Venture Capital's Hidden Metric: The Power of Interconnected Networks, Fundings: VulnCheck
26 March 2025 - A Weekly Publication by New North Ventures
The Relational Currency of Venture Capital: Lines, Dots, & Networks
In the world of early-stage investing, capital may initiate conversations, but relationships close deals and build empires. Recent data has confirmed what seasoned investors have long understood intuitively: the strength of a venture capital firm's network directly correlates with portfolio performance and returns.
The Quantifiable Power of Networks
PitchBook's latest Quantitative Perspectives report reveals striking evidence of this correlation. Companies backed by well-connected lead investors (those in the 90th percentile of network influence) experience failure rates at least 10 percentage points lower than those backed by investors on the periphery of industry networks.
This advantage becomes even more pronounced in later investment stages. For Series D investments and beyond, well-connected investors see a mere 4% failure rate compared to 15% for those on the periphery. These network effects translate directly to returns—25.6% average annualized returns versus just 3.1% for companies backed by less-connected investors.
The data confirms what we at New North Ventures have observed throughout our investment journey: relationships aren't just an important element of venture capital—they are the foundation of the entire ecosystem.
Beyond Capital: The Ecosystem Advantage
When founders secure investment from well-connected VCs, they gain far more than capital. They access an entire ecosystem of potential customers, strategic partners, follow-on investors, talent, and industry insights. Often, the right connection made at precisely the right moment determines whether a startup thrives or fails.
For venture capital firms, stronger connections lead to superior deal flow, which enhances pattern recognition and investment decisions. This creates a virtuous cycle where better relationships lead to better investments, which strengthen the firm's network further.
Drawing Lines Through Time
Venture capitalist Mark Suster elegantly frames this concept in his investment philosophy "Invest in Lines, Not Dots." As he puts it: "The first time I meet you, you are a single data point. A dot. I have no reference point from which to judge whether you were higher on the y-axis 3 months ago or lower."
For founders, this means beginning to build investor relationships well before you need capital. Regular touchpoints create a "line" that builds investor confidence in your trajectory and execution ability.
For investors, the strongest investment theses develop through observation over time, not from isolated interactions. When we invest in dual-use technologies with both commercial and national security applications, understanding a founding team's development across multiple touchpoints becomes even more crucial.
The Marathon, Not the Sprint
The investor-founder relationship resembles a marathon rather than a sprint—requiring endurance, strategic thinking, and alignment around a shared vision for the future.
This relational foundation becomes especially crucial in deep tech and dual-use technologies, where development cycles are longer and markets often need to be created rather than simply entered. Building trust over time allows investors to support founders through the inevitable pivots and challenges of bringing transformative technologies to market.
Securing Our Future Through Relational Capital
The concentration of venture capital in innovation hubs—with $123.8 billion concentrated in San Francisco and New York in 2023 alone—reinforces that the agglomeration of talent, capital, and networks in innovation ecosystems remains incredibly powerful.
At its core, venture capital is a people business that happens to involve technology and money. The most valuable investment strategy isn't finding the perfect dots, but patiently drawing lines and building relationships that support innovation for decades to come.
In an increasingly complex technological landscape where breakthrough innovations will define both commercial success and national security, these relationship networks will only grow more valuable. The firms that excel at building and leveraging these networks—connecting founders, technology visionaries, industry leaders, and government stakeholders—will be the ones that generate the most significant returns and impact.
HawkEye 360 Technology Powers Pacific Fisheries Protection Effort
HawkEye 360 continues to demonstrate the critical real-world impact of its RF analytics capabilities. In a major Pacific-wide operation to combat illegal fishing, the Pacific Islands Forum Fisheries Agency (FFA) utilized HawkEye 360's radio-frequency tracking technology as part of its high-tech surveillance toolkit. The operation resulted in the identification of over 7,600 satellite detections and flagging of seven high-risk vessels across 14 million square kilometers of ocean. This deployment exemplifies how cutting-edge commercial space technology can enhance maritime domain awareness and support global security and environmental protection efforts.
PeakMetrics and Reality Defender Win US-Japan Global Innovation
Reality Defender has achieved a significant milestone by winning the 2025 Defense Innovation Unit (DIU) and Japan Ministry of Defense's Acquisition, Technology, and Logistics Agency (ATLA) US-Japan Global Innovation Challenge.
Partnering with PeakMetrics, Reality Defender demonstrated a powerful joint solution that leverages deepfake detection and AI-powered narrative intelligence to help defense agencies identify and counter foreign malign influence and deceptive media. Their combined approach equips military and intelligence teams with real-time insights to safeguard strategic decision-making in increasingly complex information environments.
"This recognition from DIU and ATLA represents a significant milestone in the fight against AI-enabled deception," said Ben Colman, Co-Founder and CEO of Reality Defender. "Winning this innovation challenge alongside PeakMetrics validates that defense agencies are prioritizing the deepfake threat."
Reality Defender's patented multimodal approach detects sophisticated AI impersonations in real time across audio, video, and images, with flexible deployment options that integrate seamlessly with existing infrastructure. This win underscores the growing importance of AI security solutions in military and intelligence contexts where information integrity is mission-critical.
We're proud to have Reality Defender in our portfolio as they continue to lead the charge against deepfake-enabled threats and build critical technology that enables enterprises and governments to interact with confidence in an AI-powered world.
Ukraine's All-Robot Assault Sets New Precedent for Autonomous Warfare
In a groundbreaking military operation this past December, Ukraine's 13th National Guard Brigade Khartiya executed what appears to be the world's first fully unmanned assault on Russian positions near Kharkiv. As reported by Alistair MacDonald and Ievgeniia Sivorka in The Wall Street Journal, this coordinated attack involving approximately "50 unmanned aerial vehicles" and numerous land drones marks "a new chapter of warfare where humans are largely removed from the front line of the battlefield, at least in the opening stages." The operation integrated explosive-laden ground vehicles, surveillance drones, and weaponized aerial systems in a five-hour assault that successfully destroyed a Russian bunker.
This watershed moment in military technology highlights both the rapid innovation driven by urgent battlefield needs and the challenges that remain. "On Mars you don't have water and mud, and Russian FPVs," noted Lieutenant Andriy Kopach, a land drone specialist who described the attack as "the first step of the new war." While technical hurdles persist – particularly for land-based autonomous systems navigating difficult terrain – the successful demonstration has already generated significant interest from international governments and companies. As Dutch Defense Minister Ruben Brekelmans observed during a visit to the brigade: "It sometimes felt like being at a tech startup, but operating from a shelter." This intersection of battlefield necessity and technological innovation aligns perfectly with New North Ventures' mission to identify and support dual-use technologies that address both national security imperatives and commercial applications.
More links to explore:
Founded: 2020
Key People: CTO Anthony Bettini
Elevator Pitch: Provider of real-time intelligence on software vulnerabilities and potential exploits, serving both enterprise and government security needs.
Funding: The company raised a $12 million Series A round led by Ten Eleven Ventures and including previous investors Sorenson Capital and In-Q-Tel. The company has raised a total of $19.75 million, as reported on March 19, 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.
