Dual Use and Defence Tech: What’s the Difference?

Sifted recently explored the terms ‘deeptech’, ‘defence tech’ and ‘dual use’ in a couple of articles, provoking a couple of spicy LinkedIn posts and interesting debates in VC group chats.

I’ll explain how I see the relationship between these terms below, but first, I want to start with a broader question — why bother with separate terms?

It’s about fit. Founder-investor fit. It’s a waste of time speaking to someone who is never going to invest/isn’t a thesis fit. Shades of grey, in my experience, are interesting and often where some gems can be found, but being broadly clear is time efficient for all involved. The same goes for GPs when raising from LPs. The distinction has a practical application.

These distinctions have a practical application.

Several early Silicon Valley startups had links to defence and many DARPA-funded projects attracted VC funding because of the potential for commercial applications.

Could it be argued the first VCs were really dual use investors?

Today, some commentators say VCs are ‘hiding’ behind dual use — VCs should be funding more offensive technologies. I agree in some cases, some investors might be dodging the discussion. But for many funds that specialise in dual use technologies it reflects their sector expertise and belief dual use is the best way to generate the best returns and strengthen national security.

There are different managers, different business models and contrarian theses in this space. That’s part of having an ecosystem.

I invest in things like future compute, communications, sensors, manufacturing and energy. Because I believe these things will do well for Twin Track’s LPs and because nearly 20 years of uniformed service has convinced me these technologies will also make a vital contribution to national security.

These technologies don’t rely on government procurement to survive or grow, nor do they depend on mergers and acquisitions within the military-industrial complex. The markets are bigger. There are more exit opportunities. And national security still gets to benefit from that inbound flow of technology.

I don’t want to be in a boardroom hoping that one of my companies will land another arms contract.

I want to be in a boardroom knowing my companies play a role in deterring conflict. In supporting stability, so that companies funded by other VCs have the space to be amazing engines of change in sectors like climate, health and education.

Maybe this conversation shouldn’t be about more VCs funding more weapons. Frankly many investors don’t have the experience or the network to understand which technologies will really move the needle. Those that do will carve out a good niche. Many generalist deeptech VCs investing in fields like advanced materials, semiconductors, quantum and biotech. These all have a role to play in national security and a vital role in deterrence. Their companies will get pulled towards working with defence. Generalist managers will need to keep challenging what this means for founders, themselves, and their LPs.

Want to hear my explanation of the terms used?

Deeptech. Biggest category. This is tech where there’s more technical risk than commercial risk. IP rich and often a high degree of flexibility on where and how it will add value in the future.

Dual use. Overlaps with Deeptech. Dual use tech can serve both commercial customers and national security customers. A lot of deeptech is inherently dual use. The question really is which bits of deeptech have an impactful enough application for national security to get traction. To answer this question you need a deep understanding of national security and a really good network in the sector.

Defence tech. This is more of a spectrum of tech depth from regular consumer tech with a hardened form factor, like bespoke Microsoft software or ruggedised laptops, through to deeptech with a more defence-specific use cases. This is where things can get controversial as it usually means its tech with an offensive application.

You can read the Sifted articles that prompted this article here and here.