Trends Watch: Growth Equity Investing in Veteran Entrepreneurs

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.   

This week, Elana talks with Derren Burrell, Founder & Managing Partner, Veteran Ventures Capital.  

What is your outlook for growth equity investing in veteran entrepreneurs? 

My outlook for growth equity investing in veteran entrepreneurs is highly optimistic. Veteran entrepreneurs bring unique skills, resilience, and leadership qualities honed through their military experiences, making them well-equipped to tackle business challenges. 

As awareness and support for veteran-owned businesses continue to grow, we are seeing increased interest from investors in this sector. Additionally, many veterans are addressing pressing market needs with innovative solutions, creating compelling investment opportunities. 

Furthermore, with various programs and initiatives aimed at supporting veteran entrepreneurs, the ecosystem is becoming more robust. This combination of strong leadership, innovative ideas, and growing institutional support suggests a promising future for growth equity investing in this space. Investing in veteran entrepreneurs not only offers financial returns but also contributes to the empowerment and success of those who have served our country. 

Where do you see the greatest opportunities and why? 

The greatest opportunities in investing in veteran firms can be found in several key areas: 

1. Technology and Cybersecurity: Many veterans possess strong technical skills, especially in areas like cybersecurity, where their training and experience in defense can lead to innovative solutions. As businesses increasingly prioritize digital security, firms in this space are poised for growth. Additionally, non-dilutive programs offered by the government such as the Small Business Innovation Research (SBIR) program can help these companies develop and commercialize cutting-edge technologies and minimize funding rounds. 
2. Logistics and Supply Chain: Veterans have extensive experience in logistics and operations from their military service. Companies that optimize supply chains or provide logistics solutions can benefit from their expertise, especially in the current climate of supply chain disruptions. 
3. Defense and National Security: Veteran-led firms are uniquely positioned to address challenges within the defense sector, leveraging their firsthand experience and understanding of military needs. Investments in companies focusing on advanced technologies, defense contracting, or security services can yield significant returns as demand for innovative solutions continues to grow. The SBIR program also provides funding for defense-related research and development, enabling these firms to pursue vital projects in addition to private capital. 

Overall, these sectors not only align with current market trends but also allow investors to support the entrepreneurial spirit of veterans and strengthen national security, fostering a positive social impact alongside financial returns. The availability of non-dilutive funding like SBIR grants further enhances the potential for growth and innovation in veteran-led firms. 

What are the greatest challenges you face and why? 

As a venture capital firm in the defense space, typical VCs face several challenges: 

1. Regulatory and Compliance Hurdles: The defense sector is heavily regulated, with strict compliance requirements and security clearances. Navigating these regulations can be time-consuming and complex, making it challenging for both investors and startups to operate effectively. 
2. Long Sales Cycles: The procurement processes in defense can be lengthy and convoluted. Startups often face extended sales cycles as they seek to secure contracts with government agencies or defense contractors, which can strain their cash flow and delay revenue. 

Addressing these challenges requires a deep understanding of the defense ecosystem, strong relationships with stakeholders, and a strategic approach to identifying and supporting innovative companies that can navigate this complex landscape.   

What keeps you up at night? 

Access to capital is always forefront – for both us and our portfolio companies.  Raising Fund II has proven to be much more effective in 2024, and we look to oversubscribe and mitigate this challenge.  Also, establishing and maintaining strong relationships with our limited partners is crucial, and we strive to make LP communication a top priority to maintain these relationships. Addressing these concerns involves strategic planning, strong communication, and a commitment to building trust with our supporters and network. 

The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.