If there is one thing you take away from today’s newsletter, let it be this: Everyone and their mother is still pouring oodles (and then some more oodles) of money into defense.
Yesterday, SF-based Cantos Ventures announced it closed a $70M Fund IV earlier this year, which Founder & GP Ian Rountree told Tectonic that they plan to invest in “founders that are ambitious enough to transform the world we live in.”
- In real terms, that means everything from aerospace and defense, to nuclear, to biotech, to advanced manufacturing, to compute.
He said that they purposefully kept the (oversubscribed) fund small (Fund III was $50M) so that they can “look [founders] in the eye and say [their] company is a meaningful percentage of the net worth of everyone at this firm,” he said.
“We find if you get bigger, you start to focus more at Series A, and funds will masquerade as a seed fund, but they’re really treating that early check as a call option to write a bigger check later, once things get interesting, and we just don’t like those incentives,” Rountree added.
They’ve already made ten investments out of the fund and plan to max out at about 22. Checks will be early stage—from $1.5-4M to lead a pre-seed or seed round, he said.
Land before time: Cantos was founded way, way back in the pre-historic year of 2016, when Rountree said that some of his mentors told him investing in deep tech was a “terrible idea.”
“We’ve been investing in hard tech since before it was cool, maybe before it was advisable,” he said. “I started the firm 10 years ago, and have been investing in hard tech since the inception, and went all in on it in 2018. Some of my mentors told me that was crazy.”
But it seems to have paid off. Cantos has made some pretty killer bets, especially here in defense tech land. They wrote checks into:
- Neros: Everyone’s favorite FPV startup. They led the pre-seed. Sick.
- Castelion: The hypersonic missile powerhouse. They got in at Series A. Also sick.
- Heaviside: Defense manufacturing and energetics.
- Astranis: Satellites
- Skyryse: Flight autonomy
- Venus Aerospace: Also hypersonics
Star power: When we asked Rountree what he looks for in a company, he basically said it comes down to the founders.
“If I’ve learned anything in this job in 10 years, it’s that it’s somewhat foolish to think you are underwriting a business that doesn’t exist yet,” he said. “You’re really underwriting the people with the idea—their talent gravity, their intensity, their ability to bend the space-time continuum toward their will.”
He also said that—especially in terms of defense—they look for “targeted defense companies.” Companies that stay laser-focused on one product and do it well—like Neros with FPV drones, and Castelion with super-fast, lower-cost missiles.
“[We look for] neo-primes that are like Neros, just focused on FPV drones, and they want to be the best at that, rather than having a goodie basket from the Pentagon to pick from,” he added. “They pick one thing [and] they do it really well.”
Laser-focused: And that philosophy will hold for this new fund, too.
- So far, they’ve invested in an inference-on-the-edge company, a general robotics company, and a new nuclear company (among a few others).
- They plan to deploy this fund this year and next, then could go out for Fund V in “the back half” of next year (though Rountree emphasized that was a rough estimate).
“I want to see every industry transformed and the actual world improved by technology,” he said.