Looks like no one’s found the shut-off valve on the defense tech funding tap yet.
Yesterday, San Diego-based early-stage VC firm Harpoon Ventures—an investor in startups ranging from Firestorm to Ursa Major and Merlin—announced that it’s closed a $155M Fund IV to, in the words of Harpoon investor Riley Loftus, back the “maniacs that are building the things that matter.”
Big fans of those maniacs over here.
Battlefield to the boardroom: In a world where everyone and their mom wants to invest in defense tech, Harpoon’s pitch is that, well, they’ve lived it.
Harpoon’s founder and managing GP, Larsen Jensen, served as a Navy SEAL in Afghanistan (he’s also a two-time Olympic medalist and record holder in swimming, but who’s counting), and much of their investing team has deep military and government experience.
“We have guys on the team who not only experienced the problems firsthand, but they used a lot of the initial technologies,” Loftus told Tectonic. “There’s a very big difference between the big names [in VC] versus folks who have actually used the technology, been on the battlefield, and noticed the gaps. We also have guys in the team who ran budgets and did procurement.”
- That experience has helped them build a portfolio of defense startups that includes drone startup Vector, French interceptor startup Alta Ares, aviation autonomy company Merlin (which recently IPOed), Ursa Major, Firestorm, Kodiak Robotics, subsea drone startup Ulysses, and nuclear startup Aalo Atomics.
- The firm—which was founded in 2018 with the vision of being a “private form of In-Q-Tel,” per Loftus—also runs a defense tech-focused accelerator called Black Flag in collaboration with Shield Capital and (shocker) In-Q-Tel, offering startups pre-seed checks, access to advisors and go-to-market assistance, and other hands-on support.
Across the four funds, Harpoon manages over $450M in assets, and the funds they raise keep getting bigger: Their first was $55M, second was $120M, third was $130M, and their latest clocks in at $155M, supported by two new anchor LPs and “great re-ups from our existing LPs.”
Ecosystem builders: With Fund IV, Harpoon’s looking “up the chain,” Loftus said. For example, “[they] have Firestorm, and then [they] went up the chain and [backed] MATERIAL, which is doing 3D-printed batteries to supply the drones.”
“A trend in Fund IV is that, since a lot of the end products have been developed, we’re looking at what [we can] bet on to actually augment what we have in Fund III,” he added. “Like, how we can embed [ourselves] into the actual infrastructure, the picks and shovels supplying all these things…Those are going to be the big winners, because no matter who wins or loses, those guys really ingrain themselves with all the winners in the long run.”
Cutting checks: And according to Loftus and fellow investor Andrew Couillard, a former Navy EOD officer, they’re already cutting checks. Fund IV investments, so far, include Alta Ares, “a stealth company doing automated shipbuilding,” and others. Harpoon has plans to make “something like 30ish investments” out of the fund, Loftus said.
Like prior funds, these will all be early-stage investments because “early-stage boutique, specialist firms are going to have the best alpha” in the age of big-dollar defense tech bets, Couillard told Tectonic.
He also didn’t deny that things may be a bit overheated.
“Are we in a bubble? Yes, that’s what venture markets do, they invest in bubbles,” he added. “But the reality is that the people who will get the most screwed are the tourists, the ones that don’t know what they’re doing, and that’s why you need the specialist boutiques like Harpoon. The industry is ripe for disruption, and the incumbents need to be dethroned, but because it is a bubble, that’s why you need specialists and subject matter experts more than ever.”
And in case you’re sweating, fear not: With unprecedented government support for startups, conflicts around the world, and booming defense budgets, Loftus doesn’t “think the bubble is going to pop anytime soon.”
Phew.