Venture Studios Are Key to National Security Innovation
28 May 2025 - A Weekly Publication by New North Ventures
New North Ventures and Fairlead Launch Maritime Studios to Restore America's Shipbuilding Edge
Traditional venture capital waits for innovation to arrive fully formed or at least beyond an idea on the back of a napkin. But what happens when national security challenges demand solutions that don't yet exist? When problems are too complex, too classified, or too urgent for the standard startup playbook?
This is where studio ventures become essential. Instead of evaluating existing companies, studios identify critical gaps and systematically build solutions. The model combines strategic foresight with rapid iteration cycles that foreshadow and characterize successful startups.
National security innovation faces unique challenges that traditional venture models struggle to address. Requirements are often classified. Customer adoption cycles are measured in years. Technical specifications demand both breakthrough capability and battle-tested reliability.
Studios solve these problems by embedding domain expertise from day one. Instead of entrepreneurs learning national security requirements through trial and error, studio companies launch with former program managers, cleared engineers, and retired national security experts already on the team.
The real power lies in building for both government and commercial markets simultaneously. The same AI system that enhances military intelligence analysis can slash operational costs in enterprise environments. This dual-use focus ensures breakthrough technologies reach the scale necessary to maintain American technological advantages.
The partnership between New North Ventures and Fairlead demonstrates how this approach addresses urgent national priorities. President Trump's Executive Order on Restoring America's Maritime Dominance reveals stark realities: the United States constructs less than one percent of commercial ships globally, while China produces approximately half. The order demands comprehensive action within 180-210 days to rebuild America's maritime industrial base, expand shipbuilding capabilities, and strengthen the recruitment and training of a maritime workforce.
This Hampton Roads-based maritime initiative will tackle these challenges by incubating companies that integrate AI and data analytics, digital twins and generative design, and model-based manufacturing approaches. Located in the heart of American naval power, these studios have direct access to operational requirements, testing environments, and the engineering talent necessary to build next-generation maritime capabilities. The model can be replicated across other critical domains where America needs technological leadership.
As threats evolve and competitive pressures intensify, the question isn't whether we can afford to experiment with new innovation models—it's whether we can afford not to. Studio ventures offer a path to build companies systematically, strategically, and at the speed that national security demands.
NatSecEDGE Conference: Securing America’s Technological Advantage
At New North Ventures, we recognize that America's technological advantage requires deliberate cultivation through strategic partnerships and principled investment. The NatSecEDGE Conference represents a crucial convergence point where visionary leaders across the defense innovation ecosystem align their efforts to address emerging threats and seize technological opportunities.
Hosted by The Cipher Brief in Austin, Texas on 5-6 June, this gathering focuses on frontier domains including AI, Space, Quantum, and Critical Infrastructure protection. These fields represent both our nation's greatest vulnerabilities and its most promising avenues for maintaining strategic superiority.
New North Ventures' support and participation underscore our commitment to fostering public-private collaboration that accelerates dual-use innovations. Our team looks forward to engaging with decision-makers who share our mission of strengthening national security while creating commercial value through transformative technologies.
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Join us at NatSecEDGE as we advance the critical mission of protecting democracy through principled innovation and investment. Together, we will shape the technological frontier that safeguards our nation's future.
SBIR Mills vs. Scale-Up Success
The Department of Defense's SBIR program faces a fundamental identity crisis. Originally designed as "America's Seed Fund" to commercialize breakthrough technologies, it has instead become a permanent revenue stream for companies that treat government contracts like subscription services rather than growth capital.
Recent research reveals troubling dependency patterns among the top 25 DoD SBIR award winners from FY 2010-2024. These companies have received SBIR awards for an average of 30 years, with 56% of their total DoD contracts coming from SBIR awards rather than traditional defense contracts. Sixteen of these top recipients derive half or more of their defense revenue from SBIR—hardly the profile of companies that have successfully commercialized and scaled.
The contrast is stark. Successful SBIR graduates like Qualcomm, ViaSat, and Anduril used initial awards to achieve commercial scale and secure traditional defense contracts. Meanwhile, mills continue extracting SBIR dollars for other startups decade after decade without meaningful commercialization or transition to Programs of Record.
There is a question of the ideal mix of R&D and spin-out activity. It is not surprising that some - or even even most - funded activities to not materialize into thriving companies - that’s the nature of research. But do we want all of that activity concentrated in a small number of firms?
The national security implications extend beyond wasted capital. Some long-term SBIR recipients have developed concerning ties to Chinese entities, including state-sponsored talent recruitment programs and joint research with Chinese state-owned enterprises. This represents a fundamental failure of due diligence that puts sensitive research at risk.
AFWERX has pioneered reforms, including simplified applications, Open Topic solicitations, and bridge funding programs that help companies transition from prototype to production—an approach the author notes mirrors venture capital best practices.
From an investment perspective, SBIR awards serve a valuable function when used correctly—extending runway for promising startups, derisking R&D investments, and validating product-market fit with government customers. The key is ensuring companies treat SBIR as growth capital rather than permanent subsidy, using awards to scale toward commercial viability and traditional defense contracts.
More links to explore:
Founded: 2022
Key People: CEO Andrii Romanenko
Elevator Pitch: Developer of homing and control system designed for small munitions of unmanned aerial vehicles. The company's technologies include a control system, a communication system, and a guidance system, which offer aircraft construction and research into aerodynamic effects, enabling the defense industry to manage weapons that are self-guided to the target.
Funding: The company raised EUR 600,000 of venture funding from Darkstar VC on 22 May 2025.
In this episode of the 'Securing Our Future' podcast, hosted by New North Ventures, Jeremy interviews Veronica Daigle about her journey from Wall Street to the federal government, including her roles at the Office of Management and Budget (OMB) and the Pentagon. Veronica now leads the Defense Ventures group at Red Cell Partners, a venture firm focused on building and incubating companies with dual-use applications.
