Steve Baxter’s new defence-focused VC fund locks and loads $10 million in first close on $60m target

Brisbane-based specialist defence technology venture capital firm, Beaten Zone Venture Partners, has secured more than $10 million in commitments, to call first close on the fund.

The figure takes the fund to its final condition for ESVCLP (Early Stage Venture Capital Limited Partnerships) status, with its first capital call underway this week.  

Founder and managing partner Steve Baxter is now working to a final close within 18 month, targeting $60 million.

Beaten Zone will invest in sovereign early-stage businesses with products having material military use. But its scope precludes investments in controversial weapons, such as landmines.

The possibilities range from computing and software for defence applications, next-generation materials and manufacturing, autonomous systems, advanced sensing, space technology, biotechnology and human performance enhancement, and microelectronics and semiconductor sovereignty.

Baxter said Fund I will primarily target startups that have struggled to raise capital due to their exposure to defence, looking for Australian startups keen to crack the US market, where he spends considerable time.

His view is that traditional capital has been irrationally scared away, seeing opportunity in more hawkish Western governments and increased geopolitical tensions as sovereign defence budgets rise towards 5% of GDP from current levels around 2%.

“The response from investors has validated our thesis that defence technology requires dedicated venture capital expertise,” Baxter said.

“With this capital call, we’re moving from thesis to action, ready to deploy more capital into companies  building strategic technologies that enhance Australia’s sovereign capabilities. On behalf of the Beaten  Zone Ventures team I want to thank unreservedly our investors who have trusted their capital to us.” 

Already Beaten Zone has reviewed more than 350 companies for potential investments of nearly $320 million. They’re begun doling out the dollars to three startups: HEO, a space tech imaging company monitoring activity in Earth’s orbit, sensor technology developer Arkeus and simulation platform Nominal Systems, which hopes to change the way we design, test and operate every complex system, from satellites to cars. 

“What we’re seeing in the market validates our investment thesis,” Baxter said. 

“The traditional funding structure has built impressive capabilities. Now, with private capital, these companies can deliver their innovations globally.” 

Peta Ellis as joined Beaten Zone as general manager.