Venture funding for defense tech startups grew last year. The total amount invested was lower than some might have anticipated. Funding to VC-backed startups in the defense sector hit $3 billion in 102 deals.
This represents an 11% uptick from 2023, which saw $2.7 billion raised in 100 announced rounds. Defense tech had a good year in 2024, with an increase in both dollars and deals. This growth is surprising, given the historical reluctance of many investors to engage with defense tech due to ethical concerns or pressure from their limited partners.
However, attitudes began to shift in 2022 when Anduril raised a substantial round that propelled the startup to a valuation of $8.5 billion. Since then, the defense tech industry has seen a shift in the investor landscape and how VCs deploy their money. “Investors have become far more intelligent about defense in the last few years and as a result, dollars are being deployed more efficiently,” said a spokesperson from a Huntington Beach, California-based startup creating defense systems.
“Investors have become better at assessing product market fit, the important team characteristics for success, and which problems are worth attacking.”
These changes in the space led to some significant raises last year. While Anduril’s raise may have been the largest, it was far from the only big round in 2024. Other notable rounds included:
Helsing, which develops artificial intelligence software for defense applications, valued at $5.4 billion.
The Germany-based startup designs software that enhances weapons capabilities in drones and jet fighters and improves battlefield decision-making.
Defense tech funding sees notable growth
An autonomous surface vessels maker secured a funding round at a $1 billion valuation, minting the defense tech startup as the newest unicorn in the growing sector.
The rise in defense tech spending can be attributed to multiple factors, according to experts. An increasingly fraught geopolitical landscape and heightened demand from defense customers and Congress to support new firms are significant contributors. Technologies that have seen strong interest from defense tech investors include artificial intelligence, autonomous systems, advanced propulsion technologies, and space tech.
The growth of defense tech shows no signs of slowing down, partly because “defense tech” often has applications across multiple industries. AI and cybersecurity, for instance, are relevant in both defense and commercial industries such as manufacturing and energy. Additionally, many expect defense spending to increase further under the new White House administration, which will likely boost investor interest in the space.
Several prominent firms, such as Andreessen Horowitz, have shown significant appetite for defense tech. Andreessen’s newly established “American Dynamism” practice focuses on investing in sectors tied to U.S. national security, including aerospace, defense, safety, education, and manufacturing. Considering the current geopolitical tensions around the world, it is unlikely that defense tech investment will slow.
“We are in a global competition with China for economic, military, and technological dominance,” said a general partner at a leading venture capital firm and a defense tech investor. “The preservation of our way of life is dependent upon winning this competition. Fear of failure is the primary driver.”
In summary, while the total amount of funding in defense tech startups might have been lower than anticipated by some, the sector experienced significant growth in both investment dollars and the number of deals.
The continued interest from investors and evolving geopolitical circumstances suggest a robust future for defense tech venture funding.
