Steve Baxter’s defence fund Beaten Zone fires up amid Trump spending call

Tech entrepreneur Steve Baxter says Donald Trump’s push for Western countries to spend more on their militaries will be a boon for his specialist defence venture capital fund Beaten Zone.

Australia’s military spending is 1.99 per cent of GDP – just under the 2 per cent NATO benchmark.

Former Shark Tank judge and tech entrepreneur Steve Baxter says Donald Trump’s push for Western countries to spend more on their militaries will be a boon for his specialist defence technology venture capital fund Beaten Zone.

Mr Baxter, a former army officer who made his fortune in the tech sector, has raised $10m in the first funding round for Beaten Zone, which already has a pipeline spanning advanced computing, autonomous systems, space technology and orbital capabilities.

The “beaten zone” is a military term that refers to the elliptical pattern formed when rounds strike the ground or a target.

“The response from investors has validated our thesis that defence technology requires dedicated venture capital expertise,” said Mr Baxter. “With this capital call, we’re moving from thesis to action and are ready to deploy more capital into companies building strategic technologies that enhance Australia’s sovereign capabilities.”

Steve Baxter has raised $10m in the first funding round for Beaten Zone.

Mr Baxter said he aimed to raise $60m for the fund over the next 18 months.

He said the recent change of government in the US and the open discussion about Western defence budgets moving towards 5 per cent of GDP from their current levels near 2 per cent added to the opportunity in this sector.

Australia’s military spending is 1.99 per cent of GDP – just under the 2 per cent NATO benchmark Mr Trump wants to increase.

Australia’s military is facing severe challenges, with ageing submarines and too few warships, missiles and drones to be effective in any future war with China.

Mr Baxter said that at a time when defence budgets were under pressure, the weapons used by defence forces were undergoing radical change with new “consumer technologies” being incorporated into modern arsenals.

This included small, cheap and plentiful aerial drones sporting highly capable sensors.

Since launching in 2022, Beaten Zone had conducted comprehensive reviews of more than 350 companies for potential investment.

This had already led to several strategic investments, including Sydney-based HEO, which has developed software to monitor spacecraft, and high-tech sensor and radar firm Arkeus.

“We are targeting sovereign Australian businesses who can sell to an identified market demand that is primarily in the US,” said Mr Baxter.

“The US Defense budget is almost $US900bn ($1.4 trillion) compared to Australia’s $US32bn.

“The US Department of Defence also has well over 100 organisations that can acquire capability with low or no tender and process overhead.

“The breadth of our deal flow reflects the evolving nature of modern defence requirements, where traditional domains intersect with emerging technologies.

“Through our investments, we’re not just funding individual companies. We’re helping build interconnected capabilities that strengthen Australia’s defence industrial base.”

Mr Baxter said the global allied defence sector now exceeded $US1.2 trillion, presenting Australian companies with significant export opportunities.

This was underscored by AUKUS commitments of over $350bn across the next three decades, creating a sustained demand for innovative defence technologies.

“While the Australian defence market, at $US32bn, represents a strong foundation, the real opportunity lies in accessing the broader allied market through strategic partnerships and capability sharing agreements,” Mr Baxter said.

“The Western world’s holiday from history is over and substantial tailwinds in an investment sense abound. We are primarily targeting companies that have traditionally found it very difficult to raise capital due to their exposure to defence.

“This reticence has led to an opportunity for good value equity given traditional capital has been irrationally scared away.”