When defense tech is hot, it’s hot. This morning, dual-use defense- and security-focused VC fund New North Ventures announced exclusively to Tectonic the first close of its second fund. It’s raised $45M in anchor funding (with a target of $80M and room to grow to $100M) through the DoD and SBA’s Small Business Investment Company Critical Technologies Initiative (SBICCT).
That’s a big jump from New North’s $25M Fund I.
Partners in the Pentagon: New North was one of the 18 funds named in the first SBICCT Initiative cohort, a partnership between the DoD’s Office of Strategic Capital (OSC) and the SBA focused on driving and scaling investments into the Pentagon’s 14 Critical Technology Areas (CTAs).
“Our Fund I was directly in line with what they envisioned for this program, investing in critical technologies for national security and leveraging technology that sits at the intersection of government and commercial scale,” New North principal Jessica Nelson told Tectonic.
“The SBICCT is a great program,” she added, “It allows 125% fund matching, which is great for our investors. It’s great for LPs. It helps de-risk the portfolio a lot, and we can put a little bit more of our investable dollars into it.”
Of the DoD’s 14 CTAs, New North has focused on cybersecurity, space, and trusted AI and autonomy—all pretty hot topics, if you hadn’t noticed. Their Fund I portfolio includes:
- HavocAI, the white-hot maritime autonomy company.
- HawkEye360, a Radio Frequency (RF) data analytics company for commercial satellite constellations.
- Auriga Space, which recently raised $6M and focuses on electromagnetic accelerators for on-demand space launches and hypersonic tests.
New North maintains a singular focus on pre-seed, seed, and Series A investments in early-stage dual-use startups, which Nelson said was its winning ticket with the OSC and SBA’s SBICCT. It’s also been key to New North’s success with Fund I.
“Everybody knows the defense acquisition system is sort of industrial age, Cold War-built. It doesn’t innovate very quickly, so dual-use is a great way to leverage the best of both worlds while we can grow companies,” Nelson said.
Their team doesn’t hurt either. The fund is managed by serial investors and entrepreneurs Jeremy Hitchcock, Don Dodge, and Rob May, along with CIA alum Stephanie Bellistri.
Those former CIA spooks “understand the problem sets that the government faces, which can be pivoted to the commercial sector and achieve a higher magnitude of scale when it does pivot out,” according to Nelson.
On the horizon: So, what does New North have in mind next? “Fund II is going to be an $80-100M fund. We had our first close last week of $45M, and that includes SBA leverage,” Nelson said.
- The fund will have about 30 companies “with reserves for follow-on investments,” bringing New North’s total portfolio to 47 firms.
- The company will write “slightly larger checks” and reserve some of the funds to “double down on the winners.”
- The firm hasn’t made any money moves on Fund II yet, but Nelson said that’s likely coming in the next few months.
- If New North’s Fund II hits the $100M mark, that’d quadruple their AUM.
All these point to the broader fact that “defense tech is no longer a contrarian bet,” especially among larger funds, Nelson said.
“It’s a main play bet, like any other sort of hot topic,” she added, “An influx of money is going to come with its challenges, but we have sector focus, sector discipline, and sector knowledge. We were here very early in this game, so we’re smart money. If this were like sports betting, we’re sharks.”