Defense Ventures

Government

  • Frontier Development Lab brings AI engineers to work together from the effects of climate change to predicting space weather, from improving disaster response, to identifying meteorites that could hold the key to the history of our universe. The lab is hosted by the SETI Institute and NASA Ames Research Center.

Corporate VCs

  • Airbus Ventures – aerospace, cryptocurrency, materials, tough tech
  • Boeing HorizonX – Mobility, AI, IOT, Security
  • Lockheed Ventures
  • Scout Ventures – AR, AI, Drones, Mobility, IoT, Cyber, Enterprise
  • In-Q-Tel – focuses on intelligence community, tough tech investor
  • LunarX – hosted by Google

Accelerators

  • Second Front Systems “accelerate delivery of emerging commercial technologies to U.S. and Allied warfighters.”
  • FedTech
  • One Defense – Government startup consultant for YC 500 and Techstars
  • 500 Startups
  • Lemnos Labs – Hardware

Traditional LPs

  • Lux Capital is a prominent deep tech/tough tech VC based in NYC.
  • *Team 8 “is an Israeli cybersecurity foundry focused on developing disruptive technologies and building category-leading companies that challenge the biggest problems in cybersecurity today.”
  • 8VC – Former Palantir founder, Firm has lobbyist on staff
  • Khosla Ventures seeks to invest into cost-effective, scalable inventions, or black swans of energy invention. This medium post captures the vision well.
  • C5 Capital “is a specialist investment firm that exclusively invests in the secure data ecosystem including cybersecurity, cloud infrastructure, data analytics, and space.” They also launched C5 Impact Partners – “It is our first fund focused on data-driven technologies that support inclusivity, safety, resilience and sustainability of cities and communities.”
  • General Catalyst -Anduril Investor
  • ForgePoint Capital – Cybersecurity
  • Harpoon
  • Andreesen Horowitz – Anduril Series B Investor
  • Lightspeed – enterprise, security, citadel defense anti-drone company
  • Founders Fund – government, Trae is early Palantir, co-founder of Anduil
  • Trident Capital – Enterprise, IT, Cyber, Cloud
  • Acero Capital – Enterprise Software, co-invested with In-Q-Tel
  • Crosslink Capital
  • Bessemer Venture Partners – Consumer, Enterprise, Healthcare
  • Khosla Ventures
  • DCM
  • Shasta Ventures
  • DCM
  • Shasta Ventures
  • Softbank
  • Arsenal Growth – Enterprise, Commerce/Logistics, Healthcare
  • The Engine – tough tech investor
  • New Enterprise Association – tough tech
  • SOSV – runs HAX and Indie Bio. Focus on hardware and has Chinese chapter

Climate Ventures

Prelude Ventures “is a venture capital firm partnering with entrepreneurs to address climate change. Since 2013, we have invested in over 40 companies across advanced energy, food and agriculture, transportation and logistics, advanced materials and manufacturing, and advanced computing.”

X Prize “has designed and operated seventeen competitions in the domain areas of Space, Oceans, Learning, Health, Energy, Environment, Transportation, Safety, and Robotics.

Stanford Climate Ventures is “led by two Precourt Energy Scholars with decades of energy technology, business, and policy expertise…[who] launch plans for high-impact ventures in the context of a new energy development framework.” Here is the latest from the 2020 Impact Assessment.

Breakthrough Energy Ventures is a $1 billion dollar Bill Gates energy fund. “Our strategy links government-funded research to the patient, risk-tolerant capital so that more transformative clean energy innovations get to market faster.” Here is a great Quartz article on the latest portfolio.

Obvious Ventures. “Early-stage venture capital for startups reimagining trillion-dollar industries through a world positive lens.” They invest in health, wellness, energy, mobility, and sustainable cities.

