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Let’s be honest, it’s been a tough week. But let’s use some spare brain cycles to reflect on defense tech, AI in Canada and alternative investments. — Anna
Time for defense
Just two weeks ago, I mused on the fact that defense tech is no longer a taboo for VCs or for top tech talent. It is too early to tell how long the Israel-Hamas war that started after last weekend’s atrocities against civilians may last, but it is likely to make democracies’ need for defense tech even clearer.
That’s true in the U.S., as well as in Europe, where defense AI company Helsing is built on the premise that “software, in particular artificial intelligence, will be the key to protecting our democracies.”
Capital has been flowing steadily into defense tech companies for a while. Saronic, a Texas-based defense startup building autonomous ships and headed by a former Navy Seal, raised $55 million, my colleague Kyle Wiggers reported. This came in the wake of other recent deals, he noted:
Castelion, which aims to mass-produce defense hardware starting with hypersonics, secured a $14.2 million initial funding round. And defense startup Mach Industries landed $79 million at a $335 million valuation.
Castelion is notably only 11 months old, and Mach’s round of funding is a Series A. But capital could also go to companies that are further along in their journey. Among them, VC-backed Anduril is seeking to raise another $400 million to $500 million at a valuation of about $10 billion, Bloomberg reported, citing anonymous sources.
Should Anduril secure this new funding, it could mean more money for startups, too: The company is said to be looking to finance more acquisitions as well as R&D efforts. I don’t know what kind of teams or technologies it is hoping to get its hands on, but the latest batch of startups from AWS European Defence Accelerator might not be the worst place to look.
Oh, Canada
AI is pretty hot in VC right now, and Canada has quite a few AI stars, such as Cohere. But to my surprise, these AI tailwinds didn’t save the country from a dire Q3 in terms of VC funding.
Canadian startups had a tough Q3, and AI’s popularity isn’t making a big difference
Perhaps VCs already placed enough bets on Canada-made AI and are now waiting to see how these companies will fare before making new investments. And no AI hype makes for low tallies overall. However, Ripple Ventures managing partner Matt Cohen expects more activity in the current quarter.
“I think because everyone took the summer ‘off’ in the VC world (besides us, of course), not a lot of fundraising rounds got completed and everyone is rushing to raise now from September–November before the holidays and before runway runs out in Q1,” he said.
I had to laugh at that typical VC parenthesis, but the acknowledgment that many startups are running out of runway is also a painful reminder of what might be coming next year. Unless they manage to raise — or sell themselves — before then, of course.
Helping alts go mainstream
Alternative investments (alts) can refer to a lot of things that aren’t part of the typical 60/40 stock-bond portfolio. They can refer to private assets, as well as luxury items and collectibles, from wine and spirits to sneakers.
One thing is for sure, wealth management firms see a growing need to include alts into their day-to-day work.
“We’ve both talked to plenty of advisers and a lot of them have said that [offering] alts has provided and is providing differentiation for them when it comes to client acquisition or client retention,” Michael Sidgmore, partner and co-founder of Broadhaven Ventures, said in a recent podcast with iCapital CEO Lawrence Calcano.
However, there’s a gap between alts and banking, entrepreneur Sharon Obuobi told me. Her company Alt/Finance is hoping to bridge that gap with dashboards that let private banks and wealth management firms track data on alts — whether that’s art, luxury cars or watches — in the exact same way they would track more traditional assets such as bonds. Bigger clients, such as larger banks, can also use the company’s API integration.
A Startup Battlefield 200 finalist that launched at TechCrunch Disrupt 2023, Alt/Finance is currently part of an accelerator program from Techstars New York City powered by J.P. Morgan, and it will definitely remain on my radar once it graduates.
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