Razor’s Edge, a defense and security-focused venture capital firm, announced the closing of its third startup investment fund for less than $340 million. Even in difficult economic times, the firm investment suggests that national security technology is a safe bet.
Defense- and security-focused VC firm Razor’s Edge Ventures today announced the closing of its third startup investment fund at just under $340 million, indicating that national security technology is a safe bet even in difficult economic times.
According to the firm, it has surpassed its initial target of $250 million and will target companies developing autonomous systems, space technologies, cybersecurity, AI and machine learning, digital signal processing, and other aerospace and defense technologies. Razor’s Edge, which was founded in 2010, funds multistage startups with both commercial and government customers, but it focuses on ventures that “[help] national security community [members] solve difficult technology problems and advance critical missions.”
The firm’s interests are guided by “strategic national security priorities,” according to managing partner Mark Spoto, with the ostensible goal of assisting the United States in maintaining “technological superiority.”
Spoto said, “Economic circumstances in the broad financial markets are tough at the moment. But, the United States and foreigne countries have dramatically increased defense spending. We face an increasingly complicated and expanding threat environment. Our most recent fund’s limited partners (LPs) recognized that Razor’s Edge provides an investment opportunity that is uncorrelated to the broader financial, stock, or commercial technology markets and, in many ways, works as a countercyclical hedge to those asset classes. We began collecting funds for the new fund last fall and completed it in June, exceeding our goal.”
Traditional venture firms are often not ready to invest in defense-oriented startups. This is due to the ethical implications as well as the long road to profitability.
In America, it usually takes at least 1 and a half year of planning before a government contractor secures its first contract — and the majority of contracts are offered to incumbents. Razor’s Edge claims to have an advantage due to its relationships with the national security community and its investment strategy.
The firm has a two-pronged strategy, investing in both early-stage startups (Series A and B) and more established companies.
Razor’s Edge claims to have an edge due to its ties with the national security community and its investment strategy. The firm has a two-pronged strategy, investing in both early-stage startups (Series A and B) and more established companies. For example, Razor’s Edge recently invested in Corsha, a cybersecurity startup based in Washington, D.C. that aims to bring multifactor authentication security to machine-to-machine API traffic. Another portfolio company is X-Bow Systems, which is working on a solid rocket motor.
When it comes to early-stage investments, Razor’s Edge says it focuses on companies that it believes have the potential to grow into sizable businesses in the defense and intelligence markets before expanding into commercial enterprise verticals.
Razor’s Edge advises on strategic business investments and “tuck-in” acquisitions for more established and later-stage prospects, which tend to be companies already doing work with the US government.