We live in a very different world from the Russian invasion of Ukraine in 2022 and the Hamas attack on Israel on October 7. With global military spending catching up $2.4 trillion last year, startups are hoping to get a piece of the pie, and formerly reluctant investors want to help them do it.
The US budget is by far the largest, with contracts worth $53 billion in major tech companies between 2019 and 2022. But the rise of defense technology as an investment trend is very global.
German AI startup Helsing is a strong example unprecedented amounts of funds available to technology companies with military potential.
Investor appetite is particularly strong for dual-use technology solutions, meaning they can be used for both civilian and military applications. The idea that defense technology can benefit society more broadly is also reflected in the growing concept of ‘resilience technology’.
More than the well-worn term “defense,” the word “resilience” reflects the idea that innovation can make democratic societies less vulnerable to attack and help them recover more quickly.
For example, Helsing co-CEO Gundbert Scherf he said that he and his co-founders created the company “because we believe that artificial intelligence will be necessary for democracies to continue to defend their values.”
The fact that Helsing’s mission resonated with mainstream investors like Spotify founder Daniel Ek reflects a change in mindset in society as a whole, but also in venture capital itself.
Although usually prevented from investing in weapons by the so-called anti-shipment clause, funds large and small are now willing to fund international startups in the broader resilience technology space, with the blessing of important limited partners such as the European Investment Fund.
From the EU to Ukraine to Israel, here are some venture capital firms betting on resilience tech outside the US
NATO Innovation Fund
NATO Innovation Fund is currently one of the most frequently mentioned players in resilience technology conversations. A $1 billion fund rarely goes unnoticed, and even more so when it’s dedicated to an area where venture capital has been scarce. However, it had kept a low profile since its official launch in August 2023, even reducing interview requests.
Not anymore: One year, NIF revealed the first investments he made across a wide range of verticals – AI, space technology, manufacturing, transport and robotics – but always with an eye towards ‘advancing defence, security and resilience’.
NIF direct investments can only go to startups from 24 countries these are his LPs. This includes Iceland, but not France, for example, which could help provide new funding to locations that traditionally receive less capital but are even more aggressive than larger countries in resilience technology.
However, the scope of the NIF is made a bit more flexible by the fact that it is also a fund of funds. The VC firms he has backed so far include; Alpine Space Ventures, Join CapitalOTB Ventures, and Vsquared Ventures.
OTB Ventures
Founded in 2017, above OTB Ventures it existed long before NIF, but its focus on deep technology takes on a new flavor. Backed by the NIF, as well as the European Investment Fund (EIF), the Amsterdam-based company with Polish roots has already started using the $185 million early-stage development fund on what it calls “real technology.”
OTB’s understanding of “real technology” translates into a focus on space technology, business automation and artificial intelligence, cyber security and fintech infrastructure. all of these can easily fall under resilience technology as well.
Co-founder and managing partner Marcin Hejka also understands dual-use technology as a reality for many startups. “It’s only natural that the defense sector is implementing more and more technologies with civilian roots,” he told TechCrunch in March.
MD One Ventures
Dual use is the focus MD One Ventures, a UK-based VC firm that invests in early-stage companies. Founded in 2021, it describes itself as “committed to supporting deep technology applied innovation for the UK, Europe and Allies”.
This leaves the door open to a wide range of applications. “We are agnostic across a range of sub-sectors and technology types and have invested in both software and hardware-based companies, with [national security]business and defense background,” the MD One website explains.
Its portfolio includes startups like Labrys Technologies, a Slack-meets-location-meets-payments for military and humanitarian scenarios, and Materials Nexus, which uses artificial intelligence to discover new materials.
Israel Resilience Fund
Launched in late 2023 in the wake of Hamas attacks, the Israel Resilience Fund aims to raise $50 million to invest in startups affected by war or developing solutions relevant to Israel’s immediate needs.
It is one of the funds of the Israeli investment platform OurCrowd, which it has had since March secured commitments of $17 million for this special fund, for which it waived all management fees and carried interest, and focused on catalytic co-investment from public and private sources.
From 8 investments unveiled last December, the Israel Resilience Fund’s portfolio has now grown to 35 groups, representing around 1,000 jobs in a country where 14% of employees work in technology. Arguably thanks to initiatives like these, the industry has shown resilience, with Israeli startups growing more than $3.1 billion since the war began.
D3
D3 is an early-stage fund whose name represents its appeal to “Dare to Defend Democracy.”
“We launched our fund in the summer of 2023 with the primary goal of investing in founders who are leveraging technology to help Ukraine defend itself and define the future of Western national security,” its website explains.
With a typical investment of $125,000 for a 7% equity stake, it is also open to making follow-on investments of up to $750,000 in later rounds led by other investors. Its current portfolio covers industries such as drones, sensors, unmanned aerial vehicles (UAVs), often with an AI component.
D3 was also one of the sponsors of a recent defense technology hackathon in London. The first of its kind, but likely not the last, confirms that these VCs will also have a growing pipeline of startups to invest in.
