New venture capital fund focused on high-need, dual-use technology

WASHINGTON — A team of national security experts has launched a new venture capital fund targeting entrepreneurs developing critical dual-use commercial and defense technology.

Shield Capital announced the new fund Tuesday, which exceeded its target capitalization of $120 million and is focused on four “high-growth” technology areas: artificial intelligence, space, autonomy and cybersecurity. Founders and managing partners Philip Bilden, a businessman and former military intelligence officer, and Raj Shah, a former director of the Pentagon’s Defense Innovation Unit, told Defense News in an interview that Shield has been working with a number of companies across those areas of expertise and will announce one of the fund’s first investments in an artificial intelligence company in the next few weeks.

Shah said the firm differentiates itself by bringing together partners from a diverse range of companies with deep knowledge of the government procurement process.

“Inside a firm, we really haven’t seen that done in any venture fund, and it’s resonated with our limited partners and the companies that we’ve invested in so far,” Shah said.

Along with Shah and Bilden, Shield’s team includes former military officers, program managers, acquisition experts and industry executives. Its board of advisers is filled with former national security officials, including retired Secretary of Defense Ashton Carter and past Director of the National Geospatial-Intelligence Agency Letitia Long.

Bilden said having a team of experts who are engaged and know how to navigate DoD processes brings value to the companies Shield invests in.

“These are earlier stage businesses — they need all the help they can get,” he said. “And one of the ways that we can do that is to have our national security advisors support them by either serving on their boards or basically giving them counsel on how to approach working with the labyrinth that is the Department of Defense or the federal government.”

Bilden and Shah began planning for Shield Capital in 2015, originally focusing their seed investments on cybersecurity. In 2016, Shah went to lead DIU, where he worked to leverage commercial technology to address national security needs and help non-traditional companies work with the government. That experience helped shape Shield’s investment strategy and after Shah left, he and Bilden decided to institutionalize their investments and create a fund.

Bilden said Shield hopes to create more funds in the future, focused on the “very important challenges in our national security ecosystem.”

The firm’s investment in technologies that are needed by both commercial and national security customers is key, Shah said, noting that companies developing dual-use capabilities tend to outperform.

“Historically, companies that have successfully done these dual-use strategies have grown very, very quickly,” he said. “We also think that by doing so now, we help build and support entrepreneurs creating great companies.”

Shield’s early portfolio companies include Resilience Insurance, Hawkeye 360, Elroy Air, GoSecure, Authentic8 and Rebellion Defense.

C4ISRNet