This article was initially published for Business Insider subscribers, highlighting the significant surge of interest from venture capitalists in the field of defense technology. With the Trump administration now firmly established in Washington, a wave of executive orders aimed at revamping defense acquisitions and modernizing military capabilities is energizing investors.

The momentum among investors in defense tech has been remarkable. In 2024 alone, venture capital investments in defense-related companies soared by an impressive 33% year-over-year, reaching a staggering $31 billion. As 2025 has commenced, the investment landscape is already showing robust activity. During the first quarter, there were 27 venture-backed defense tech deals, a significant increase from the 12 deals registered in the same period the previous year. Notably, these funding rounds amassed a total of $1.4 billion, a dramatic rise from the mere $200 million seen in the first quarter of 2024.

Several recent deals underscore the massive financial flows into this sector. For instance, maritime startup Saronic Technologies successfully raised a $600 million Series C funding round at a valuation of $4 billion, led by prominent solo-capitalist Elad Gil. Similarly, drone manufacturer Epirus secured a $250 million Series D round with backing from 8VC and Washington Harbour Partners LP. Another drone-focused startup, Shield AI, attracted $240 million at a valuation exceeding $5 billion, with investments led by L3 Harris and Hanwha Aerospace. Furthermore, early-stage funding is also thriving, as evidenced by military systems company Castelion Corporation, which raised $70 million in a Series A round led by Lightspeed Ventures Partners.

Investors who may have missed out on these early funding rounds are now aggressively seeking opportunities in the secondary market, particularly for shares of high-performing defense companies like Anduril.

However, not all policy changes are yielding positive outcomes for investors. Some venture capitalists have expressed concerns about Trump's tariffs, which they claim are inflating costs for hardware startups and complicating capital deployment. Others voice apprehension that the current enthusiasm surrounding defense tech could attract generalist investors, potentially leading to unsustainable valuations. Even the most optimistic investors remain cautiously optimistic, hoping that the administration's ambitious promises will translate into actionable results.

As defense technology becomes an increasingly integral part of various venture portfolios, many investors are hopeful that the Trump administration's initiatives will bring about significant innovation within the Pentagon. Jackson Moses, founder of the defense-focused firm Silent Ventures, perceives a genuine interest from the administration to reshape the Department of Defense, a sentiment he links to President Trump's ongoing executive orders.

Garuth Acharya, a principal at 8090 Industries, shares in this optimism, particularly regarding new executive orders aimed at streamlining the federal procurement process. This complex framework governs how Congress and federal agencies acquire military equipment and technology, and Acharya believes it is crucial for expediting innovation in defense.

George Hoyem, who oversees investments at In-Q-Tel the CIA's strategic venture capital arm is optimistic that the administration's push for increased public-private partnerships will lower barriers for startups eager to engage with government clients. "These policies not only promise to enhance capital flows into the sector but also aim to hasten the adoption of cutting-edge technologies, benefiting both investors and the nation's defense capabilities," Hoyem stated in an email to Business Insider.

Historically, the defense tech landscape has been dominated by a select few specialized funds. However, the current administration's focus on this sector is attracting a broader range of investors, according to defense-focused venture capitalists. Jake Chapman, whose firm Marque Ventures invests in national security startups, has noted a growing interest in the defense tech ecosystem, observing that new managers and established firms are actively developing defense tech investment strategies that they previously overlooked.

While competition for deals remains relatively manageable at this point, Chapman anticipates that this could change in the near future as more limited partners (LPs) start to fund promising initiatives. Currently, a significant portion of LP investment is still directed toward large, established funds that cater to institutional investors, rather than emerging or specialized players.

Garuth Acharya at 8090 Industries welcomes this influx of interest, suggesting that both political motives and financial incentives are fuelling the surge in defense tech investments. He describes this trend as "patriotic capital," emphasizing the financial viability of many of these deals. However, some investors, like Jackson Moses, remain cautious about the potential risks. He is wary that an influx of cash could inflate valuations, even for high-profile defense tech startups.

Moses further cautioned that an over-reliance on generalist funds could backfire, potentially creating a wave of underperforming startups that fail to achieve significant scaleleading to a market saturated with what he terms "zombie startups." He predicts that defense tech could see an influx of companies funded by generalist capital, but many of these might struggle to survive in the long term.

In light of the tariffs and the evolving competitive landscape within the defense tech sector, even seasoned investors are proceeding with caution. Firms like Marque Ventures and In-Q-Tel are finding that these tariffs may make U.S.-made hardware startups more attractive compared to those that depend on Chinese components. Garuth Acharya sees these tariffs as a potential catalyst for a resurgence in U.S. manufacturing capabilities, stating, "If anything, tariffs are going to accelerate re-industrialization in terms of advanced manufacturing." However, other investors, such as Taylor Sargent of Industrious Ventures, view these policies as hindering their investment strategies, expressing concerns that these measures complicate the landscape for dual-use startupscompanies that serve both military and commercial sectors.

As the defense tech sector continues to evolve, investor sentiment appears to be a mix of optimism and caution. Chapman expresses a cautious optimism regarding the Trump administration's ability to fulfill its ambitious vision for the industry, emphasizing the need for careful consideration of the current circumstances. Yet, there remains a pervasive concern that excitement may be outpacing tangible execution. Moses warns that this moment presents an opportunity for founders to present enticing narratives to eager investors about the anticipated transformation within the Department of Defense under the Trump administration. He fears that we might see an influx of underperforming "zombie companies" in the wake of this fervorsimilar to previous investment frenzies in the early 2020s. Sargent concurs with this sentiment, noting the recent influx of mega-rounds in early 2025, which has prompted Industrious Ventures to adopt a more cautious approach. Yet, in the long run, Moses remains optimistic about the resilience of defense tech, stating, "But, like history exemplifies, defense tech will bounce back." While the administration's ambitions are commendable, Chapman underscores that success is not guaranteed. "It's clear that the administration wants to accelerate contracting and procurement processes. They want to work with nontraditional defense companies, like the ones we're invested in. But just because they want that to happenand they're trying to reshape policy to facilitate itdoesn't mean it will happen."