Global geopolitical tensions continue to escalate, driving hundreds of billions of dollars into the defense technology sector and fundamentally reshaping the traditional defense industry. A new emerging force called “neoprimes” is rising, challenging the dominance of traditional “defense giants” like Lockheed Martin and Northrop Grumman, and reshaping the national security landscape of the Western world.
According to JPMorgan statistics, in the first half of 2025, U.S. defense technology startups attracted approximately $38 billion in venture capital. If this pace continues in the second half of the year, the annual amount may surpass the peak of 2021.
In Europe, investors have also responded to the prospect of increased defense spending, with €1.4 billion already invested in European defense startups in the first seven months of this year. Since the outbreak of the Russia-Ukraine war in 2022, defense startups in Europe have raised a cumulative total of €2.4 billion.
Jameson Darby, co-founder and chief autonomous systems officer of investment alliance “MilVet Angels” (MVA), told CNBC, “The so-called ‘neoprimes’ are receiving more funding than ever before. Although it still represents a small fraction of the overall budget, the trend is significantly on the rise.”
Anduril Industries, valued at $30.5 billion after its latest round of financing, has become one of the representatives of the “neoprimes.” It, along with companies like Palantir, SpaceX, are seen as challenging traditional defense contractors.
Unlike traditional defense giants, the core advantage of these startups lies in being faster, more streamlined, and prioritizing software.
Ernestine Fu Mak, co-founder of MVA and founder of venture capital firm Brave Capital, told CNBC that these startups have the ability to bridge the “critical technology gap essential for national security.”
She said, “The battlefield is changing, requiring new technologies… War is no longer limited to land, sea, and air. Cyberspace and space have also become battlegrounds.”
Darby stated, “In the world after the 9/11 attacks, the entire defense department focused on… the global war on terror. In most cases, it was our military against insurgents, guerrillas, asymmetric warfare, and combatants with relatively low technology.”
However, today’s warfare is more focused on “great power competition.” Defense startups are not only developing weapons but also “dual-use” technologies, demonstrating special strategic value.
Darby said, “Technologies like artificial intelligence (AI) and autonomous systems have broad and far-reaching commercial applications, and they can clearly multiply combat power in a military context.”
“The U.S. Department of Defense is quickly assessing and adopting these dual-use technologies,” he said, “They are signaling to the investment community and the defense industry base that the U.S. government needs these items.”
Fu emphasized that this government direction also provides investors and entrepreneurs with a clear and strategic roadmap.
At the same time, European domestic capital is shifting from observation to action. Expeditions, established in 2021 and focused on investing in defense technology startups, stated that its second fund has raised over €100 million, with a target of reaching €150 million before the year-end closing.
Mikolaj Firlej, co-founder of Expeditions, told the Financial Times that due to escalating geopolitical tensions, Europe “has no time to waste and cannot stand idle.”
He stated that Vice President JD Vance’s speech at the Munich Security Conference this year sparked a “significant shift” among investors, making them more willing to support European security and defense technology companies.
Firlej said, “The ripple effect of the Munich Conference was even greater than the war in Ukraine. The ‘quality of investors’ from Europe has changed.”
Expeditions’ first fund has invested in several startups, including Alpine Eagle for anti-drone technology; the second fund has invested in seven startups, such as Lendurai from Estonia.
Fu welcomed the role of U.S. capital in supporting European funds but emphasized that Europe must stand on its own.
“We should provide flexible funding led by Europeans for European companies, but if we can establish strong relationships with key U.S. players… that would be the right direction,” he said.
Another fundamental pressure driving this investment race is the competition with China’s technological advantage.
Brian MacCarthy, managing partner of the Booz Allen Ventures venture capital division, acknowledged that he does not see other venture capital funds pouring into the defense technology field as competitors. In an Axios interview, he said, “We are actually collaborating together.”
On the contrary, the pressure comes from China’s military expansion and corporate mobilization. In September, the Chinese military parade showcased dozens of unmanned systems, long-range missiles, and laser weapons.
MacCarthy stated that China is not concerned about corporate competition; the Chinese military will “leverage their entire ecosystem” to develop military capabilities.
To address this competition, investment strategies are shifting from the laboratory to actual combat. Booz Allen has announced an increase in venture capital to $300 million, planning to complete 20 to 25 investments over the next five years to help startups transition past the “low-rate initial production (LRIP) phase” and accelerate technology implementation for frontline deployment.
“We see many patterns where these companies are all building incredible technology. But they still struggle to enter large projects through what we call the LRIP stage,” MacCarthy said.
Matt Calderone, chief financial officer of Booz Allen, emphasized that technology “must be put into action.”
“This is where we provide extraordinary value. We have a deep understanding of the unique needs of the combat troops and their technological requirements.”
“The question is how to get valuable things into people’s hands in the next 12 to 18 months,” he said.
Calderone mentioned that they are specifically focusing on four major defense technology areas, including frontline manufacturing (detached from typical supply chains), space domain command and control, quantum computing, simulation worlds, and digital test beds.
On September 17, MVA ended its “stealth operation” status and publicly disclosed that it has quietly invested in several leading defense technology startups since 2021.
Ernestine Fu stated that the alliance currently has around 250 members, including tech entrepreneurs, Wall Street finance professionals, corporate executives, intelligence officials, former military leaders, and Navy SEALs. The companies they collectively invest in include Anduril Industries, Shield AI, Hermeus, Ursa Major, Aetherflux, and others.
“Collaborating with actively engaged, well-informed patriots, they strengthen our defense ecosystem and solidify the foundations of national security,” Ernestine Fu said.
She added that modern national security requires “insights of warriors on the battlefield” and “the drive of builders towards innovation.”
“You see these technical experts, these builders… developing defense technology, and they do so not to provoke conflict but to create a credible deterrence force to prevent aggression.”
Ernestine Fu added, “No one in the defense technology field wants to start a war; on the contrary, its goal is to deter and stop conflicts, hoping opponents think twice before threatening peace and stability.”