Defense Front and Center

Market Overview

It was a volatile week in public markets. They began the week in the red due to Trump’s tariff threats on several NATO allies over Greenland, with both the S&P 500 and Nasdaq down roughly 2% midweek. Indices rallied on Thursday as Trump called off the Greenland tariffs and ruled out military action, though weak earnings from Intel weighed on Friday’s performance. The S&P 500/ Nasdaq were down 0-1% for the week and are each up a little less than 1% YTD. Our NPM Private Market Tracker*, which shows the average price performance of the 50 largest names in our internal Tape D® data, is up 1.1% YTD.

Geopolitics brings defense front and center

Most people probably didn’t think they would ever need to learn as much about Venezuela or Greenland as they have in the first three weeks of 2026. With geopolitics in the spotlight after Davos this week, we’re thinking about defense startups, including how they have fared over the last twelve months and some key issues on our minds for this year.

2025 was a banner year for defense VC capital. Global Defense Tech VC deals reached

$49.1 billion in 2025, the highest dollar amount in at least the last 10 years, and much higher than the $27-28 million raised in each of 2023 and 2024 (Pitchbook). Notable raises include Anduril ($2.5 billion Series G in June), Saronic ($600 million Series C in February), Helsing (€600 million Series D in June), Chaos Industries ($785 million across two deals), Shield AI ($240 million Series F-1 in March) and Castelion ($420 million of equity across two deals).

It’s a good time to be dual use. Many companies are pivoting to being “dual-use” in order to capitalize on the surge in US/European government funding for defense. Crunchbase identified 17,619 dual-use scaleup companies in May of last year, up 16% from October 2024, with roughly 70% of new scaleup investment during that period going to dual-

use startups. Critical minerals companies such as MP Materials and Vulcan Elements have framed themselves as dual-use, and several space companies, including Planet Labs, Rocket Lab, Redwire, and Voyager Technologies have pivoted towards doing more defense work in addition to their commercial space portfolios. Applied Intuition, which began developing software for commercial autonomous vehicles, announced that it will build a simulated missile defense environment for Golden Dome (Tectonic). Boom Supersonic is working on both commercial and military uses for its aircraft (Company Reports). With no slowdown in defense budgets in sight, we expect this trend to continue in 2026.

Building things is hard to do. One reason defense has historically been dominated by defense primes is that manufacturing large, exquisite machinery is difficult to do.

While defense tech startups are often developing far simpler pieces of equipment than the F-35, building resilient, compliant supply chains and efficient factory floors that can manufacture at scale still requires significant capital, resources and expertise. US government agencies are focused not only on speed to prototyping and fielding new technology, but also on scaling manufacturing and reducing lead times (DIU, Defense News).

According to Pitchbook, manufacturing readiness is now a key factor in valuation and in startups’ ability to raise capital. Some defense tech startups are vertically integrating in order to control their supply chains and speed to market. Others are choosing to outsource manufacturing entirely — Hadrian, a startup building highly automated factories to produce components and systems for aerospace and defense companies, raised $260 million in 2025 and additional funding in January 2026 (CNBC, Washington Technology). We expect defense tech capital needs to continue as companies prioritize building out their manufacturing capacity.

Prime partnerships. One alternative for defense tech startups who either are not positioned to build a manufacturing footprint or see their advantage in software is to partner with defense primes, who have manufacturing expertise but may want exposure to new technologies. These partnerships sometimes come along with capital investment from primes, but not always. Dassault Aviation SA recently led a $200 million investment in French drone startup Harmattan AI which includes Harmattan embedding its autonomous systems into Dassault’s aircraft (Bloomberg). Lockheed Martin made two announcements last year in the realm of maritime autonomous systems: One was a strategic partnership with HavocAI whereby Lockheed will combine HavocAI’s autonomy stack with its weapons systems and expertise; the second was a $50 million investment in Saildrone to advance unmanned surface vehicle (USV) technology (Company Reports). L3 Harris invested in Shield AI’s 2025 round, while Northrop Grumman announced partnerships with Luminary Cloud, Picogrid and Merlin to integrate these startups’ technology into its hardware.

BIGGEST MOVERS AND TOPICAL NAMES

Based on our proprietary Tape D® data, the best performers of the large cap names in the private market thus far in 2026 have been:

Clickhouse, with a +16% estimated share price performance

xAI, +14%

Cerebras, +12%

Blockratize, +9%

RECENT EVENTS

• ByteDance, parent of TikTok, reached a deal to sell the company to a in investor group including Oracle, MGX and Silver Lake (New York Times, 1/22).
• Blue Origin announced plans to build TeraWave, an ultrafast satellite internet service that will rival SpaceX’s Starlink and Amazon’s Leo (The Information, 1/22).
• EQT agreed to acquire secondaries investment firm Coller Capital for up to $3.7 billion (Axios, 1/22).

NOTABLE CAPITAL RAISES

• Anthropic is in the market to possibly raise over $20 billion, with Coatue, GIC, Iconiq, Sequoia, Nvidia and Microsoft in the round (Bloomberg, 1/21).
• Baseten, which helps businesses deploy and run AI models in production for applications, raised a $300 million Series D at a $5 billion valuation (Wall Street Journal, 1/20).
• Humans&, a startup that builds software to help people work together using AI, raised $480 million at a $4.48 billion post-money valuation (Axios, 1/20).
• Clickhouse, which builds real-time analytics and data infrastructure, raised $400 million at a $15 billion post-money valuation (StrictlyVC, 01/16).
• OpenEvidence, a provider of a clinical decision-support chatbot trained on peer-reviewed medical research, raised $250 million at a $12 billion valuation (StrictlyVC, 1/21).
• SambaNova, a startup developing AI computing systems and software, is reportedly seeking to raise up to $500 million after a potential Intel acquisition stalled (Bloomberg, 1/21).
• Zipline, which operates autonomous drones to deliver goods, raised a $600+ million round at a $7.6 billion post money valuation (Reuters, 1/20).

NOTABLE EXITS

• York Space Systems set IPO terms for 16 million shares at a $30-34 range, implying a $4 billion market cap at the midpoint (Axios, 1/20).
• BitGo raised $213 million in its IPO (Axios, 1/22).
• General Fusion, a Canadian fusion developer, agreed to go public via Spring Valley Acquisition Corp III at a $1 billion valuation (Company reports, 1/22).
• CapitalOne announced that it would acquire Brex, a corporate credit card startup, for $5.15 billion (The Information, 1/22).