Editor’s Brief¹

Last week, we looked at Moonshine AI, an offline voice translation and speech processing software that runs entirely on-device. Keep an eye out on LinkedIn for the interview with Founder Pete Warden and John Fritchle on Thursday.

This week we spotlight Leonid Capital Partners and their approach to a resilient capital chain.

Special thanks to founding partner Chris Lay for talking all things capital and Claire Carloss.

Signal Brief: Leonid Capital Partners² - Building a Resilient Capital Chain

Leonid Capital Partners is a specialized private credit firm that provides flexible financing solutions to high-growth technology companies engaged in defense, aerospace, and broader government innovation. Their portfolio companies have already booked nearly $3B in government revenue while avoiding the typical equity dilution of venture backed startups.

Origins & Vision

Founded in 2019 by Christopher Lay and James Parker, Leonid Capital Partners set out to provide efficient and accessible capital to innovative companies supporting U.S. national security. Lay began as a DARPA-funded graduate student researching traumatic brain injury; Parker served as a NASA flight controller and operations/systems engineer for major defense primes.

After watching companies front heavy costs for staff and suppliers due to lack of capital, Leonid built a model aligned with federal acquisition rules. Unlike traditional banks, they treat government contracts as highly lendable assets, providing bridge capital while companies execute on their government contracts.

Their philosophy: defense contractors need capital solutions designed for their environment, not legacy bank credit boxes. By focusing on companies with federal contracts, Leonid removes early-stage market risk and solves the working-capital crunch that stalls growth.

Key Takeaways

• Critical Market Gap: Traditional banks avoid defense contractors due to cancellation risk, classified work, and messy payment cycles. 

• DoD Validation: Trusted Capital Provider status, earned after nine months of vetting, ensures a clean capital stack and alignment with national security priorities.

• Strategic De-risking: Financing against awarded contracts leverages reliable government payments and avoids early-stage market risk.

• Scalable Approach: The model applies across defense sectors from space hardware to AI-driven supply chains

Capital Stack:

Flexible Capital Solutions

Leonid's offerings preserve founder control and provide capital tailored to the realities of Department of Defense / Government Contracting

Key Financial Products:

• Term Loans – Structured around contract milestones

• Revolving Credit Lines – Smooth out payment cycle mismatches and delays

• Acquisition Financing – Fund strategic defense M&A

• SBIR/STTR Advance Financing – Timelines designed for research awards

• Contract Bridge Financing – Cover ramp-up between award and first payment

Market Signals

Funding & Growth

• Total Capital Raised: Over $300M across multiple vehicles

• Latest Milestone: Surpassed $287M in current evergreen fund (Nov ‘24)

• Portfolio Revenue: 75% of borrowers increased their top-line revenue by 189% during loan terms

Portfolio Companies

Leonid's sample investments span critical defense technology domains:

• Space & Orbital Systems – BlackStar Orbital (autonomous spacecraft servicing), Zero-G (microgravity research platforms)

• Autonomy – Skyways (cargo UAVs), LeVanta Tech (maritime drones), WingXpand (portable AI-drones)

• AI & Software – Unmanned Experts (swarm robotics), EMPEQ (supply chain security AI)

• Advanced Materials & Energy – Ion Storage Systems (solid-state batteries), Infinite Composites (materials science)

Looking Ahead

Resilient supply chains remain critical. But the first raw material any company needs before it can ship a product is money. And if the source of that money is questionable, growth can stop just as fast as if lithium or batteries vanished from the line.

The U.S. remains one of the world’s largest magnets for foreign direct investment (FDI), with the total position rising by $332.1B to $5.71T at the end of 2024. But where that capital comes from matters.

Capital from allies raises wages, drives innovation, and strengthens our economy, investment we should continue to attract. Capital from adversaries on the other hand, builds leverage.

Chinese inflows peaked at $55B in 2016 and have since fallen to $2.2B in 2024. Yet U.S. counterintelligence agencies warn that China still uses venture, private equity, and LP stakes to undermine national security.

The risks cut two ways.

Exploitation. Investors use holding companies, joint ventures, and even “due diligence” to gain access to sensitive technology. Firms have seen proprietary data siphoned off during acquisition talks that never closed.

Disqualification. Adversarial capital on the cap table can disqualify a startup from working with the U.S. government. For a dual-use or defense company, that can mean losing its biggest customer overnight.

Washington has tightened guardrails. AML and KYC screen dirty money.  CFIUS now reaches some non-controlling inbound stakes and the Treasury’s new outbound rule stops U.S. dollars from supercharging China’s most sensitive tech sectors.

Together these define the boundaries. But the middle ground, seed checks, LP stakes, and founder-level diligence, remains exposed.

The solution is a resilient capital chain, and Leonid Capital Partners proves the model. As a DoD Trusted Capital partner, they’ve done the legwork to remove the risks of exploitation and disqualification. Their fund is built for rapid underwriting and expandable credit facilities, backed by investors who believe in the future of national security.

Will it take longer to raise a fund? Probably. Is a nine-month review harder than a handshake deal? Absolutely. But if we can’t secure the capital chain, the supply chain doesn’t matter.

Challenges

• Budget Cycle – Vulnerable to defense spending or program priority shifts

• Payment Timing Risk – Government contract delays/cancellations can strain portfolio companies

• Market Competition – Traditional lenders may follow Leonid’s lead

Bottom Line:

For funders, if you truly care about defense, not just because it’s the hot thing, take a hard look at your LP base. What looks clean on the surface can trace back to adversarial capital, and that risk compounds all the way down.

For founders, the source of capital is as critical as the amount. Adversarial money risks exploitation or disqualification, while trusted capital keeps the path to government customers open. Leonid Capital Partners shows that with clean, mission-aligned financing, growth doesn’t have to come at the cost of eligibility.

Stay Ahead of Defense Innovation

Not just because it’s content
But because the future is being built. And you want a seat at the table.

1  The views expressed in this newsletter are my own and do not represent the views of the U.S. Navy, Department of Defense, or any government agency. Mention of companies, technologies, or products is not an endorsement or recommendation. The content is for informational purposes only and should not be considered investment advice.

2  Disclosure: Leonid Capital Partners is coming on as a Strategic Partner with Defense Tech Signals. This Signal Brief was prepared independently, without sponsorship, and reflects our editorial analysis alone.