
Troy Rohrbaugh and Douglas Petno, co-CEOs of JPMorgan Chase’s Commercial and Investment Bank.
Provided by: JP Morgan Chase
“There are a lot of very interesting companies working to solve some of these problems,” Petno said.
These “early venture-stage advanced manufacturing companies have found a way to build these capabilities within the United States rather than relying on foreign trading partners,” he said.
In August, the bank helped lead a $1.4 billion funding round in Hadrian, which is building an automated factory to make parts for the defense, aerospace and maritime sectors. Hadrian’s California factory has 10 robots for every human employee, according to the startup’s founder.
That same month, JPMorgan also participated in a $1 billion funding round for Castellion, whose flagship product is a relatively low-cost hypersonic missile called Blackbeard. Castellion was founded in late 2022 by a group of former SpaceX engineers.
“Our approach is to find generational companies and partner with them for the long term,” Combs said in a statement Monday.
“Coming up with more than $5 billion in our first year shows how many great businesses are being built in an industry that strengthens critical supply chains,” Combs said.
Is it a risky business?
JPMorgan’s multibillion-dollar direct investment in startups is a departure from its normal role as a lender and advisor.
Before the defense initiative, banks had shied away from investing in startups, which could be relatively risky bets on unproven technologies. JPMorgan spun off its private equity business, One Equity Partners, more than a decade ago.
In its more traditional role, JPMorgan has lent more than $230 billion to promote industries that support U.S. interests, the bank said.
This part of the security and resiliency project is expected to reach $1.5 trillion over 10 years and is being led by former investment banking co-head Jay Hollein.
JPMorgan has assembled a team of approximately 30 bankers for this project, and hundreds more bankers within the company are assisting as it expands into Europe and Canada.
Petno said the company’s bankers are mapping the distribution lines of major products, from submarines and missiles to aircraft, and identifying suppliers that may lack the capital or capacity to meet growing demand.
He said JPMorgan is also in regular contact with the U.S. Department of Defense and the Department of Commerce about government needs.
