Space was the start.
The rapid commercialization of the aerospace industry, traditionally dominated by government programs, in the past decade led to a realization that other government-heavy industries were ripe for private investment, Ben Patz, managing partner of Orlando-based venture capital firm DeepWork Capital LLC, told Orlando Inno.
That is why innovative defense contractors doing work in industries like robotics and software are seeing more interest and investment from venture capitalists, Patz said. “Space was the catalyst.”
Indeed, a pair of high-tech defense firms based in and relocating to Central Florida demonstrate the rising interest in the sector among startup investors.
For example, Santa Monica, California-based Red 6 Inc., which will open a technology hub in Orlando, raised $30 million in a Series A round earlier this year.
Likewise, Melbourne-based Tomahawk Robotics Inc. in April closed a $10 million round, the largest recorded on the Space Coast so far this year.
The Department of Defense is a typical customer of these companies and others like them. However, they’re going after venture capital dollars as well as government contracts to pump money into their businesses.
Defense companies raising significant amounts of venture capital is a relatively new phenomenon, said George Cheros, CEO of the Orlando-based National Center for Simulation. Many of the region’s defense contractors are part of Central Florida’s $6 billion simulation industry, and they typically use government contracts, lines of credit or the Small Business Administration's SBIR grants to fund themselves, Cheros said.
However, companies like Red 6 show businesses can tap into multiple capital sources to get up and running, he added. “It’s exciting to see someone want to launch something this fast.”
Venture capital is important because it can fuel growth at companies, supporting new high-wage jobs and the creation of innovative solutions other businesses can use. Startup investment activity last quarter jumped 69% from $49.9 million in deals in the first quarter to $84.3 million. Venture capital dollars also were up 103% from $41.6 million in second-quarter 2020.
Meanwhile, defense and government work are key components of the region’s economy. Government data shows Central Florida landed nearly $6 billion in federal contracts in fiscal 2020.
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