Is defense tech a viable category for seed-stage venture investment?

Michael Eisenberg · Jun 19, 2024

A lot of money will be made in defense, but many investors will lose a lot of money chasing it as the new new thing because they drastically underestimate how hard it is to sell defense technology to government buyers

Palantir took twenty years to crack the code of selling to government, and people who have never sold defense tech and just came out of an MBA have no idea what it takes

Scope: Anduril will crack it much faster because of Palantir's path

27:05 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg

Harry Stebbings · Oct 27, 2025

Most of the dollars currently going into defense venture will be lost

Many new defense VCs are consultants who don't understand the space and parrot metrics like cost per kill

65:20 20VC: Sequoia's David Cahn on The Winners and Losers in AI | The $0-$100M Revenue Club: Is Triple, Triple, Double, Double Dead? | The Future of Defence: Who Wins and Who Loses | How to Analyse Margins and Growth Rates in a World of AI

Palmer Luckey · Sep 28, 2020

The only two defense unicorns of the last thirty years, Palantir and SpaceX, were founded by people who had just sold companies for billions — a pattern in which non-billionaires who start defense companies fail and billionaires succeed

Pattern-matching the last thirty years of defense startups: non-billionaire founders fail because they can't fund the long years a defense startup requires

Scope: based on the pattern of the last thirty years

7:23 20VC: Anduril Founder, Palmer Luckey: "I Am Here To Build a $50Bn Company", How Palmer Evaluates His Relationship To Money Pre & Post Oculus' $2.3Bn Exit & Why The US DOD Needs To Be More Like China in It's Approach

Trae Stephens · Apr 3, 2024

Having a billionaire cofounder confers a real capital advantage in defense, because you can raise a war chest and fund through a long revenue drought until program-of-record wins land.

Palantir and SpaceX took a very long time to get commercial momentum; getting to program of record is capital intensive and takes closer to three years than six months.

Scope: less acute for Anduril today because it can stand on the shoulders of prior companies and hire people who have run the sales motion

49:36 20VC: Founders Fund's Trae Stephens on Why The Most Competitive Deals are the Worst, Why No Company is Successful Because of their VC, Why We are Making ZIRP Mistakes Again Today, Why Loss Ratio is BS and Upside Maximisation is Everything

Harry Stebbings · Apr 11, 2026

Defense is very hard to invest in at seed because it takes roughly five years and hundreds of millions to billions before the first dollar of product revenue

That cost-to-revenue curve doesn't fit a seed venture investor's model

65:34 Time to first revenue makes defense unfit for seed

Shyam Sankar · Jan 17, 2024

SBIR small business research grants are a strategy for staying a zombie, not for becoming a big company, and should not be expected to deliver defense innovation, new champions or real competition

Study after study shows companies that take these grants never achieve scale, which is why VCs treat them as the kiss of death; the program may be worthwhile as a white-collar STEM jobs program, but that is a different justification

30:34 Sbir grants keep companies as zombies rather than enabling scale so shouldnt be expected to drive real defense innovation

Harry Stebbings · Oct 27, 2025

Defense is an unattractive category because of buyer concentration — selling to a handful of governments who lack the right incentives — unlike AI where the buyer is every business or consumer in the world

Concentration of buyers plus selling to governments with poor incentives is structurally worse than a broad market

62:18 Buyer concentration and poor government incentives make defense unattractive

Tom Hulme · Apr 10, 2025

European defence is a significantly more interesting venture category now than in the past, and there is an opportunity to build next-generation primes in the UK

Three things changed: very smart people now want to work on it because they perceive an existential threat; the buyer is less monolithic than it looks, with multiple services and regiments each a potential customer; and proximity to a war zone with British personnel at risk is forcing innovation — plus Anduril's oversubscribed $8bn round shows appetite from talent and capital, and the UK's role in Ukraine makes it an excellent place to test technology

34:52 Defense tech is now more attractive due to talent buyer diversity and dual use

Stan Boland · Apr 10, 2025 · speculative

Roughly £2–3 trillion could be spent on European defence over the next five to eight years, across all layers from components to final product

36:18 Large multi trillion defense spending pool signals a large viable market

Palmer Luckey · Sep 28, 2020

Venture capitalists are rational to avoid defense startups today, because defense has produced only two unicorns in thirty years — both founded by billionaires — while comparable periods produced dozens in social, automotive, fast casual dining, fintech, biotech, medtech and consumer hardware

Without examples of success outside billionaire-funded outliers, a VC cannot justify the investment; DoD structure pushes startups to subcontract to Lockheed or Raytheon and lets the government fund the R&D and own the IP, so financially significant outcomes are hard or impossible

26:07 Defense vc track record of only two billionaire