As U.S. adversaries and near-peer competitors continue to aggressively advance their defense and intelligence technology postures, it is critical that the U.S. government leverage and deploy the latest, cutting-edge capabilities and solutions to stay ahead of these growing national security threats. One company that has grown its portfolio to specifically meet these national security challenges is one of this year’s ACG Corporate Growth Award winners: Razor’s Edge.
With the motto “Investing at the intersection of national security and commercial enterprise,” Razor’s Edge has been committed to “find, fund, and foster” tech companies that will provide emerging solutions to the government’s top national security needs.
To learn more about Razor’s Edge, the current national security trends that are driving the company’s investment portfolio, and to pull back the curtain on their ACG Deal Team of the Year Award win, we sat down with Mark Spoto, Managing Partner, and Matt Robinson, Vice President at Razor’s Edge.
Here is what they had to say:
Corporate Growth, Capital Style (CGCS): Can you tell our readers a bit about Razor’s Edge? Which industries is the firm interested in? And what kind of companies does Razor’s Edge look to add to its portfolio?
Mark Spoto: Razor’s Edge, based in Reston, VA, is a multi-stage investment firm interested in technology companies solving significant challenges in national security and high-growth commercial enterprise markets.
The idea for Razor’s Edge was borne out of the successes of Blackbird Technologies and Ravenwing, both national security solutions companies founded and operated by the firm’s managing partners, Peggy Styer, Richard Moxley, Steve Pann, Jack Kerrigan and Mark Spoto. With Razor’s Edge, the firm’s principals are leveraging their operating expertise, network, and familiarity with the national security community’s hardest problems to deploy capital strategically with strong management teams that are impacting critical missions.
“Current technology areas of interest for the firm…include autonomous systems, space technologies, cybersecurity, artificial intelligence / machine learning (AI/ML), digital signal processing, and other aerospace and defense technologies.” – Mark Spoto
We operate under a two-pronged approach, under which we invest both in early stage startups and more established companies. In both cases, we work with our management teams to deliver significant growth and customer expansion. Our early stage strategy focuses on Series A and B investments in companies developing disruptive technologies that we think, based on our perch in national security, can grow into sizable businesses in the defense and intelligence markets.
Often, that success can then be leveraged into high value commercial enterprise verticals. Our more established company investments take the shape of platform investments where we gain a material stake in rapidly growing companies that are already doing impactful work in strategic areas directly with the U.S. Government. We help these companies grow rapidly through a combination of organic business investments and tuck-in acquisitions.
Current technology areas of interest for the firm, which are informed by strategic U.S. national security priorities, include autonomous systems, space technologies, cybersecurity, artificial intelligence / machine learning (AI/ML), digital signal processing, and other aerospace and defense technologies.
CGCS: Why would companies be interested in private equity and venture capital funding? What other funding opportunities exist for them, and why would private equity and venture capital funding be the best option for them?
Matt Robinson: At Razor’s Edge, we do not just find and invest in businesses, we build them to scale with high character entrepreneurs and leading management teams. We bring decades of experience as operators and entrepreneurs that we can impart to founders and management teams. We pride ourselves on our ability to leverage our unique access within the national security community and our detailed understanding of emerging mission requirements. This provides Razor’s Edge with a competitive advantage in steering portfolio companies to “skate where the puck is going” from a budgetary trend perspective, and to sourcing new business development opportunities and strategic partnerships.
“The U.S. is no doubt still the most technologically advanced superpower, but it no longer maintains the same significant lead over other global powers.” – Matt Robinson
We have a vast network of talent, in areas such as management, operations, engineering and sales, that our portfolio companies draw from. We operate a “franchise athlete” system where we deploy our most elite talent to successive opportunities, usually in increasing levels of responsibility from management to C-level positions to Board and co-investor roles. This helps attract confident, talented people capable of building multiple different types of high growth companies. Having demonstrated our ability to successfully navigate across a variety of market cycles, we also provide valuable mentoring to management teams on how best to position their businesses for subsequent fundraises or exit events.
