Chris Gonzales’ Post

🌿 Just as flowers need sun and water, innovative ideas require ecosystem support - especially in areas like national security. The Ukrainian military tech sector recently received a new boost with the launch of MITS Capital, an international defense tech fund and startup accelerator co-founded by partners from the USA and Ukraine. Since technology could be a strong factor in creating an asymmetric advantage and bringing the war's end closer, MITS aims to catalyze the growth of Ukraine's defense tech ecosystem, contributing to both national and global security. #tech #startup #defencetech

Defence tech has long been a bigger industry in the US than in Europe — but since Russia’s full-scale invasion of Ukraine in 2022, European investors and founders have been keen to create and back startups in the region. Now, US investors like Lockheed Martin Ventures, the American aerospace and defence titan’s VC arm, are increasingly eyeing European startups as potential investments. The intent is to do more investing in Europe, says Chris Moran, vice president and general manager at Lockheed Martin Ventures (LMV). LMV has advised the €1bn NATO Innovation Fund. “We're getting to see more opportunities, and we will make those investments as we see fit,” Moran says.

Funderlyst's latest blog post delves into the increasing interest of VC giants in Israeli defense tech startups. Highlighting insights from Lior Handelsman, partner at Grove Ventures and a key thought leader in the defense tech space, the article emphasizes significant investments by funds like Sequoia Capital and Lux Capital in companies founded by combat veterans, such as Kela. With over 160 defense tech companies now operating in Israel, the sector is poised for explosive growth, drawing attention from international investors. https://lnkd.in/dJSbkarb #defensetechnology #defensetech

Defence tech has long been a bigger industry in the US than in Europe — but since Russia’s full-scale invasion of Ukraine in 2022, European investors and founders have been keen to create and back startups in the region. Now, US investors like Lockheed Martin Ventures, the American aerospace and defence titan’s VC arm, are increasingly eyeing European startups as potential investments. The intent is to do more investing in Europe, says Chris Moran, vice president and general manager at Lockheed Martin Ventures (LMV). LMV has advised the €1bn NATO Innovation Fund. “We're getting to see more opportunities, and we will make those investments as we see fit,” Moran says.

J2 Ventures, a firm led mostly by U.S. military veterans, announced on Thursday that it has raised a $150 million second fund. The Boston-based firm invests in startups whose products are purchased by civilians and the U.S. Department of Defense. While many emerging VCs are struggling to raise second funds, J2’s latest vehicle is more than double its $67.5 million debut fund from 2021. At first blush, the firm may seem to be benefiting from VCs’ growing interest in defense tech. But J2 has no interest in positioning itself as a defense tech investor. “Our portfolio is national-security adjacent, but not defense-focused,” said Alexander Harstrick, J2’s managing partner. The firm does not invest in technologies that protect critical national infrastructure or help deter attacks, such as drones, robotics, or surveillance tech. Instead, J2 backs companies whose products help maintain the well-being and healthcare of nearly 3 million people employed by the U.S. military. https://buff.ly/3XRS7Bl

The federal government investment in technology from the top 100 national-security startups is less than half of what venture capitalists have invested in those companies, thus underscoring a huge and longstanding discrepancy between the surge of venture capital funding for defense technology and the U.S. government’s spending on substantial contracts to startups. But there's room for hope, due to recent congressional approval for larger budgets for Department of Defense investments in innovation programs. Read more in this Op-ed from The Wall Street Journal ⬇️ #nationalsecurity #siliconvalley #startups #innovation #defensetechnology #DepartmentofDefense

Very interesting article in Sifted about Defence and Dual-use tech. One sentence caught my attention: “There have been more discussions in the past year about the grey areas around investing in defence — namely, whether VCs invest in dual-use technologies with both commercial and military applications, or pure defence startups which may include weapons.” We just launched a report about Nordic DefenceTech Startups. Here, the conclusion is pretty clear. -The VCs, we talked to all prioritized Dual-use. -Most Nordic VCs prioritize a civilian-first strategy, focusing on scalability, exit potential, and market flexibility. Defence is seen as an additional revenue stream and a way to accelerate growth, rather than the primary focus. -However, some VCs view a defence-first approach as advantageous, with government funding and immediate market needs offering stability in the early stages. The report is done by #DanskeBankGrowth / Danske Bank and Dealroom.co with valuable insights from byFounders, Niels Vejrup Carlsen, Voima Ventures, PSV, Maki.vc, Luminar Ventures, Nordic Makers, and Lifeline Ventures. Read more about the report here; https://lnkd.in/dRyYU2gD

I'll share some thoughts on this as there is some confusion. "The federal government has spent $22 billion in recent years on technology from the top 100 national-security startups, a paltry portion of overall contract spending and less than half of what venture capitalists have invested in those same companies." While VCs are obviously concerned about revenue, the reporter ignores the most important issue. Valuations in young private companies are something like one part guesswork, one part aspiration, two parts salesmanship, and three parts milestones, with a fair amount of fraud mixed in particularly in bubbles, but even in more mature growth companies a 10x multiple is conservative. That $22 billion in DOD contracts probably represents something like $300-400 billion in valuations claimed by the ventures and VCs, if not more. Even if the realized valuation is less than that for DOD contractor ventures, it would still represent an attractive ROI over a decade. If total invested is $50 billion and the realized value for VCs is $150 billion over 10 years, it's still 3x, and within that there would be likely be several 10X ++. That's not much different than the rest of the markets VCs invest in. My guess is it's more on track to be 5x or more for the entire portfolio, which is much better than most investments, though needs to be due to the risk involved. The more troubling statistic is that only 1% of total DOD contracts are going to VC-backed startups. That is a terrible failing grade for the DOD with regard to favoritism for incumbents, and explains most of the problem about unhealthy relationships and insufficient innovation. Given the size of the DOD budget, it may not be quite as bad as it seems as they can and should act as their own investors as a proactive customer, and they do some of that, but the reality is that the bureaucracy is so expensive to navigate that it usually requires significant capital. In fact, the most successful DOD startups in recent years were founded or co-founded by billionaires, which pretty well tells the entire story. Quote: “Startups are either purposely being kept out, or the DOD has just not figured out how to take advantage of them,” said Tara Murphy Dougherty, chief executive of defense software company Govini. Venture-backed companies have consistently received around 1% of total Defense Department award spending annually going back through 2018, despite throngs of new companies joining the defense-tech field, according to Govini data. https://lnkd.in/gK7emEqT

Despite the surge in venture capital funding for defense technology, Silicon Valley's top national security startups have received a mere fraction of government contracts. A recent report reveals that the federal government has spent only $22 billion on technology from these startups, a paltry sum compared to the $53 billion raised in private funding. This disparity highlights the challenges faced by startups in securing substantial government contracts. As the defense landscape evolves, it's crucial for innovators and policymakers to bridge this gap. #DefenseTechnology #GovernmentContracts #SiliconValley #Startups #InnovationPolicy https://lnkd.in/eE3CgJ8w

NEW: For years, procurement red tape and token contracts have discouraged Silicon Valley tech startups and their VC backers from doing business with the Pentagon. Read more about how Doug Beck, a former Apple executive armed with a $900 million budget, plans to change that and what's at stake if he fails. #defense #startups #tech #pentagon #DOD #AI