The 2020 Techstars x Starburst Aerospace Accelerator Cohort

The accelerator is run over three months and is partnered with NASA’s Jet Propulsion Laboratory, Lockheed Martin, Maxar Technologies, SAIC, Israel Aerospace Industries North America, and the U.S. Air Force, with support from The Aerospace Corporation.

Bifrost

Build AI 10x faster by allowing AI developers to generate simulated datasets. 

https://bifrost.ai

Holos

User-friendly AR/VR software platform that’s revolutionizing education, training, and military command and control.

https://holos.io/

Infinite Composites Technologies

Infinite Composites Technologies makes the most efficient composite pressure vessels and structures in the universe!

http://www.infinitecomposites.com

Lux Semiconductors

Lux is developing next generation System-on-Foil flexible electronics.

http://www.luxsemiconductors.com

Natural Intelligence Systems

Developer of advanced AI systems that provide deeper insight and allows data scientists to focus on results instead of data prep.

https://www.naturalintelligence.ai/

Prewitt Ridge

Prewitt Ridge is developing engineering augmentation software to help engineers design and build complex engineering systems.

https://www.prewittridge.com/

SATIM Inc.

SATIM is a fin-tech company providing insights on risks related to critical, linear infrastructure.

http://www.satim.co

Urban Sky

Urban Sky’s stratospheric remote sensing vehicle, the Microballoon, delivers the lowest cost, highest resolution Earth Observation data available. 

https://urbansky.space/

vRotors

vRotors brings telerobotics to everyone:  remotely control any partner robot or drone in the world from your PC or VR headset.

https://www.vrotors.com

WeavAir

WeavAir offers the most accurate platform for monitoring air contamination, air quality and mechanical system failure using a combination of networked sensor modules and predictive algorithms.

http://weavair.com/

FullCycle is a Cleantech VC Building an Acceleration Economy

So I found FullCycle from last year’s Davos Forum highlights.

As you can see from the video, the thesis is to find technologies that transfer high carbon to low carbon economy – a “gigaton of carbon annually.” The company they highlighted is called Synova.

Transforming waste into valuable resources

Synova has developed a cost effective, closed loop system that converts all types of trash – including plastic – into clean energy, fuel, high-value chemicals, or virgin plastic feedstock, without fossil fuels.

Synova’s technology is disruptive in the developed world and the first to fulfill a huge unmet need in the developing world.”


Unfortunately, other than Synova, I haven’t seen too much other updates this year. I believe they have a solid team though. Their advisors – Erika Karp, Nathalie Nino – are faces quite active in impact investing circles.

Despite the $100 million committed at the Climate Action Summit, I’m not sure where exactly FullCycle is at. Synova hasn’t provided an update since 2018 either. Corona snooze? I’m not quite sure.

C5 Accelerate Welcomes Urban Resiliency Cohort

C5 Accelerate looks for technologies in cybersecurity, space, AI and cloud-based technologies. C5 Accelerate’s advantages are: “strength, depth, and diversity” with mentorship from “business, military, policy, academia, and startup experience.”

“Three million new people move into cities every week and by 2050 nearly 70% of the global population is expected to live in cities. The aggregate demand for technologies to address this market is expected to grow at a compound annual growth rate (CAGR) of 18.4% to USD $717 Billion by 2023.

For the 7th cohort, C5 Accelerate (C5A) selected nine leading early-stage startups that are helping to build urban resiliency. The programming focuses on access to investors, advanced mentorship, leadership development, and business development support.”

