We live in a very different world since Russia’s invasion of Ukraine in 2022 and Hamas’ attack on Israel on Oct. 7. Global military spending hit $2.4 trillion last year, startups want a share of it, and previously reluctant investors are eager to back them.
The U.S. budget is by far the largest, awarding $53 billion worth of contracts to major tech companies between 2019 and 2022. But the rise of defense tech as an investment trend is truly global.
Germany-based AI startup Helsing is a prime example of the unprecedented scale of capital available to technology companies with military potential.
Investor interest is particularly strong in technology solutions with potential for dual-use, civilian and military applications. The idea that defense technologies can benefit society more broadly is also reflected in the rise of the concept of “resilience technology.”
More than the overused term “defense,” “resilience” reflects the idea that innovation can make democratic societies less vulnerable to attack and enable them to recover more quickly.
For example, Hellsing co-CEO Gundbert Scherf said he and his co-founders founded the company “because we believe that AI is essential for democracies to continue to uphold their values.”
The fact that Helsing’s mission has resonated with a mainstream investor like Spotify founder Daniel Ek reflects a shift in thinking not just in society at large, but within venture capital itself.
Although normally barred from investing in weapons due to so-called estoppel clauses, funds large and small alike are now open to funding international start-ups in the wider resilience technology sector, with the backing of key limited partners such as the European Investment Fund.
From the EU to Ukraine to Israel, here are some venture capital firms betting on resilience technologies outside the US.
NATO Innovation Fund
The NATO Innovation Fund is currently one of the most frequently mentioned players in conversations about resilience technologies. A $1 billion fund rarely goes unnoticed, especially when it specializes in a sector where venture capital is scarce. But since its official launch in August 2023, the fund has kept a low profile, even declining interview requests.
Not anymore. A year after it was launched, the NIF announced its first investments in a wide range of sectors, including AI, space technology, manufacturing, transportation and robotics, but always with an eye on “improving defence, security and resilience”.
NIF’s direct investments can only be made in startups from the 24 countries that are its LPs – this includes Iceland but not France, for example – which could bring new capital to regions that have traditionally been less receptive to capital but which may be more enthusiastic about resilience technologies than larger nations.
However, because NIF is also a fund of funds, its scope is more flexible. Venture capital firms that have been backed by NIF to date include Alpine Space Ventures, Join Capital, OTB Ventures and Vsquared Ventures.
OTB Ventures
Founded in 2017, the aforementioned OTB Ventures has been around long before NIF, but its focus on deep tech is a new one: The Amsterdam-based firm with Polish roots is backed by the European Investment Fund (EIF) as well as NIF, and has already begun pouring $185 million of its initial growth fund into a space it calls “real tech.”
OTB’s “real tech” mindset translates into a focus on space tech, enterprise automation and AI, cybersecurity, and fintech infrastructure – all of which easily apply to resilience tech.
Marcin Hejka, co-founder and managing partner at the company, also understands that dual-use tech is a reality for many startups: “It’s entirely natural for the defense sector to apply more and more technologies of civilian origin,” he told TechCrunch in March.
MD One Ventures
Dual use is a focus for MD One Ventures, a UK-based venture capital firm that invests in early-stage companies. Founded in 2021, the firm describes itself as “dedicated to supporting applied deep tech innovation for the UK, Europe and allies.”
This opens the door to a wide range of applications. “We have invested in both software- and hardware-based companies, across different subsectors and technology types. [national security]”We have talent from corporate and defense backgrounds,” MD One’s site explains.
Its portfolio includes startups such as Labrys Technologies, which combines Slack with location and payments for military and humanitarian scenarios, and Materials Nexus, which uses AI to discover new materials.
Israel Resilience Fund
The Israel Resilience Fund, launched in late 2023 in the aftermath of the Hamas attacks, seeks to raise $50 million to invest in startups affected by the war and companies developing solutions relevant to Israel’s immediate needs.
This is one of the funds from Israeli investment platform OurCrowd, which had secured $17 million in commitments as of March for the special fund, which will waive all management fees and interest and focus on facilitating co-investment from public and private sources.
From eight investments announced last December, the Israel Resilience Fund’s portfolio has now grown to 35 teams, creating nearly 1,000 jobs in a country where 14% of employees work in the tech industry. Perhaps thanks to these efforts, the sector has proven resilient, with Israeli startups raising more than $3.1 billion since the war began.
D3
D3 is an early-stage fund whose name represents a call to “courage for democracy.”
“We are launching the fund in the summer of 2023 with the primary objective of investing in founders who are leveraging technology to help Ukraine defend itself and define the future of national security in the West,” the company’s website explains.
A typical investment is $125,000 for a 7% equity stake, with the option to raise up to $750,000 in follow-on rounds led by other investors. The current portfolio covers areas such as drones, sensors and unmanned aerial vehicles (UAVs), often with an AI component.
D3 was also one of the organizers of the recent Defence Tech Hackathon in London – the first of its kind but likely not the last – confirming that these VCs will also be expanding their pipeline of investment eligible startups.
