Ask HN: Who is working on defence sector startups?

17 points by defencetechhn 2 years ago | 10 comments

Hey HN!

Asking around, would be really interesting to talk to some other founders working in the defence innovation space. Especially regarding fundraising, the NATO Investment Fund and the DIANA initiative (a NATO version of DARPA).

On my personal experience in the market I'm currently fundraising for a seed round in an and we're finding it very hard to get any VCs to commit to being lead investors. VCs are super excited/optimistic about our company and willing to immediately jump on board as soon as a term sheet is signed by a lead investor.

Trouble is that absolutely everyone is taking that position - leaving us in quite a pickle. I've gone through fundraising cycles before and never encountered something like this before, hearing the same from a bunch of other companies as well. I understand that the macroeconomic situation has made many more cautions, but this is just odd.

Would really appreciate insight from both defence sector VCs and/or other founders currently raising.

lockhouse 2 years ago |

I think the biggest issue you’re going to run into is that the Department of Defense acquisitions process is incredibly complicated and favors large incumbents that specialize in government contracts. It can be very lucrative once you get your foot in the door, but be prepared for lots of government red tape and lengthy timelines from your custumers before the first check clears.

Oh and if you can find a minority, disabled, female military veteran to “own” your company at least on paper it will give you an enormous advantage, as the laws require the military to preference such companies when purchasing.

fakedang 2 years ago |

Used to be a co-founder of a semi-successful aerospace startup.

> On my personal experience in the market I'm currently fundraising for a seed round in an and we're finding it very hard to get any VCs to commit to being lead investors. VCs are super excited/optimistic about our company and willing to immediately jump on board as soon as a term sheet is signed by a lead investor.

For this sector, don't count on VC investment just yet. Your best bet is to get some well-connected angels on board, who can give you connects in the government and leads to other companies. If your technology isn't an entirely novel sector, you're better off participating together with one of these other bigger companies who can actually nail those contracts. Most of these companies have their own venture arms which will invest in your company (and potentially acquire it outright if they can).

VCs were the same 10 years back, they're the same today. They see defence as high risk because of the very low number of government contracts, which are often exclusive, so they're always hesitant to invest. VCs won't add much value to your startup either, and especially not more than what a well-placed angel or board member just retired from government can bring to the table.

alaskamiller 2 years ago |

I know much more about this. You'll have more luck building relationships with VCs that focus on dual use military tech, with partners that have prior military service experience, or you'll need to find a consultant that knows how to get you into the SBIR process, knows how to look up grants, write for lots of grants, and apply for grants.

It's a small world, prior military experience gets you far since everyone would rather pull someone up like that, not necessarily just the tech.

c_o_n_v_e_x 2 years ago |

Not a founder but I'm an early stage employee at a company that manufactures dual use rugged hardware. We know that products like ours get used in defense, but we focus on industrial only. There are some companies out there with nearly identical products that sell exclusively to defense, however unlike us, all of the senior leadership are veterans/former officers and or former employees of 3 letter agencies.

Even if you have a great product, you need people familiar with the culture, the language, the systems, etc.

I recently met with a group of consultants who specialize in helping companies enter defense markets. Theyre selling point was that their customers (companies trying to get into defense) typically get a PO within 12 months of engaging their services.

austin-cheney 2 years ago |

Defense hiring is off the chain at the moment. There are a lot of big companies that cannot fill positions because they cannot find people with the right combination of development experience, clearance, and certifications.

egorfine 2 years ago |

I'm thinking about launching a startup in the area of air defense. I'm located in Ukraine, so there is plenty of opportunity to beta-test new features right away; however the ukrainian jurisdiction is not suitable for business, so that's kind of a paradox.

logicalmonster 2 years ago |

This isn't a sector I know a lot about, but it might conceivably be the case that you have a product idea that doesn't really work for the industry, but investors are blowing smoke up your butt to not burn future bridges with you.

PyWoody 2 years ago |

In-Q-Tel (https://www.iqt.org/) is what you want.

slim 2 years ago | |

brilliant. So you literally need to get vetted by the CIA to get funding in the defence sector. makes sense

PyWoody 2 years ago | | |

I mean, yeah.