  • BACE Group provides an AI-driven facial recognition API that helps businesses, especially financial institutions, remotely verify the identity of their clients while protecting the KYC data and fighting against online identity fraud.
  • Cybermap 360 helps companies manage their cyber footprints to provide full 360 awareness of the challenges on network systems for enterprise at scale.
  • Cyber COAST helps enterprises optimize their cybersecurity investments by automating testing against evolving adversary tactics and providing dynamic recommendations.
  • Modex simplifies blockchain adoption and builds blockchain-driven apps for clients, notably in the healthcare sector.
  • NSION provides highly optimized data security and speed in video data transfer in complex life critical field. The NSC3™ System is built for easy and effective operations — stream and store secured live video from drones to phones and cars to command and control centers.
  • NLX builds AI-powered enterprise chat and voice bots with a no-code UX.
  • Vyorius is creating an AI enabled plug and play delivery drone ecosystem for healthcare logistics.
  • V2Verify replaces usernames, passwords and challenge questions with a voice biometric technology that requires just 2-seconds of speech and works literally anywhere a company interacts with employees and customers.
  • Contact Tracing LLC is building a platform to be the world’s premier pandemic risk mitigation company with a contact tracing app designed to minimize infection fallout and a digital marketplace for PPE.

So You’re Interested in Korean Startups?

The one I think most VCs outside Korea might start looking into might be Crunchbase— like this site here on VCs. It shows some acquisition history and the overall landscape, but not much.

Where Korean VCs and startups look into who invested into where is called thevc.kr. Yes, it is in Korean, but with a Korean speaker, you can look up any fund, who invested into where, and who are the hottest VCs are, and even filter by the technology, geography, and the stage of startups to get the latest funding round news. This is the site I recommend. This is a nice map to view the listings of angel clubs, communities, and foundations. Another place you can view a list of recent funding investing news is at Venture Square, run by a media startup.

To look other thematic funds in Korea, check out FundFinder. If you need contact information to the fund managers, here is a list of directory on KVCA. In Korea though, cold call or messaging almost never works. It is usually done through mutual connections or introductions.

Okay, now you need some templates and forms to begin.

  1. Korean Venture Capital Association guidebook for both startups and VCs. It’s an amazing resource. Definitely bookmark it.
  2. START Docs for early-stage Korean startups. Co-written by 500 Startups. You can log in your numbers, and you’re good to go. It’s been reused and vetted many times, so they’re pretty standard.
  3. ModuSign These are docs for between investors, MOUs, you name it. It also has a quick explanation next to it, so it’s quite good.

Bon Voyage.

How Venture Capital Impacts Defense: Conversation with Peter Thiel and Josh Wolfe

Harnessing and Securing American Innovation: How Venture Capital Impacts Defense

Josh Wolf is a co-founder of Lux Capital to “support scientists and entrepreneurs who pursue counter-conventional solutions to the most vexing puzzles of our time in order to lead us into a brighter future. The more ambitious the project, the better—like, say, creating matter from light.” Peter Thiel is a co-founder of PayPal, Palantir Technologies and Founders Fund. Plantir is an In-Q-Tel and Founder’s Fund-backed company.

Peter: By my count, there are only two companies that have been started since The Cold War, that are (1) focused on national security, and (2) have reached a billion-dollar valuation: SpaceX and Palantir. [4:00]

Peter: A lot of innovation gets driven by smaller companies. This is absolutely critical. When not many people are doing it— if you are one of the few who do it— there is a lot of opportunity. [4:25]

Josh: Strength comes in part from technological dominance. Technological dominance comes from brilliant engineers that are inventing cutting edge technologies. [6:20] 

Josh: Palmer Luckey, Trae Stephens, and Brian Schimpf [founders of Anduril Industries] are authentic engineers that are obsessed with technology. 

They are constantly thinking about: 

What does the warfighter need? 
Where is the white space? 
Where is the gap? 
What is China developing? 
What is Russia developing?
How can we put them [US warfighters] with the most cutting edge technologies out there?[6:35]

Josh: Many of these people [those inventing new technology] were inspired by Science Fiction. They are literally going back— 20 years into the annals of comic books and sci-fi movies— and saying it would be amazing if we had that. [7:00] 

Peter: If you can’t create a business that is worth a billion or more the venture capital model does not work that well. If you start a company that is worth $30 or $100 million that can be quite successful for the person who started that company. For a venture fund if that is the best we did we would be out of business. [9:40]

