Defence sector startups are seeing the investment dollars pour but that alone is not enough to win government contracts. This is where strategic investors on the cap table come in.
Five years ago, venture capital investors were barely willing to admit that they invested in startups with a connection to military technologies. Today, with Russia's war on Ukraine in its fifth year, Europe rebuilding its arsenal and AI accelerating technological development, investment in defence sector startups is booming.
"I don't think anyone could have guessed that defence tech and dual use investing was going to be kind of the belle of the ball," says Bill Collier, who leads Noblis Ventures, the strategic investment arm of Virginia-based federal contractor Noblis. "But with the emergence of AI, the B2B, SaaS and app era is dead and people are looking at areas that are more defensible—IP portfolios, and hardware related business models."
Not only are more investment dollars pouring generally into defence startups, with more than $35bn overall VC investment so far this year according to PitchBook, but that investment is increasingly coming from corporate investors, particularly so-called defence primes—the legacy contractors with longstanding, multi-decade ties to Western governments.
According to PitchBook, more than $9.3bn of the investment in defence-related startups this year — over a quarter — has come from rounds involving a corporation.
Maija Palmer
Maija Palmer is editor of Global Venturing and puts together the weekly email newsletter (sign up here for free).
