Venture funding for defense technology startups saw growth last year, reaching $3 billion across 102 deals. This figure represents an 11% increase from 2023, which recorded $2.7 billion in funding through 100 announced rounds. Despite some significant funding rounds, the total amount invested fell short of expectations.
Upswing for Defense
In 2024, the defense tech sector experienced a positive trend, with both funding amounts and deal counts on the rise. This shift is notable, as historically, defense tech has not always aligned with the broader venture capital and tech ecosystems. Ethical concerns and pressures from investors often led to a reluctance to invest in this area. However, the landscape began to change following a substantial $1.5 billion Series E funding round for Anduril Industries in 2022, which boosted its valuation to $8.5 billion.
Key takeaways
- Defence technology startups raised $3 billion across 102 deals in 2024, an 11% increase on the $2.7 billion raised across 100 rounds in 2023.
- The turning point was Anduril Industries' $1.5 billion Series E in 2022, which lifted its valuation to $8.5 billion and made the sector legible to mainstream investors.
- Other large rounds included Helsing at approximately $489 million for defence AI software and Saronic at $175 million for autonomous surface vessels.
- Andreessen Horowitz's 'American Dynamism' initiative targets US national security sectors including aerospace and defence, and the firm has been among the most active investors.
- Growth is expected to continue on anticipated defence spending increases and a proposed US sovereign wealth fund that could target the sector.
As a result, investors have become more knowledgeable about defense technology, leading to more strategic deployment of capital. Ethan Thornton, CEO of Mach Industries, noted that investors are now better at evaluating product-market fit and identifying key team characteristics necessary for success.
Last year saw several significant funding rounds in defense tech, with Anduril’s being the largest. Other notable rounds included Helsing, which raised approximately $489 million for its AI software aimed at defense applications, and Saronic, which secured $175 million for its autonomous surface vessels.
Building Up
The momentum in defense tech funding is expected to continue, as many technologies in this sector have applications beyond military use, such as in AI and cybersecurity. The anticipation of increased defense spending under the new administration is likely to further attract investor interest. Additionally, the proposed U.S. sovereign wealth fund could potentially target defense tech for investment.
Prominent venture firms like Andreessen Horowitz and Alumni Ventures have shown a strong interest in defense tech, making numerous investments in the sector. Andreessen’s “American Dynamism” initiative specifically focuses on sectors related to U.S. national security, including aerospace and defense.
Recent funding rounds in 2024 have already demonstrated significant investment activity, with startups like Hidden Level and Castelion raising substantial amounts for their innovative defense technologies. Given the current geopolitical climate, investment in defense tech is unlikely to wane.
As Josh Manchester from Champion Hill Ventures pointed out, the competition with global powers like China for technological and military superiority is a driving force behind the urgency for investment in defense tech.
Methodology
Defense tech encompasses industries related to military, national security, and law enforcement. The data reflects most announced funding rounds, although there may be slight delays in reporting. This analysis excludes incubators and accelerators due to their fluctuating investment figures.
Frequently asked questions
Why did venture capital historically avoid defence?
Ethical concerns and pressure from limited partners made many firms reluctant. That reluctance eased as large rounds demonstrated returns and as investors became more comfortable evaluating the sector.
What makes defence tech attractive beyond military contracts?
Much of the underlying technology has civilian applications, particularly in AI and cybersecurity. That dual use gives investors a second path to returns if defence procurement is slow.
What is driving the urgency?
Geopolitics. Josh Manchester of Champion Hill Ventures pointed to competition with China for technological and military superiority as the force behind sustained investor interest.
