Venture funding for defense technology startups experienced growth in 2024, though the overall investment total didn’t reach the heights some anticipated. According to Crunchbase data, VC-backed startups in the defense sector—encompassing military, national security, and law enforcement—secured $3 billion across 102 deals. This represents an 11% increase compared to 2023, which saw $2.7 billion raised in 100 announced rounds.
The $3 billion figure may seem modest, especially considering that Anduril Industries, a prominent defense tech startup based in Costa Mesa, California, secured $1.5 billion in a Series F round co-led by Founders Fund and Sands Capital Ventures, valuing the company at $14 billion.
Defense Tech Experiences an Upswing
Despite expectations, defense tech had a positive year in 2024, with both deal volume and total dollars invested rising. This result is noteworthy, given that historically the defense tech sector and the broader venture capital and tech communities haven’t always aligned. Ethical concerns or pressure from limited partners previously deterred many investors.
Attitudes started to shift after Anduril’s significant $1.5 billion Series E raise in 2022, which propelled its valuation to $8.5 billion. Since then, the defense tech sector has observed a shift in the investor landscape, along with how venture capitalists allocate their funds. “Investors have become far more intelligent about defense in the last few years and as a result dollars are being deployed more efficiently,” said Ethan Thornton, CEO of Mach Industries, a Huntington Beach, California-based startup developing defense systems. “I think that investors have become better at assessing product market fit, the important team characteristics for success, and which problems are worth attacking,” he added.
These changes led to some big investments in 2024.
While Anduril’s investment was largest, it was not the only significant deal of the year. Major funding rounds in 2024 included:
- In July, Helsing, a Germany-based startup developing artificial intelligence software for defense applications, raised about $489 million with General Catalyst as the lead investor, bringing its valuation to $5.4 billion. The company’s software enhances weapons capabilities in drones and jet fighters and improves battlefield decision-making.
- Just a week after Helsing’s raise, Saronic, an autonomous surface vessels maker, secured a $175 million Series B round, reaching a $1 billion valuation and establishing itself as the newest unicorn in the defense tech sector. Andreessen Horowitz led the round.
- In the fourth quarter, Chaos Industries, a defense technologies startup focused on critical infrastructure, secured $145 million in a Series B round.
Daniel Ateya, president and managing director at RTX Ventures, the venture arm of aerospace and defense giant RTX (formerly Raytheon), identified multiple factors contributing to the rise in defense tech spending. These included the increasingly complex geopolitical landscape and increasing demand from defense customers and Congress for support of new companies.
According to Ateya, the technologies that have attracted strong interest from defense tech investors include artificial intelligence, autonomous systems, advanced propulsion systems, and space technology.
Continued Expansion Predicted
The growth in defense tech is expected to continue. This is partially because “defense tech” frequently has various commercial applications. For instance, AI and cybersecurity are applicable to both defense and commercial domains like manufacturing and energy. Many industry insiders anticipate that the new White House administration will further boost investor interest in this area.
In addition, the recently proposed U.S. sovereign wealth fund, if implemented, would likely consider defense tech as a potential investment area. Additionally, established firms like Andreessen Horowitz, Alumni Ventures, and 8VC have shown a substantial interest in defense tech, executing numerous investments in the field; meanwhile, others like Founders Fund, Sands Capital Ventures, General Catalyst, and Thomas Tull’s US Innovative Technology Fund have either led or co-led major funding rounds.
Notably, Andreessen’s newly established “American Dynamism” practice focuses on investments in industries relevant to U.S. national security, including aerospace, defense, safety, education, and manufacturing.
In the early weeks of this year, several defense tech startups have already secured substantial funding.
- Early this month, Hidden Level, a radar startup based in Syracuse, New York, secured a $65 million Series C round led by DFJ Growth.
- A week prior, Castelion, a defense manufacturer in El Segundo, California, developing long-range hypersonic strike weapons, raised a $100 million Series A round with a mix of debt and equity. Lightspeed Venture Partners led the equity portion.
Josh Manchester, a general partner at Champion Hill Ventures and a defense tech investor, emphasized the importance of this sector, stating, “We are in a global competition with China for economic, military and technological dominance. The preservation of our way of life is dependent upon winning this competition. Fear of failure is the primary driver.”
Methodology
For the purposes of this article, “defense tech” is defined by the industries of military, national security, and law enforcement, according to Crunchbase data. While most announced rounds of funding are included in the database, there may be a brief lag for rounds reported late in the quarter. Incubators and accelerators are not included due to the fluctuations their investment numbers can cause.
