Defense Tech Startups See Silicon Valley Boom Amid Shifting War Landscape

Silicon Valley’s defense tech sector is experiencing a seismic shift, with a surge of startups attracting billions in venture capital and significantly impacting America’s national security landscape. This influx of investment is fueling the rise of so-called “neoprimes,” innovative companies challenging the established dominance of traditional defense contractors.

Among these disruptors is Anduril Industries, a company recently valued at $30.5 billion after its latest funding round. These “neoprimes” are vying for market share against legacy players like Lockheed Martin, Northrop Grumman, Boeing, General Dynamics, and RTX (formerly Raytheon), often referred to as “primes.”

“There’s more money than ever going to what we call the ‘neoprimes,'” Jameson Darby, co-founder and director of autonomy at investment syndicate MilVet Angels (MVA), told CNBC. “It’s still a fraction of the overall budget, but the trend is undeniably positive.”

Darby, also a founding member of the U.S. Department of Defense’s Defense Innovation Unit, points to SpaceX and Palantir Technologies as further examples of defense tech startups disrupting the established order.

One key differentiator lies in the agility and technology-centric approach of these startups. Unlike the traditionally hardware-focused primes, these companies are leaner, faster, and software-first. They are often focused on addressing “critical technology gaps that are really important to national security,” according to Ernestine Fu Mak, co-founder of MVA and founder of Brave Capital, a venture capital firm.

Data from JPMorgan indicates the magnitude of this shift. Venture funding for U.S.-based defense tech startups reached approximately $38 billion in the first half of 2025. If this investment pace continues, the sector is poised to surpass its 2021 peak, signaling sustained and robust growth.

The evolving global security environment has prompted the U.S. Department of Defense to identify critical technologies vital for maintaining national security. These include areas such as hypersonics, energy resilience, space technology, integrated sensing, and cybersecurity, reflecting the increasingly complex and multi-faceted nature of modern warfare.

“In a post-9/11 world, the entire Department of Defense effectively focused on … the global war on terrorism. It was our military versus insurgents, guerrillas, asymmetric warfare, relatively low-tech fighters in most cases,” said Darby.

However, the current geopolitical landscape necessitates a shift towards addressing “great power competition,” according to Mak. This transition demands a focus on advanced technological capabilities to deter and compete with potential adversaries in complex, multi-domain conflicts.

“The focus is more on deterring and competing with [adversaries] in these very high-tech, multi-domain conflicts,” Mak added. “The battlefield is changing and new technologies are needed… warfare no longer being limited to land, sea, air. There’s also cyber and space domains that have become contested.”

Importantly, many of these Silicon Valley “neoprimes” are developing dual-use technologies – innovations applicable to both commercial and military sectors. This overlap is strategically significant, fostering innovation and attracting a wider pool of talent.

“So things like artificial intelligence and autonomy have broad, sweeping commercial applications, but they’re also clearly a force multiplier in a military context,” said Darby. “[The] Department of War is rapidly assessing and adopting these dual-use technologies … they’re sending signals to the investment world, to the defense industrial base, that the U.S. government needs these things.”

This clear direction from the government provides a strategic roadmap for investors and entrepreneurs, incentivizing innovation and investment in critical technologies, according to Mak. She notes the government signaling has been crucial in aligning private sector resources with national security needs.

MilVet Angels (MVA), an investment syndicate supporting leading defense tech startups, publicly launched on Sept. 17, after operating quietly since 2021. Its establishment underscores the increasing formalization of the venture capital interest in defense technologies.

Mak highlights that MVA’s roughly 250 members comprise a diverse group of individuals, including tech founders, Wall Street financiers, company executives, intelligence officials, former military leaders, and Navy SEALs. Together, they have invested in companies such as Anduril Industries, Shield AI, Hermeus, Ursa Major and Aetherflux – companies representing a new generation of defense innovators.

“Overall, we believe that ‘neoprimes’ cannot exist in the abstract. They require people — individuals who bring technical expertise, who carry a deep sense of mission, and who contribute complementary voices and talents. Together, this coalition forms what we are convening and calling the ‘new guard,'” said Mak. This speaks to the critical role of human capital in shaping the future of defense technology.

She emphasizes the necessity of combining “warrior’s insight on the battlefield” with the “builder’s drive for innovation,” highlighting the convergence of practical operational experience and cutting-edge technological development.

“Working together with engaged, informed patriots whose participation strengthens our defense ecosystem and reinforces the very fabric of national security,” Mak said, emphasizing the collaborative nature required to address modern security challenges.

Mak and Darby also acknowledge that as new technologies proliferate on the battlefield, they alter military strategies and introduce novel security risks. The increasing reliance on AI and autonomous systems, for example, raises concerns about potential vulnerabilities and ethical considerations.

“You’re seeing these technologists, these builders … building defense tech, and the reason why they’re doing so, is not to initiate conflict, but rather to create a credible deterrent that discourages aggression,” said Mak. This underscores the strategic goal of these defense tech innovations: to maintain peace and stability through technological superiority.

“No one in defense tech is looking to wage war, rather, it’s looking to deter it and wanting adversaries to think twice before threatening peace and stability,” Mak added, reaffirming the commitment to avoiding conflict through advanced technological deterrents.