CGCS: What trends is Razor’s Edge seeing in the national security sector and how is that impacting the firm’s investment decisions?
Matt Robinson: Threats posed by U.S. near-peer adversaries have become the predominant focus of our nation’s defense, as these governments have significantly increased their aggression towards the U.S. and its allies. The U.S. is no doubt still the most technologically advanced superpower, but it no longer maintains the same significant lead over other global powers. Other governments and organizations have made rapid technological advancements in intelligence, cyber, quantum computing, hypersonics, AI/ML, and other defense capabilities.
With our latest fund, Razor’s Edge is focused on investments in technologies that will help our customers maintain their technological advantage over near-peer nations and competitors. This creates a significant opportunity for growth for our portfolio companies.
CGCS: Razor’s Edge recently won the ACG National Capital Growth Award for “Deal Team: Growth Equity or Venture Capital Firm of the Year.” To what do you attribute the company’s continued and sustained growth and success?
Mark Spoto: We were honored to be nominated and to have won this award from ACG National Capital, a great organization that brings together the best and brightest companies, investors, and services organizations in the D.C. region. We view the award as a validation of our approach to investing in impactful companies and leaders who are not just building great businesses, but also having a real positive impact on our country’s national security.
In 2021 we were fortunate to have successful exits in the form of two sales and two IPOs in our portfolio. BlackHorse Solutions sold to Parsons Corporation, and BlackLynx sold to Jacobs. Our portfolio companies 908 Devices and BlackSky made successful public offerings.
In the case of BlackHorse Solutions and BlackLynx, we started with majority growth investments in sub-scale but mission-focused businesses with strong cultures. From those initial investments, we were able to recruit talented executives and technical staff to supplement the existing team, and to back high-character, high-talent founders through follow-on acquisitions. In both companies, we worked as a team to diversify the customer base by expanding capabilities and delivered significant annual organic growth over successive years.
“The U.S. faces an increasingly complex and rapidly growing national security threat environment, which has created compelling requirements across a number of strategic technology areas.” – Mark Spoto
With 908 Devices and BlackSky, we invested in very early rounds of financing. Each developed very innovative technologies – a miniaturized mass spectrometer in the case of 908 Devices, and highly capable but low-cost imaging satellites with associated data fusion and analytics in the case of BlackSky. We helped both companies grow sizable and important national security businesses that they could then leverage to build high growth commercial enterprise businesses in valuable markets such as energy, financial services and life sciences.
CGCS: What’s next for Razor’s Edge? Are there any opportunities that the company is currently pursuing? Any upcoming news that you’d like to share with our readers
Mark Spoto: We recently closed an oversubscribed Fund III, with approximately $340 million in commitments, significantly exceeding our fundraising target of $250 million. We attracted strong investor support for the firm’s strategy of investing in sophisticated companies that are key to helping the U.S. advance its technological edge in the global power competition with near-peer countries. The fundraising brings the firm’s total assets under management to more than $600 million.
The U.S. faces an increasingly complex and rapidly growing national security threat environment, which has created compelling requirements across a number of strategic technology areas. In the first half of the year, we sourced four new platform investments and two early stage venture investments.
A few of these new investments include:
BlackSea Technologies, a next-generation maritime technology solutions platform, delivering innovative naval platforms and autonomous systems to the nation’s warfighters from ocean surface to the seabed.
Corsha, a cybersecurity company that has developed a novel SaaS solution for automated, dynamic multi-factor authentication to better secure machine-to-machine API communications.
X-Bow, an aerospace company using proprietary additive manufacturing techniques to develop and build the next generation of solid rocket motors and associated technologies.
Veros Technologies, a multi-domain cybersecurity services and solutions platform, delivering advanced operational capabilities to elite national security customers.
And, BlackSignal Technologies, a digital signal processing and electronic warfare platform, delivering advanced signal processing and cyber capabilities in support of mission critical, national security programs.
For a full list of 2022 Corporate Growth Award winners, click HERE.