Venture capital can do very little for the military hardware industry because, unless it can withstand extreme electronic warfare, or if it is not tied to a guaranteed continuous production contract by the government, "all" is pointless.
The industry is transitioning from heavy, slow-moving pieces of equipment to a software-defined and autonomous architecture in some cases.
However, many executives still misconstrue the difference between a pilot program (which lasts 60 days) and a long-term revenue stream (i.e., a government contract).
This guide addresses the hype surrounding defense tech startups and provides clarity regarding their procurement paths, deployment metrics, and hardware integration with the respective leaders in their industry.
The truth about defense funding
The fact that the aerospace and defense technology sector is projected to generate $49.1 billion in total deal value by 2025, according to PitchBook, and represents a 415% increase in deal activity within the first half of the year, will not change the reality of the defense technology market in any way, shape, or form.
However, capital raised is not the same thing as being ready to fight (i.e., produce combat-ready technology). The venture valuation of these companies should not be used as the guiding metric for judging their true worth.
Assessing the success of a defense-technology company is the ability to successfully transition from an "Other Transaction Authority" (OTA) contract to an "Indefinite Delivery Indefinite Quantity" (IDIQ) contract.
Most of the market consists of prototypes. A small number of organizations in the market possess the necessary secure manufacturing capabilities, government security clearances, and supply chain infrastructure required to manufacture and deliver equipment under a program of record (PoR).
Classifying the defense tech startups market
Due to the extreme differences in business models for competing companies, it is not possible to fairly compare a manufacturer of disposable drones with one that produces aggregate sensor groupings for commercial data-integrated analysis. To make the best possible decisions, we must categorize the defense technology marketplace in a defined manner.
Pure-play defense operations
Pure-play defense operations are a type of defense contractor that manufacture products specifically for the military. The companies' only real customers are national governments or other militaries that they have allied with.
Unfortunately, while the barriers to entry into this market are high, once you win a contract with a government customer, you are generally guaranteed to stay in business for years.
Dual-use commercial pivot
The dual-use commercial pivot allows companies that manufacture products for commercial use to pivot and adapt those products so they can also be used by military customers. Dual-use companies often include their products as part of their normal business operation.
Synthetic-aperture radar (SAR) satellites, autonomous vehicle simulator (AVS) systems, and automated manufacturing (AM) systems are the most common products produced by dual-use companies. Using a dual-use model reduces the financial risks associated with government procurement cycles, which are typically slow and cumbersome.
However, dual-use products need to have major modifications before they can be utilized by military customers. For example, an AVS designed for commercial ocean monitoring may not function at all when subjected to signal jamming associated with military operations.
Public companies and benchmarks
In addition, there are several public companies that produce product-related information for the defense industry, and many lists of defense tech startups include established public companies and companies that have received Series A investment and are on their way to being an established business.
It is essential that a distinction is made between early-stage venture bets and established players, who have long-term software contracts with governments.
Publicly traded companies should be viewed as benchmarks for how integration and data security is done, as they provide a blueprint of what a fully operational government software platform looks like, which is what younger companies must strive for.
How to judge defense tech startups with hard numbers
Most founders have a passion for 'disruption.' On the other hand, defence buyers only evaluate organisations on 'deployment', 'reliability' and 'scale'.
When conducting an evaluation on the organisation providing defence services, make sure to look beyond the marketing messages and instead analyse the actual operational evidence provided.
Procurement transition risks
The procurement transition risk is another topic of importance when conducting evaluations on defence contractors. The organisation has moved from a basic experimental phase to a funded production path.
Many organisations have received SBIR Phase I or Phase II funding and therefore, the funding may be very useful for the management team. The Department of Defence will award up to $1.72 million through a DoD SBIR Phase II award over a period of 24 months, however, this is a starting point only and may not represent a sustainable business model.
A DIU prototype agreement will take on average 60-90 days to process, however, some organisations will only achieve a 51% transition rate from a prototype to production. As a result, verify that the reported 'contract' will provide actual revenue, maximum ceiling value, and the number of units produced.
Manufacturing and deployment capacity
Manufacturing capacity and deployment capacity are also very different topics. An organisation building three state of the art drones within a laboratory is an entirely different business than building three thousand drones on a monthly basis during a supply chain crisis.
