Defense Tech Boom
Defense Tech continues to grow
PitchBook released its second annual report on the Defense Tech sector, with some very promising statistics. First and foremost, investors have poured nearly $100 billion into startups in this critically important sector since 2021—that’s 40% more than than the seven year period from 2014-2021.
I’ve written a lot about why we’ve seen such a shift in opinions from investors, founders, and operators; why the DoD needs this investment and cannot build the future of national security on its own; some of the challenges in building for defense; who has been making waves in this space; and of course, lots and lots about trends in the technology and requirements.
To summarize, this shift towards greater alignment between private industry and the public interest comes largely from a realization that the world remains a very dangerous place and there are actors with the intent and capability to threaten our security and existence.
Trends in technological advancement have shifted from being within the purview of the government principally, to happening in the private sector at an accelerating rate. Distributed information technology, increased computing power, and other developments (and I think this is important) that result from government innovations have shifted the edge to the private sector for continued advancement. So, the government has become increasingly reliant on a symbiotic relationship with the private sector to assist in developing and adopting critical technologies and capabilities.
Of course, the adoption of those technologies can still be slow and cumbersome. Vice Chairman of the Joint Chiefs of Staff, ADM Christopher Grady described some of the challenges and need for reforming our requirements development process and acquisitions to better align our capability development with the Joint Warfighting Concept (Joint Publication 1, Volume 1) and deliver those required capabilities more expeditiously.
In other words, there’s still a lot of work to be done on the government’s side to make fast technological adoption possible. Investors and operators both must enter this space with eyes wide open that building for defense is ponderous and fraught with risks.
I find PitchBook’s report to be a positive indicator of the alignment between the Pentagon and Silicon Valley. Of course, there is the risk that we’re starting to see an influx of ‘momentum capital’ chasing the promise of continued growth in this sector. As the sector gains in popularity and we start to see returns both to the Defense Department (the ROI there is capabilities and technologies) and to investors, more momentum capital will pour in, flooding the market and leading to a lot of companies failing. My fear then is that we’ll see a return in sentiment to a period where Silicon Valley and private industry won’t touch defense because they have been burned by it.
Investors, companies, and yes the Pentagon must work to mitigate that risk, so we can continue fielding the critical technologies that will allow the Joint Force to win today and tomorrow.
And of course, through it all, we must…
Keep building,
Andrew
SPECIAL NOTE: I’ve heard reports that people may be struggling with the ‘Subscribe’ buttons on the newsletter. I’ll be working through that with Substack to identify and rectify the issue. In the meantime, if you’re finding yourself unable to subscribe or change your email address, you can ‘hit reply’ to the email or email me directly at andrew.glenn1981@gmail.com.