THE RAIN VC
A Venture Capital and Defense Directory
Venture capital investment in defense is of critical importance as the United States seeks to modernise its defense industrial base and military capabilities. Access to emerging and advanced technologies is increasingly important to maintain an edge over competitors on the world stage. In the current Science and Technology model of the United States, venture-backed private companies driven by market incentives, rather than government research laboratories, are responsible for the research and development (R&D) of emerging technologies.
The US has recognised that applying commercial sector practices and innovations to the defense enterprise is a vital step towards correcting outmoded path dependent trajectories that lead to military obsolescence. Commercial sector market incentives drive innovation in artificial intelligence and emerging technologies areas critical to the military. As the foremost supplier of capital, VCs are increasingly the driver for R&D in the emerging technologies essential for a future capable defense force. This report takes the pulse of VC in defense in the US.
A new convergence of government and VC objectives is leading to the development of a defense-oriented VC business model and a new type of startup, a model that could be a key driver of defense innovation. The business case for VCs is the DoD’s appetite for software, AI and innovation as well as the potentially lucrative contracts for companies that can best fulfil the requirements of the DoD and Intelligence Community.
This emerging VC-backed defense innovation is a remedy for the trend towards sector overconsolidation among incumbent contractors. It is also an alternative to private equity owned defense companies that seek growth through vertical integration and sector dominance via the acquisition of competitors, which leads to market capture rather than innovation.
What this report covers
This report offers an analysis of the VC in the defense ecosystem in the United States. The report is informed by data on the top 50 VC funds active in the defense sector and the top 150 VC-backed companies offering products and services for the defense enterprise.