In addition to needing to produce the units, defence buyers also want to know the unit economics for expendable interceptors. Will the organisation be able to produce, maintain, upgrade, and support these systems at volume? Will they be using raw materials from hostile nations?
Therefore, the organisation needs show they have a resilient supply chain as well as a quality piece of technology. Additionally, even the most advanced software-controlled weapon would be useless if the organisation could not procure the necessary microchips to manufacture that weapon at scale.
Integration and validation
Can the device communicate with the military's current command-and-control systems?
It is mandatory for a new sensor system to interface with legacy command-and-control systems, meet strict cybersecurity requirements, and demonstrate proper software assurance.
Compliance with such things as export controls, ITAR, and CFIUS are also required when bringing this technology to market. Just because a product performs as expected during a controlled demo does not mean it will comply with ROE or have HIL (human-in-the-loop) capability once it is deployed.
Top 17 defense tech startups and companies
The following companies are representative of a diverse range of verticals in the defense technology stack from early-stage hardware innovations to established software benchmarks to present-day price points, and beyond. All valuations and contract values are documented with their source date and context.
1. Anduril Industries
Anduril is the first pure-play, fully integrated software-defined autonomous defense system. They're positioned to provide military prime contractors an alternative to existing defense contractors by embracing the full-stack mantra.
Their platforms consist of Lattice, which is their command and control software, as well as multiple types of autonomous vehicles, sensors and interceptors (e.g., Roadrunner, Fury and Barracuda).
In 2026, Anduril announced its Series H and raised $5 billion at a $61 billion valuation (subject to total funding to date approx $11.4 billion as reported by Crunchbase News and its own capital raising efforts).
Introduction of the March 2026 Army contract vehicle for up to $20 billion over the next 10 years; here again, it's critical to note that the $20 billion ceiling is not realized revenue and simply indicates the maximum amount the government may expend through this vehicle, rather than guaranteed payments to Anduril.
2. Shield AI
Shield AI is developing software to provide AI-based autonomy through their Hivemind platform. Their focus is on defense aviation and the development of autonomous mission systems that operate in contested environments where GPS signals are denied.
The most recent public record concerning their funding search indicates that in 2026, $2 billion was raised which gives them an estimated valuation of $12.7 billion according to Crunchbase News.
Another report connects them to the production of the Air Force Collaborative Combat Aircraft (CCA) program. This marks a major advancement from a prototype to an actual military system, although official defense budgets need to verify the amount of actual production.
3. Helsing
Helsing is developing software for defense and autonomous systems and AI-powered strike and reconnaissance systems, while emphasizing European sovereignty in technology.
They have been deeply integrated into the European programs of NATO. There is an industry report from Defense Tech Signals linking Helsing to the Future Combat Air System (FCAS) project.
The same source provides information on contracts for AI-guided drones for use in Ukraine specifying contract amounts (10,000 HX-2 drones, and €70 million for the Baltic defense system). Startupill ranked Helsing between $16 and $18 billion, indicating the growth rate of the non-US defense software industry.
4. Saronic Technologies
Saronic Technologies builds autonomous surface vessels and software for unmanned maritime operations. The company’s primary customer is the U.S. Navy, with a focus on distributed and autonomous naval warfare.
Reports from Tech Times covered a Series D funding round of approximately $1.75 billion at the valuation of $9.25 billion. For operational evaluation, we note that a second source provides confirmation of a contract awarded by the U.S.
Navy to Saronic for production valued at $392 million. In addition to the contract valued at approximately $400 million, this recent example shows that the systems developed by Saronic have been used in the field as opposed to the majority of maritime companies that are still conducting pilot tests on their systems.
5. Epirus
Epirus is focused on developing high-power microwave (HPMW) directed-energy systems. The primary purpose of Epirus’ directed-energy systems is to provide counter-drone capabilities and to protect other assets from low-cost aerial swarm threats.
Market participants consistently consider Epirus to be the industry leader in the field of directed energy; however, there is a wide-ranging discrepancy in the amount of funding that Epirus has attracted, with estimates as low as $500 million to as high as $1 billion based on the value of one source reporting value and total investments raised by Epirus (Value Add VC) respectively.
