Swimming Against the Current in a Brutal Market
20 August 2025 - A Weekly Publication by New North Ventures
When we started raising Fund II in the fall of 2024, the data was sobering. Median fundraising timelines had stretched to a record 15.3 months. First-time managers were collectively raising just $1.8 billion across 44 funds in the first half of 2025. The venture market had bifurcated dramatically—mega-funds and big names were capturing 50% of all capital while boutique managers struggled.
Yet through persistence and conviction in our thesis, we successfully conducted our first close of Fund II with strong support from family offices and individuals who shared our conviction. How did New North Ventures succeed when 37% of emerging managers are expected to fail at raising second funds? We examine this below.
Timing the Tailwinds
While many sectors faced headwinds, we recognized that national security tech was experiencing a policy renaissance. Unlike climate-focused funds and other single-purpose funds grappling with regulatory reversals, our dual-use strategy aligned perfectly with government priorities. Our selection as one of just 18 funds in DoD's SBICCT initiative demonstrated that our investment approach resonated beyond private markets—government partners were backing the same technologies and strategies we'd been pursuing with a recognition that economic resilience and national security are integrally connected.
Deep Knowledge as Currency
Our Limited Partners gravitated toward our deep sector knowledge and operational experience. Our team's combination of government and commercial experience and technical expertise provide insights into both the problem sets the USG faces and the path to scale solutions commercially. Portfolio successes like HavocAI's maritime autonomy breakthroughs and HawkEye360's RF analytics demonstrate this thesis in real-time.
The Boutique Advantage
Rather than fighting the market's flight to mega-funds, we embraced what made us different. Our focused approach to cybersecurity, space, and trusted AI create a defensible niche in an increasingly crowded space.
The result? We successfully launched our Fund II first close thanks to investors who share our conviction that investment in technology is investment in our country’s future - and accelerated by our partnership with SBA and DOD - demonstrating that in this market, differentiation and deep sector focus can create opportunities even in challenging times.
Family Offices Flock to Private Markets Surging over 500%
The CNBC piece on family offices caught our attention this week. Family office allocations to private markets have surged 524% since 2016 - you read that right - and they're now managing $3.1 trillion combined, up 63% from 2019. That's a lot of dry powder looking for a home.
What's interesting is the selectivity trend. Family offices are "increasingly selective about private offerings" and becoming more strategic about where they place their bets. But here's the thing—when you have patient capital that thinks in decades, not quarters, dual-use defense tech starts looking pretty attractive. It is hard to be this patient as a VC but we are excited to partner with investors who understand patient capital.
The timing feels right for our sector. While family offices are being more choosy overall, nearly a third planned to invest more in infrastructure through 2026. Cybersecurity and space technologies? That's infrastructure now, especially when national security is table stakes.
It makes sense why family offices have gravitated toward our approach. They understand the long-term value proposition and appreciate strategies that aren't following the herd.
More links to explore:
Inside the Office of Strategic Capital, the Pentagon’s new $200 billion lending powerhouse
Cybersecurity's dual AI reality: Hacks and defenses both turbocharged
Beacon AI continues building momentum with the Air Force, securing their twelfth DoD contract—a Direct-to-Phase II SBIR with Air Force Special Operations Command. The milestone isn't just another contract win; it represents a shift in how the military is engaging with the company.
"This is the first time that the users sought us out," CEO Matt Cox told Tectonic Defense. "AFSOC reached out to Air Force users from our tenth contract, and said, 'This is what we want to work on, we think Beacon would be a good partner for this, can you connect us with them?'"
That's the inflection point every dual-use company hopes for—when military end users become your advocates rather than obstacles. Beacon AI’s strategy of embedding former military pilots alongside their engineering team has created authentic credibility with operators who understand the real problems.
Rather than chasing full automation, Beacon AI focuses on augmenting pilot decision-making through intelligent data processing and risk assessment. It's a pragmatic approach that addresses immediate operational needs while building toward longer-term capabilities. With the Air Force alone conducting over 500,000 sorties annually, the scale of impact becomes clear when users start pulling you into new programs.
In this episode of the 'Securing Our Future' podcast, hosted by New North Ventures, Jeremy interviews William “Mac” McHenry, an experienced leader from the Department of Defense and Intelligence Community, to discuss the evolving landscape of technology acquisition and the crucial role of government partnerships. Learn about the journey from being a Marine aviator to leading at the Defense Innovation Unit, the cultural shifts in Silicon Valley, and strategies for tech startups to successfully navigate government contracts.
Thanks for reading Securing Our Future! Subscribe for free to receive new posts and support my work.