We live in a very different world since the Russian invasion of Ukraine in 2022 and the October 7 attack by Hamas on Israel. With global military spending reaching $2.4 trillion last year, startups are hoping to get a piece of the pie, and investors have been reluctant to help them.
The US budget is the largest, with contracts worth $53 billion for major technology companies between 2019 and 2022. But the rise of defense technology is a strong global investment trend.
Germany-based AI startup Helsing is a powerful example of the unprecedented amount of capital available to tech companies with military potential.
Investor appetite is particularly strong for technology solutions with dual-use potential, meaning they can be used for both civilian and military applications. The idea that defense technology can benefit society at large is also reflected in the concept of “resilience technology.”
More than the term “defense”, the word “resilience” reflects the idea that innovation can make democratic societies less vulnerable to attacks and help them recover more quickly.
For example, co-CEO Helsing Gundbert Scherf said that he and the founders created the company “because we believe that AI will be important so that democracy can continue to defend its values.”
The fact that Helsing’s mission resonates with major investors such as Spotify founder Daniel Ek reflects a change in mindset in society as a whole, but also in venture capital itself.
While usually prevented from investing in weapons by so-called representative clauses, large and small funds are now willing to finance international startups in the broader resilience technology space, with the blessing of major limited partners such as the European Investment Fund.
From the European Union to Ukraine to Israel, here are some of the venture capital firms making bets on resilience technology outside the US
NATO Innovation Fund
The NATO Innovation Fund is now one of the most frequently mentioned players in the resilience technology conversation. A $1 billion fund rarely goes unnoticed, and even more so when it is dedicated to a sector where venture capital is scarce. However, it has kept a low profile since its official launch in August 2023, even refusing interview requests.
Not anymore: A year ago, NIF announced the first investments made in different verticals – AI, space technology, manufacturing, transportation, and robotics; but always with an eye on “advancing defense, security and resilience.”
NIF’s direct investment can only go to startups from 24 countries that are LPs. This includes Iceland, but not France, for example, which could help bring new funding to locations that typically receive less capital, but are better off than larger countries in terms of resilience technology.
However, the scope of NIF is made more flexible due to the fact that it is also a fund of funds. VC firms that have been backed so far include Alpine Space Ventures, Join Capital, OTB Ventures, and Vsquared Ventures.
OTB Ventures
Founded in 2017, the aforementioned OTB Ventures predates NIF, but its focus on deep technology takes on a new flavor. With the support of the NIF, but also the European Investment Fund (EIF), the Amsterdam-based company with Polish roots has started to use an initial growth fund of $185 million into what it calls “real technology.”
OTB’s take on “real technology” translates into a focus on space technology, enterprise automation and AI, cyber security and fintech infrastructure; all of which can easily fall into resilience tech, too.
Founder and managing partner Marcin Hejka also knows dual-use technology is a reality for many startups. “It’s natural for the defense sector to adopt other technologies with civilian roots,” he told TechCrunch in March.
MD Salah Ventures
Dual use is the focus of MD One Ventures, a UK-based VC firm that invests in early-stage companies. Established in 2021, it describes itself as “dedicated to supporting deep technological innovation that applies to the UK, Europe and the Allies.”
This leaves the door open for many different applications. “We are agnostic across several subsectors and types of technology, and have invested in both software- and hardware-based companies, with (national security), company and defense background,” Md One explains the site.
Its portfolio includes startups such as Labrys Technologies, Slack-meets-location-meets-payments for military and humanitarian scenarios, and Materials Nexus, which uses AI to discover new materials.
Israel Resilience Fund
Launched in late 2023 after the Hamas attack, the Israel Resilience Fund aims to raise $50 million to invest in startups affected by the war or developing solutions that meet Israel’s immediate needs.
This is one of the funds of the Israeli investment platform OurCrowd, which since March has received a commitment of $ 17 million for this special fund, which eliminates all management costs and carries interest, and with a focus on catalyzing co-investment from public and private sources.
From the 8 investments revealed last December, the Israel Resilience Fund’s portfolio has now grown to 35 teams, representing around 1,000 jobs in a country where 14% of employees work in technology. Arguably thanks to initiatives like this, the sector has shown resilience, with Israeli startups raising more than $3.1 billion since the war began.
D3
D3 is an early stage fund whose name is a call to “Dare to Defend Democracy.”
“We launched the fund in the summer of 2023 with the main goal of investing in founders who use technology to help Ukraine defend itself and define the future of Western national security,” the site explains.
With a usual investment of $125k for a 7% equity stake, it is also open to making follow-on investments of up to $750k in later rounds led by other investors. The current portfolio covers verticals such as drones, sensors, unmanned aerial vehicles (UAVs), often with AI elements.
D3 is also one of the promoters of the new defense technology hackathon in London. The first of its kind, but likely not the last, it confirms that these VCs will also have a pipeline of many startups to invest in.