Due to the discrepancies observed in funding numbers across several sources, investors must treat the amounts and values indicated above as estimates only and not accurate facts.
Investors recognize the potential for Epirus’ systems to provide a more economical solution to the expense of traditional interceptors.
6. Hadrian
Hadrian is primarily involved in manufacturing and automation for aerospace and defense companies through the development of software-controlled automated manufacturing processes.
Hadrian’s customers consist primarily of prime defense contractors and various hardware startups that are looking for faster methods of producing complex metal parts. Value Add VC reports that as of mid-2025, Hadrian raised approximately $260 million.
The presence of Hadrian in this capital environment illustrates an important truth: the defense industry will only be able to deploy autonomous drones/support systems at the required scale if the machining and manufacturing supply chain that supplies these systems processes is sufficiently fast and integrated.
7. True Anomaly
True Anomaly is involved in developing space situational awareness and orbital maneuvering technology. They provide space security solutions for U.S. national security customers.
Coverage of True Anomaly’s Series C round in 2025 and 2026 indicates that True Anomaly raised approximately $260 million at an estimated private company valuation of approximately $1 billion. When evaluating companies in the field of space defense, it is essential to differentiate between companies that focus on financing and those that focus on operational deployment.
Building a successful satellite is a significant accomplishment, but being able to demonstrate that the satellite can fulfil its intended purposes of conducting advanced inspection of space-based assets under military command is a much larger challenge.
8. ICEYE
ICEYE produces synthetic-aperture radar (SAR) satellite images. These satellites produce "always-on" earth imaging capabilities in all weather conditions including cloud cover and during night.
ICEYE is often viewed as being in the same class as some of the best-in-class defence-space companies.
However, ICEYE's primary business focus is on delivering satellite image services to both defence clients, disaster response organisations, and commercial clients; therefore, correct analysis of ICEYE requires an evaluation of their government contract deployment, rather than focusing exclusively on their potential military usage.
9. Hermeus
Hermeus is a developer of high-speed and hypersonic aircraft who develops autonomous or optionally piloted aircraft systems for defence aircraft and high-speed testing applications.
According to reports from the ValueAdd VC (Market Coverage) database, Hermeus has raised estimated capital in excess of $500 million with a private company valuation of approximately $1.5 billion. However, these predictions are highly dependent upon the source of the data and it is important to evaluate advanced technologies like hypersonic flight based upon their product assertions and engine-testing data rather than relying solely on funding announcements.
10. Chaos Industries
Chaos Industries provides products and services that protect against unmanned aerial vehicles (UAV) or drones by providing capabilities in the areas of radar systems to detect and counter the systems, communications, advanced sensing and electronic warfare. The target customer of the products offered by Chaos Industries is the national security community that is dealing with multiple types of complex aerial threats.
According to reporting on PitchBook relating to LinkedIn, Chaos Industries has completed a combined Series C and D funding round of approximately $785 million in 2025. The size of this capital raise corresponds with the urgent and immense market need for systems that can effectively detect and eliminate, before they reach their intended targets, inexpensive, mass-produced attack drones.
11. Firestorm Labs
The focus of Firestorm Labs is on developing modular, quickly manufactured drones and manufacturing systems based on modularity and rapid product development. Firestorm Labs hopes to offer defense customers capabilities to print/build drones right in the area of operation.
Firestorm Labs is frequently listed as one of the most relevant companies in the current defense-tech ecosystem, but the results of independent research on Firestorm Labs show that no independent verification exists regarding either field reliability or volume of production. Thus, the market for Firestorm Labs is not yet mature enough to support large-scale manufacturing and distribution of drones via expeditionary manufacturing until independent verification of field reliability and actual volume of production has been established.
12. Quantum Systems
Quantum Systems is a company that manufactures autonomous aerial platforms that are used to gather intelligence and reconnaissance data. The company is focused heavily on providing drone reconnaissance support to European and allied defense customers and supports critical battlefield reconnaissance operations.
As highlighted by an industry review (Startup Fortune), Quantum Systems was included in the list of the largest defense-tech financing rounds of 2026, with an announced financing round of approximately $1.2 billion. This financing should be verified through a check against their subsequent announcements, but it clearly indicates that there are significant amounts of European capital being invested into sovereign drone capabilities directly tied to the war in Ukraine.
