Defence sector venture capital firm Beaten Zone Venture Partners attracted commitments of $2.6 million to its initial fund in March, by far the highest monthly total the fund had achieved in over two-and-a-half years of capital raising.
Fundraising was launched in August 2023 with a $500,000 initial commitment from Beaten Zone Venture Partners founder Steve Baxter. The fund had raised $17 million by the end of March.
Baxter said: “The sharp focus on Australia’s defence posture has prompted a growing investor recognition that high-value sovereign companies whose technologies will matter to our future security have been irrationally unloved by the market.
“Defence was once seen as too hard or too slow for venture capital, and in recent years ESG mandates made defence a dirty word in investor circles. But more investors are recognising that our fund will not only generate great returns, but it will also help build key capabilities that our country will need in the coming decade to protect our way of life.”
Baxter argued this case to investors as a speaker at Private Equity Media’s Growth Capital Forum in Sydney on 2 March.
Beaten Zone’s fund is being raised under the tax-advantaged Early Stage Venture Capital Limited Partnership (ESVCLP) legislation which caps fundraising at $200 million.
The ESVCLP legislation allows limited partner (LP) investors to gain an immediate 10% capital gains offset on their investments with any eventual returns being capital gains tax free.
Based in Brisbane, Beaten Zone also has investment team members in Adelaide which helps the firm monitor developments in space technology. The Beaten Zone fund’s mandate is to invest in sovereign early-stage businesses with products that have material military use for Australian and allied forces, including lethal capabilities. Investments in businesses involved with controversial weapons such as such as landmines which would contravene treaties or agreements ratified by Australia, are, however, excluded.
Companies in which the fund has invested to date include HEO Space, which has developed in-space imaging technology for monitoring satellites, Arkeus which provides safety technology merging optics with robotics, and Zendir, a digital twin platform for managing the design and manufacturing of space equipment.
Dr Vu Tran, co-founder of solid fuel rocket motors defence start-up Black Sky Industries, and previously a co-founder of education technology business Go1, is an investor in the Beaten Zone fund.
“When you consider the geopolitical events of the past 12 months, the thesis has never been clearer,” he said. “I’m confident we’re backing the right horse, in the right area, at the right time. It’s hard to overstate the value of their early conviction in this space. Meeting the portfolio companies and seeing their progress firsthand has been nothing short of inspiring.”
Image: Steve Baxter speaking at Growth Capital Forum.