AI's Paradoxical Power: Investing at the Intersection of Threat and Opportunity in National Security
23 April 2025 - A Weekly Publication by New North Ventures
NEW NORTH VENTURES PRESENTS: INVESTING IN THE GLOBAL COMPETITION AND INNOVATION ERA
May 13, 2025 11:00 AM EST — VIRTUAL WEBINAR
As geopolitical tensions intensify and technological competition accelerates, strategic investors must navigate complex risks and identify mission-critical opportunities. New North Ventures invites you to join our executive briefing on investing in the Global Competition and Innovation Era, featuring expert analysis from the Executive Director of the Council on Global Competition and Innovation alongside our team's presentation on Dual-Use Venture strategy. This webinar delivers actionable intelligence on strengthening both national security and investment portfolios through principled capital allocation in frontier technologies.
AI's Triple Frontier: Finance, Intelligence, and Venture Capital
The convergence of artificial intelligence across multiple sectors is creating both opportunities and challenges, with financial security, national intelligence, and venture capital experiencing similar paradoxes. Federal Reserve Governor Michael Barr recently highlighted the exponential rise in AI-enabled threats, noting that "deepfake attacks have seen a twentyfold increase over the last three years," while emphasizing that the same technologies enabling these attacks can be used defensively by financial institutions to develop "AI-powered advances such as facial recognition, voice analysis, and behavioral biometrics to detect potential deepfakes" and protect critical infrastructure.
Meanwhile, the intelligence community is aggressively pursuing similar dual-use approaches. National Geospatial-Intelligence Agency Director Vice Admiral Frank Whitworth has declared 2025 "the year of AI" for his agency, stating, "Warning involves establishing a baseline of equipment, behaviors, activities around the world and being able to prioritize where you're looking, and then ensuring you can find anomalies and announce them." This mission focus has driven NGA to establish a new program executive office for advanced analytics and appoint its first-ever director of AI standards, recognizing that multimodal AI models will be essential for processing intelligence from diverse sources beyond just imagery.
The venture capital world faces its own AI paradox. While AI is touted for its efficiency-boosting potential, PitchBook data reveals that early-stage funding rounds are actually growing larger across most sectors—including a 29% increase in pharma/biotech, 41% in media, and 71% in IT hardware—rather than decreasing as AI supposedly enhances productivity. As Axios notes, "If AI is supposed to supercharge productivity, why are startups raising more money? Shouldn't they need less?" This contradictory trend suggests AI's benefits may still be more theoretical than practical for many applications, with real-world implementation requiring significant capital investments before efficiency gains materialize.
For us at New North Ventures, these converging trends present unique opportunities. As government agencies and financial institutions scramble to adopt AI defense systems against sophisticated threats, startups with proven capabilities in multimodal AI, deepfake detection, and autonomous systems are positioned at the nexus of national security and commercial applications. The paradox of larger funding rounds despite AI's efficiency promise may actually benefit focused investors who can identify which AI applications truly deliver transformative value rather than incremental improvements—particularly in domains where security requirements demand robust, well-capitalized solutions.
More links to explore:
HavocAI has announced the upcoming launch of "Seahound," a 38-foot autonomous vessel designed to complement their existing smaller drone boats. The new vessel will feature a 1,000-nautical-mile range and 1,000-pound payload capacity, and can operate on the same software as HavocAI's existing 14-foot "Rampage" craft. HavocAI's CEO Paul Lwin, a Myanmar refugee and former EA-6B weapons system officer, emphasized the critical importance of developing "smaller, faster, attritable unmanned maritime vessels" alongside traditional shipbuilding, pointing to Ukraine's Black Sea operations as proof of their pivotal role in naval combat. The company, which raised $11 million in funding last year with backing from investors including New North Ventures, is positioning itself in the competitive unmanned surface vessel market that includes players like Leidos, Textron Systems, Saildrone and Saronic.
HawkEye 360 was recently lauded for its innovative use of AI-supported analytics to track a Russian ship suspected of cutting undersea cables in the Baltic Sea. HawkEye 360 presented an unsolicited demonstration to NATO showing how its radio frequency (RF) sensing satellite constellation could identify and track potential sabotage vessels, revealing their "dark interactions" with networks of known bad actors. NATO Colonel Jonathan Whitaker specifically praised the company for taking "a NATO problem set" they hadn't been tasked with and demonstrating valuable capabilities that could help address the increasing incidents of damage to critical subsea fiber optic cables that carry 95% of global data traffic.
Founded: 2024
Key People: CEO Carl Schoeller
Elevator Pitch: Developer of visual navigation system (VNS) intended to retrofit onto any drone that mimics a GPS. The company's VNS uses cameras, an accelerometer or gyroscope, and reference satellite imagery for positioning that offers a visual navigation replacement for GPS, enabling militaries and surveillance teams to access defense systems independent of GPS.
Funding: The company raised $4.3 million of seed funding in a deal led by First Round Capital on April 17, 2025.
In our most recent episode of the Securing Our Future Podcast, general partner Jeremy Hitchcock sits down with Paul Thompson, a 20-year Army Special Forces veteran now helping bridge critical technology gaps at Morgan 6 LLC. Together, they dive into how commercial and national security sectors collaborate to drive innovation.
