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.

Arabesque: Beauty based on Geometry and Math

Arabesque is the first ESG Quant Fund global asset management firm founded by Georg Kell, the founder and former Executive Director of the United Nations Global Compact. It is focuses on advisory and data solutions by combining big data and environmental, social and governance (ESG) metrics to assess the performance and sustainability of companies worldwide.

It has its headquarters in London and a research group in Frankfurt and has offices globally. It analyzes the ESG data first and then finds out how much to invest based on the company model. The fund has a 32.5% return on investment, higher than global investment growth rate of 24%.

It all began with George Kell’s speech at the Davos forum. He partnered up with Bob Eccles, the founding chairman of the Sustainability Accounting Standards Board. The vision is to enable everyone to be able to invest in responsible companies to hold them accountable.

The technology of Arabesque S-Ray is based on the dimensions of the UN Global Compact – environment, human rights, labor rights, ant-corruption and excludes those who rate poorly in the fields of arms, tobacco, or gambling. Kell hopes to continue to move a critical mass of companies in the right direction and markets demonstrate responsibility of creating a shared future.

Five Approaches to Impact Investing

The idea of impact investing and how to allocate capital based on different approaches have diverged over time. Asset classes can be clustered according to the way investments would deliver financial return by the approach that they take. As illustrated by the below frameworks, impact investments are intended to align with an investor’s preference.  In the impact investing spectrum, one end has the traditional investing mechanism and the other philanthropy and can compare the extent of impact and risk in an impact portfolio. The categories in organizing impact portfolio to determine level of impact, moving from less to more integral impact, are the following:

  • Responsible: Also known as Socially Responsible Investing (SRI), this approach involves the negative screening of investments due to conflicts or inconsistencies with personal or organizational values, non-conformity to global environmental standards, adherence to certain codes of practice, or other such binary impact performance criteria. ‘Responsible’ captures investment activity that may proactively contain a social or environmental component in its strategy.
  • Sustainable: Sustainable investments move beyond a defensive screening posture, actively looking for investments that are positioned to benefit from market conditions by integrating Environmental, Social and Governance (ESG) factors into core investment decision-making processes. This can include corporate engagement, innovations, and new markets that are recognized as a path to growth, with positive social and environmental benefits, such as, for example, alternative energy.
  • Thematic: Thematic or mission investments have a particular focus on one or more impact themes, such as clean water or deforestation, and work to channel investment allocations in those particular directions. These are highly targeted investment opportunities, in which the social or environmental benefits are fully blended into the value proposition of a commercially positioned investment.
  • Impact-First: Investments that seek to optimize a desired social or environmental outcome, without regard for competitive return. They are open to trading off financial return for more impact where a more commercially oriented return is not yet available.
  • Non-Impact Investments: Investments made for the sole purpose of financial return, without any explicit consideration given to the social impact of the investments.
  • 100% Impact Investment: The intentional commitment by asset owners of 100% of their assets to positive social and/or environmental impact.

To navigate the following strategies, the report recommends adopting an incremental philosophy to explore opportunities in the program that builds upon the internal capacity, investment functions, and existing relationships. For instance, mission related investments are “financial investments made with the intention of furthering a foundation’s mission and recovering the principal invested or earning financial return.”  Socially responsible investing focuses primarily on (negative) social   screening and proxy activity in public equities, while mission-related investing is a proactive approach in use across asset classes.[7]

Impact investing is no longer a niche market. As more investors are interested in exploring impact, they are seen as a simple mechanism with expected financial return and an approach to impact.

Impact investing can offer the following opportunities when pursuing impact investing:

  • Banks, pension funds, financial advisors, and wealth managers can provide client investment opportunities to both individuals and institutions with an interest in general or specific social and/or environmental causes.
  • Institutional and family foundations can leverage significant assets to advance their core social and/or environmental goals, while maintaining or growing their overall endowment.
  • Government investors and development finance institutions can provide proof of financial viability for private-sector investors while targeting specific social and environmental goals[8]

McKinsey & Company looked at financial returns for impact investments on 48 investor exits between 2010 and 2015 and found that they produced a median internal rate of return (IRR) of about 10 percent. The top one-third of deals yielded a median IRR of 34 percent, clearly indicating that it is possible to achieve profitable exits in social enterprises. The below figure shows some evident relationships between deal size and volatility of returns, as well as overall performance. The larger deals produced a much narrower range of returns, while smaller deals generally produced better results. The smallest deals had the worst returns and the greatest volatility.[9]

            Source: McKinsey & Co., 2018

Learn more:

[1] Jacen Greene, An Introduction to Impact Investing https://impactentrepreneurs.wordpress.com/2012/04/16/an-introduction-to-impact-investing/

[2] Jane Finkelman, Kate Huntington, Impact Investing: History & Opportunity, https://www.athenacapital.com/wp-content/uploads/Impact-Investing-History-and-Opportunity.pdf

[3] GIIN, 2018 GIIN Annual Impact Investor Survey,  https://thegiin.org/assets/2018_GIIN_Annual_Impact_Investor_Survey_webfile.pdf

[4] GIIN, What you need to know about impact investing, https://thegiin.org/impact-investing/need-to-know/#core-characteristics-of-impact-investing

[5] J.P. Morgan, Impact Investments: An Emerging Asset Class, https://thegiin.org/assets/documents/Impact%20Investments%20an%20Emerging%20Asset%20Class2.pdf

[6] NPC, Investing for Impact: Practical Tools, Lessons, and Results, 2015. https://www.thinknpc.org/wp-content/uploads/2018/07/KLF_Investing-for-impact_FINAL.pdf

[7] Heron, Expanding Philanthropy, Missionrelated Investing at the F.B. Heron Foundation, https://www.heron.org/sites/default/files/Expanding_Philanthropy_Mission_Related_Investing_at_the_FB_Heron_Foundation.pdf

[8] GIIN, Impact Investing Guide, https://thegiin.org/assets/documents/GIIN_impact_investing_guide.pdf

[9] McKinsey & Company, Private Equity and Principal Investors, https://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/a-closer-look-at-impact-investing

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] 

Introducing Informa’s Family Office Forum

Informa is a £2.4bn publicly traded international events, intelligence and scholarly research company.  Informa produces over 1,000 events per year, including such past speakers as Leon Black, Steve Pagliuca, David Rubenstein, and Stephen Schwarzman. This is their first initiative geared to family offices. The inaugural NextGen Family Office Forum will be 20th November in Manhattan.   

The Family Office Forum is open exclusively to the next generation of multi-generational wealth families.  Our working definition is: families who have invested at least $50m into funds in the last two years or who hold at least $200m in funds, business or real estate. There will be a small number of others in attendance (less than 5%) who fall outside this category, exclusively event sponsors and advisory board members.   You can see more details of the event as well as further information on Informa here: 

https://finance.knect365.com/next-generation-family-office/

Our Advisory Board members so far are:

The Advisory Board’s responsibilities are:

– Propose attendees, panelists, and keynotes.   

– attend our inaugural forum. Draft agenda: https://finance.knect365.com/next-generation-family-office/agenda/1– make suggestions on design and format of the program. Here is the the best practices of events for family offices here: https://docs.google.com/document/d/170nrvzjsicd8BRpMq_STJ0sMzkf-JcI5BYJMv4dGuLE/edit?usp=drive_web&ouid=102503730600987245501