Have Palantir and SpaceX created a template for other startups to follow with the defense space? [Peter]: Well there is certainly proof that it can be done. In both cases, it took a wickedly long time. Close to a decade to start getting significant contracts from the US Military. In some ways, they were not conventionally venture fundable. [10:20] 

Josh: It helps to reduce market risk. You will have a lot of venture capitalists that say you are focused on the defense industry. The stereotypes of the defense industry are that the defense industry is slow-moving, bureaucratic, very political, they might not pick the best technology, they might instead give the contract the company they have been working with for the past 20 years, etc…So whatever you can do to eliminate that risk [is good]. [If not] It is like we are fighting with ourselves by not equipping the warfighters with the absolute best technology that is coming from some of these early companies. [14:30] 

Josh: The origins of Silicon Valley were in electronic warfare and defense. There is an aversion for people to want to work on defense-related things. That is a zeitgeist that is growing. [21:30]

Josh: I think there is a job society can do —and that is the retelling of a narrative that can galvanize some of the best and brightest to work on American defense. [23:10]

Peter: There is always this danger for a tech company to become overly bureaucratized. [29:49]

Josh: The one real edge you can have as an investor is a behavioral advantage. For us [at Lux Capital] that means having a longer time horizon than the average investor. We call this time arbitrage. If the average investor is looking for a signal of success in a year or two— and we are looking at something that might not give us a signal for 4 or 5 years —then by definition there will be fewer investors looking to fund what we are funding. 

The valuations will be lower— and if we are right —the returns for us and our investors will be higher. So we like to look at things that are further out which means they are riskier and more improbable to work. But when they do they work in a really big way. [30:46] 

A VC from Israel’s High-Tech Intelligence Agency

I was fortunate to tune into a conversation with Liran Grinberg the Managing Partner of Team8 Capital, a global cybersecurity VC. He founded Team 8 in 2014 with the former Head of Israeli intelligence unit, 8200, Nadav Zafrir.

Team8’s company-building Foundry model de-risk process to venture investing, which is a process of “co-founding and serial-investing.” This led to serial investing into enterprises such as the creation of Sygnia ($250M exit with x60 return in 3 years) and Claroty, the world’s leader in Industrial Cybersecurity, backed by Rockwell AutomationSiemensSchneider ElectricGeneral MotorsBMW Group and more.

Here are three main advantages to having 8200 as the backbone of Team8.

So what is Unit 8200, and how does it contribute to the success of Team8 Capital?

  1. Level of talent is high. In Israel there is a mandatory service, and Unit 8200 is an elite military Israeli unit. The Team 8 leadership had access to the 1% of the 1%, those who had can new companies or can help build new companies. They were security entrepreneurs, cyber operating partners, and top talent from the largest unit within the military.
  2. Training is high. They start practicing leadership at a young age in the military and in technology. Under Team 8, under the Cyber and Data division, they build products and services to protect from cyber threats for data at scale.
  3. Culture is failure-tolerant and bottom-up. As 18, 19 year olds, they military entrants have their first year, second and third year to experiment with their new ideas each year. The graduates of the 8200 naturally fuel the tech ecosystem and the “startup nation.” 

Another really interesting aspect to the model of Team8 was the venture-building model and the formation of the “Team8 Village,” a critical mass of mass of talent through which a platform- they built out a process for entrepreneurs, engineers, and the investors.

Instead of focusing on commercial innovation, Team8 geared attention to the VC world and the intersection of academia, inventions, and startups and how to enable the backbone of startups to be more influential. As incumbents, enterprises have a lot of resources and access to the markets like understanding of the customers, they are bureaucratic and it is hard for them to innovate. Startups solve very concrete problems. They don’t have much resources or any research capability, and the success rate is very low. So Team8 chose to ask –  how can VCs act as a platform to solve difficult questions?

