Who’s Funding the Future of Defense? Global Players Invest in Resilience

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The Rise of Resilience Tech: How Venture Capital is Fueling Innovation for a More Secure World

The world has changed drastically since the 2022 Russian invasion of Ukraine and Hamas’s October 2023 attack on Israel. This shift has sparked a surge in global military expenditure, reaching $2.4 trillion last year. This unprecedented spending has attracted newfound interest from venture capitalists, particularly towards defense tech startups, offering a compelling opportunity for innovation and investment.

While the United States leads the way in defense spending, with $53 billion in contracts awarded to major tech companies between 2019 and 2022, the rise of defense tech as an investment trend is a global phenomenon.

Helsing, a German-based AI startup, exemplifies the unprecedented capital available to tech companies with military applications. This surge in investment is particularly strong for startups developing dual-use technologies – solutions with both civilian and military applications. The broader social benefits of this technology are increasingly recognized through the concept of "resilience tech."

This new terminology signifies a shift away from the traditional, often militaristic focus of "defense." Resilience tech prioritizes innovation that makes democratic societies less susceptible to attack and aids in their faster recovery. "We believe that AI will be essential so that democracies can continue to defend their values," says Helsing co-CEO Gundbert Scherf. This powerful statement reflects the evolving mindset of investors and society as a whole.

Venture capital firms, once hesitant to invest in weapons due to "vice clauses," are now actively funding international resilience tech startups with an increasing number of major limited partners, such as the European Investment Fund, giving their blessing. This suggests a global shift in understanding and acceptance of this sector.

Funding Resilience Beyond the US

Across Europe, the EU, and Ukraine, a new wave of venture capital firms are leading the charge in resilience tech investment.

NATO Innovation Fund (NIF)

The NATO Innovation Fund, a $1 billion fund dedicated to supporting "defense, security, and resilience," is a major player in this emerging field. Despite its initial low profile after its launch in August 2023, the NIF has begun to make its presence known. This year, the fund announced its first investments in a variety of areas including AI, space tech, manufacturing, transportation, and robotics, all with a focus on enhancing defense and resilience.

While limited to startups from 24 NATO member countries, including newcomers like Iceland, the NIF’s scope extends through its fund-of-funds approach. The NIF has already backed firms like Alpine Space Ventures, Join Capital, OTB Ventures, and Vsquared Ventures, allowing it to reach a broader range of startups.

OTB Ventures

OTB Ventures, founded in 2017, is an Amsterdam-based firm with Polish roots. Its focus on deep tech has been sharpened by the rise of resilience tech. With backing from the NIF and the EIF, OTB has launched a $185 million early-growth fund targeting "real tech" – areas like space tech, enterprise automation, AI, cybersecurity, and fintech infrastructure, all of which fall under the umbrella of resilience tech.

Co-founder and managing partner Marcin Hejka acknowledges the reality of dual-use technology for startups, stating that "it’s absolutely natural that the defense sector is applying more and more technologies with civilian roots."

MD One Ventures

MD One Ventures, a UK-based venture capital firm investing in early-stage companies, shares OTB’s commitment to dual-use technology. Founded in 2021, MD One is dedicated to supporting applied deep tech innovation for the UK, Europe, and allied nations. Its portfolio covers a range of subsectors and technologies, including software and hardware, with a focus on national security, enterprise, and defense. Examples include Labrys Technologies, a Slack-meets-location-meets-payments platform for military and humanitarian settings, and Materials Nexus, which leverages AI to discover new materials.

Israel Resilience Fund

The Israel Resilience Fund, launched in late 2023 in response to the Hamas attacks, is targeting $50 million in investment for startups impacted by the conflict or developing solutions for Israel’s immediate needs.

This fund, established as part of the Israeli investment platform OurCrowd, has secured $17 million in commitments, with a focus on leveraging co-investments from public and private sources. Since its inception, the Israel Resilience Fund has expanded its portfolio to 35 teams, representing 1,000 jobs in a country where tech employs 14% of the workforce. The fund’s efforts have contributed to the resilience of Israel’s tech sector, which has raised over $3.1 billion since the war began.

D3

D3, an early-stage fund, stands for "Dare to Defend Democracy." With a focus on "founders who leverage technology for helping Ukraine defend itself and define the future of the West’s national security," D3 has invested in startups working in areas such as drones, sensors, and UAVs, often incorporating AI technology.

The firm has also actively participated in London’s first defense tech hackathon, a testament to its belief in the growing potential of the sector.

A New Era of Innovation for a More Secure World

The rise of resilience tech represents a unique opportunity for innovation and investment. As the world grapples with new threats and challenges, the demand for advanced technologies that can bolster security and promote societal resilience is only going to grow.

The increasing willingness of venture capitalists to support these startups is a sign of the times. Resilience tech is not just about security; it’s about building a more resilient and adaptable future for all. As the landscape of global security continues to evolve, resilience tech will play an increasingly important role in ensuring a safer and more prosperous world for everyone.

Article Reference

Emily Johnson
Emily Johnson
Emily Johnson is a tech enthusiast with over a decade of experience in the industry. She has a knack for identifying the next big thing in startups and has reviewed countless internet products. Emily's deep insights and thorough analysis make her a trusted voice in the tech news arena.
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