13. Vannevar Labs
Vannevar Labs is a company that provides AI-enabled intelligence, OSINT, disinformation detection, and mission software for national security and intelligence operators.
As stated in the industry overview review (ValueAdd VC), Vannevar Labs has received more than $75 million in total funding. They are an excellent example of software-driven intelligence support to intelligence community operators. They DO NOT manufacture hardware or weapons, but rather they support the processing and structuring of massive volumes of digital data required to support the tactical decision-making process of today's modern tactical environments.
14. Primer
Primer is a technology/software developer for organizations throughout the intelligence community. They develop NLP technologies and AI tools that specifically target intelligence analysts working within the intelligence community. They assist organizations with processing massive amounts of documentation and unstructured information.
ValueAdd VC reports approximately $110 million raised with a tech-first philosophy. Primer's overall value is based on increasing the efficiency of turning raw text into analysis that can be actionable.
15. Saildrone
Saildrone is an autonomous craft for collecting intelligence, thanks to sailboards that run on water.
These autonomous crafts can be heavily used by those in naval security, environmental agencies, as well as companies that use boats. Sources provide wildly different estimates of the funding raised to date — one report puts the amount at about $190 million, while another source puts it much higher, about $300 million (ValueAdd VC).
These discrepancies highlight the importance of knowing the exact date of the report and the definitions of terms being used when trying to track the private capital markets.
16. Applied Intuition
Applied Intuition is a dual-use company, making software for automotive, industrial, and defense applications. Applied Intuition has developed software and hardware components to enable companies to design and build autonomous machines.
Applied Intuition has a very large market (automotive, industrial, and defense) and is an ideal example of a dual-use company. Current reports from ValueAdd VC indicate Applied Intuition is well on its way to raising $600 million in Series F funding, and is also reported to have a $15 billion private valuation. They provide the necessary software to safely test autonomous machines before the hardware goes into production.
17. Palantir Technologies
Palantir Technologies is a publicly traded company and has been around for quite some time and is not considered a startup. As a software company that focuses on providing data integration and AI solutions for customers, they also supply agencies with large complex data platform products like AIP (no relation to any of these companies).
Due to the above two points, Palantir Technologies has substantial historical business with the US government.
When startup companies come to the military software industry with an announcement that they are going to 'revolutionize military software,' it is Palantir that they really need to take down in order to achieve a program of record.
Funding trends for defense tech startups
Currently, data has shown an incredible acceleration of capital into the defense-tech space.
However, this capital is concentrated with a few large players, and the statistics are misleading. PitchBook data through Defense News indicates that the value of global defense-tech VC deals in 2024 was $27.2 billion. By 2025, this value ballooned to $49.1 billion; this momentum has continued with another $35.4 billion raised across 415 deals in just the first half of 2026.
That said, definitions are very important. CB Insights utilizes a narrower definition of defense-tech that includes certain dual-use companies but excludes the broader aerospace industry. According to their data, equity funding for defense tech startups increased from $7.3 billion in 2024 to $17.9 billion in 2025; however, it is important to read the methodology utilized to derive these numbers.
Geography has also changed drastically. In 2023, Ukrainian defense-tech equity reportedly raised only $0.2 million, whereas in 2025, Ukrainian defense-tech equity raised $57.2 million across 28 deals and another $18 million in the first half of 2026. These numbers are indicative of a brutal and very dynamic iteration cycle caused by active war.
Investment in the field of autonomy has been the main thesis. The defense-autonomy sector accounted for 42.9% of total deals in 2024, 45.7% of all deals in 2025, and a staggering 57.6% of all deals through early July 2026 (NewMarketPitch). The market clearly believes that removing the human pilot from a vehicle will determine the future of warfare.
In addition to the fact that the strategic allocation towards autonomy is rapidly expanding, many of the large financial institutions, like JPMorgan, have committed $10 billion to specifically invest in national security.
The final test for defense companies
It's time to stop paying attention to the private valuations of hardware companies, but to actually ask the question about type of contract, economics per unit and maximum production capacity.
If a hardware company cannot legally manufacture and sell to a NATO partner or manufacture 1,000 units per month without relying on hostile supply chains, their value is merely imaginary.