Team8 helps enterprises digitally transform. The companies or LPs become strategic investors.They don’t often have the muscle power to build something from scratch. So therefore, they passively help build the model to impact the type of problem to invest in the company.

For a gate of four hours, Team8 brings a challenge and companies together with engineers and the leadership. They bring together companies without lack the technical domain expertise from different geographies with a similar problem. For instance, they brought together data scientists and enterprises that 2 entrepreneurs usually would do in the garage. Team8 then conducts technical due diligence to help them grow.

If the problem is big enough, they build the company from scratch. They have 12 companies so far. This whole model – the platform team, village, the process – the investors, and everyone – has de-risked the investing process. 

Liran began working closely with founding teams on the ideation of Team8’s first companies, including Sygnia which was acquired by Temasek for $250M, and Claroty which is backed with $100M in funding, alongside Illusive Networks, Hysolate, Curv and more. Liran then transitioned to build and lead Team8’s Go-to-Market Group across its marketing, business development and market research functions, alongside the formation of a tightknit community of hundreds of C-level executives from the world’s leading enterprises. Combined, the two initiatives have become a powerful and differentiated advantage of Team8 in accelerating the success of its portfolio companies. 

His venture-building model with Israeli’s top talent is not only tackling the world’s greatest cyber security challenges, but also the backbone of the startup nation Israel is today.

Accelerating Tech for a Secure and Sustainable Future

When you think of working in the defense industry, you are right think about the arms – the military equipment, missiles, submarines, helicopters, etc. You’re quite right. So what it mean to be working in sustainable solutions in the world of defense tech?

The idea of working with the private sector for public applications is not new. In the past, most predominant forms of spending were through governmental entities such as DARPA  as R&D directorate and for weapons and military development – the Central Intelligence Agency’s publicly funded venture capital firm – In-Q-Tel or the Defense Innovation Unit.

Their sponsored research today became the technologies in our daily lives – the GPS, the Internet, the microwave, artificial intelligence, were all products from the State investments in technology.

Emerging technologies today have far outpaced the contracting model, where it now needs to move towards venture financing. The types of threats we are facing today including cyber – are outside the security contractor supply chain. The existing model’s ability to keep pace in future warfare is questionable.

The world of defense tech is an interesting one, where it extends beyond the traditional arms to encompass artificial intelligence (AI), quantum computers, cyber, robot, 5G (5th generation), urban air mobility (drones) mobile communication, and aerospace technologies.

At the current Center, we build a hub of: a) challenging technical problems; b) globally shared security challenges c) the intersection of commercial and public sectors, and d) with significant economic upside. We seek to work with venture capitalists accelerating dual-use early-stage technologies by facilitating technology transfer, and forming strategic alliances. 

We work with a network of highly vetted global advisors and partners, enabling us to map technologies to globally shared security challenges. We base our selection on performance, application of technologies to our partner’s mission capacities, and on complete alignment of interest. 

So how can defense tech serve as means for sustainability?

Aerospace and automobiles both rely on high technologies but are both major manufacturing industries relying on advanced materials, electronics, embedded systems, mechanical components, engines, and structures.

The basic idea is the same – you invest into new technologies that are more efficient, faster, smarter but to invest into clean technologies doesn’t also release toxic chemicals or with greater mitigation mechanisms to control GHG emissions.

The battery-powered electric airplanes are, believe it or not, already here. By investing into dual-use (commercial and public) technologies, clean technologies in the commercial sector could be bolstered with public sector investments. Through partnerships and their collaboration with domestic and foreign defense conglomerates, we can accelerate the progress of companies making a material difference in carbon emissions through increased incentives.

The vision is to invest into technologies to help advance the capabilities of the defense sector to have advanced technologies and to develop technologies that will enable the industry to shift from nonrenewable to renewable resources for energy and materials in a significant way – and thus will help to achieve a secure and sustainable future.

VC Reads

Updated: 7/12/2020.

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