Defence Tech’s Venture Capital Moment: Opportunities, Risks and the New Funding Landscape

Homeland July 13, 2026

For all the modern innovation in venture capital, history often repeats itself. The First and Second World Wars led to unprecedented public investment in industrial capability and advanced manufacturing, which later found widespread commercial application. Similarly, the Cold War drove sustained investment in semiconductors, satellite communications, and GPS.

There is a clear pattern that is once again becoming evident: technology developed for national security can often instigate broader economic growth. Defence technology has rapidly emerged as one of venture capital’s fastest-growing investment priorities. According to PitchBook, global aerospace and defence start-ups attracted more than US$19 billion of venture capital in 2025 – almost double the US$10 billion invested in 2024 and significantly outpacing growth across the wider venture market. Governments and private investors are increasingly recognising this, making the sector an attractive long-term investment proposition.

This trend is represented in the scale of individual funding. In June 2025, autonomous defence company Anduril Industries completed a US$2.5 billion Series G funding round at a US$30.5 billion valuation, one of the largest venture capital raises ever completed by a defence technology company. Shortly afterwards, European AI defence company Helsing secured €600 million of investment at a €12 billion valuation, demonstrating that investor appetite is no longer confined to Silicon Valley but extends across Europe and other allied markets. Beyond these headline valuations, established defence primes continue to dominate global procurement budgets, and even well-capitalised entrants have not yet materially displaced incumbent contractors at scale. Yet there are significant regulatory and structural barriers still obstructing entry to the defence market.

From the founders’ perspective, increased investor appetite does not necessarily translate into easier fundraising. Capital remains concentrated in a relatively small number of businesses with established government relationships, proven technologies or clear commercial traction. Many early-stage companies continue to struggle to bridge the gap between successful product development and meaningful procurement contracts – a challenge widely referred to as the defence innovation “valley of death”. Lengthy procurement cycles, constrained early revenues and limited customer diversification continue to prevent many promising businesses from reaching commercial scale.

Against this backdrop, legal and regulatory preparedness has become a key differentiator. Export control regimes, sanctions legislation, national security investment screening (including regimes such as CFIUS and its international equivalents) and government procurement rules can all influence both fundraising and future commercial operations. Investors expect founders to demonstrate a sophisticated understanding of these issues, together with governance structures capable of supporting growth in a highly regulated sector.

For many start-ups, however, this presents a significant commercial challenge. Government policy may encourage innovation, but procurement processes often struggle to match the pace of technological development. Securing defence contracts is often a protracted process, and this places considerable pressure on cash flow. Businesses must either secure additional funding or pivot towards alternative revenue streams while waiting for procurement decisions.

Intellectual property ownership is equally critical. Investors will seek assurance that innovations are protected and that ownership is clearly documented, particularly where technologies have been developed alongside universities, research institutions or government bodies. Founders should also consider whether their products are genuinely capable of serving both defence and commercial markets. These products are

often viewed more favourably by investors because they reduce dependence on government procurement and create more diversified revenue opportunities.

A company’s investor base also requires careful consideration. Strategic investors can provide valuable sector expertise, government relationships and routes to market but founders should carefully assess whether governance rights, board appointments or exclusivity provisions could restrict future fundraising or commercial partnerships.

Defence investment is likely to continue as a significant political issue. Governments across Europe, North America, and internationally, are placing greater emphasis on sovereign capability, supply chain resilience and domestic innovation as essential components of national security.

Defence has moved from a niche to a mainstream venture capital sector. As governments continue to increase defence spending and prioritise sovereign technological capability, private capital is likely to play an ever more important role. Businesses able to address both defence and civilian markets will be particularly well positioned to benefit from this long-term trend.

Greater political focus, however, is also likely to bring greater scrutiny. National security reviews of foreign investment are becoming more common, export controls continue to evolve, and governments are exercising closer oversight of strategically important technologies. For investors and founders, commercial opportunity will be accompanied by regulatory complexity, particularly as defence becomes a political battleground even within party lines. While this may appear daunting for early-stage companies, founders should not lose confidence. There is a well-established ecosystem of experienced investors, advisers, lawyers, scientists and industry specialists who have successfully navigated these challenges before. This collective expertise can help start-ups manage the process, avoid common pitfalls, and position themselves to capitalise on the opportunities emerging in the sector.

Ultimately, success in the defence technology sector depends on far more than technical innovation alone. Investors are looking for businesses that combine cutting-edge technology with strong governance, regulatory compliance, and well-managed intellectual property.. The businesses that can successfully navigate this complex legal and commercial landscape will be best placed to benefit from defence technology’s status as one of venture capital’s defining investment themes.

Article submitted by:

Sarah Melaney, Partner, Ya’ara Barnoon, Special Counsel, and Alex Davidson, Senior Associate at Pillsbury

Pillsbury Winthrop Shaw Pittman LLP is recognised internationally for advising companies and investors operating in highly regulated and strategically significant sectors, including defence, aerospace, cybersecurity and advanced technologies. The firm’s multidisciplinary team combines leading venture capital, corporate, government contracts, national security, export controls, CFIUS and foreign investment, intellectual property and regulatory expertise to help clients raise capital, structure investments, secure government contracts and scale innovative businesses.

As defence technology continues to attract unprecedented levels of private investment alongside increased regulatory scrutiny, Pillsbury is uniquely positioned to help founders, investors and established businesses navigate the legal and commercial challenges that accompany growth in this rapidly evolving sector.