In the world of defense tech, the stakes have never been higher — and the signals coming from the Trump administration are impossible to ignore.
Secretary Pete Hegseth’s inaugural Message to the Force made one thing clear: our lethality depends on the ability to “rapidly field emerging technologies.”
Meanwhile, President Donald Trump took aim at the F-35 program’s ballooning costs, prompting Lockheed Martin’s CEO to promise to “drive down the cost aggressively.”
For venture capitalists, these high-profile statements are a positive indicator, fueling optimism for those hoping to morph their patriotism into profits.
But while investors might be eager to dive in, there are a few overlooked factors that determine whether a defense-focused startup is actually worth backing.
The Reality of Defense Tech Investing
As investors and founders, we must take a hard look at how we define success and potential. Sometimes, that means pointing the finger at ourselves.
First, the zero-sum reality of Department of Defense budgeting cannot be overstated. Introducing new technologies often requires eliminating or reducing funding for existing programs.
Moreover, the advantage of incumbent solutions — even if objectively inferior — is a major hurdle for newcomers.
Inertia is a powerful force in bureaucracies, and the Pentagon may be the prime example. Anyone looking to enter the defense tech market needs to be clear-eyed about this reality.
You see this when it comes to writing requirements. Believe it or not, it’s often unclear whether there’s a legitimate written requirement to address a problem — whether it’s already in progress or being planned.
Unlike the commercial world, the DoD can sometimes struggle to forecast demand signals. It’s an unfortunate reality that we, as entrepreneurs, must operate within. Consequently, startups are left feeling around in the dark, unable to guess where things are headed.
Look for the signs: they’ll tout partnerships, pilot programs, and potential deployments, making it seem like the end user can’t live without their product. But if you were to call up the actual customer for feedback, their unvarnished opinion might surprise you.
There’s a good chance many of the loudest and proudest startups on LinkedIn would not get rave reviews if you asked the end user directly.
The Harsh Reality for Hardware Startups
For hardware-focused startups, the reality check becomes even more intense. It’s not enough to have a slick prototype or successful demo. Has the product been installed on military platforms? Has it passed necessary certifications?
The amount of compliance and security red tape involved in securing DoD approval is staggering. We’re talking years of work — far beyond the timelines most venture-backed startups can handle.
While milestones like military airworthiness or Technology Readiness Level 9 are significant and very difficult to achieve, they shouldn’t be mistaken for guaranteed success.
Many startups celebrate these achievements without securing actual deployments. It’s essential to distinguish between progress indicators and concrete results when evaluating a company’s potential.
Does the Product Save the Government Money?
Another often overlooked consideration is whether a product or technology genuinely saves the government money.
In the private sector, efficiency or capability improvements are easy sells. In defense contracting, it’s more complex.
If a startup improves on current technology, will it reduce costs? And if it introduces a completely new technology – say, in hypersonics – which existing program will lose funding to pay for it?
Questions Investors and Founders Should Ask
Given these challenges, a more nuanced approach to evaluating defense tech startups is necessary.
Investors and founders should prioritize these key questions:
- Is there verifiable interest and commitment from DoD customers beyond the company’s publicity?
- For hardware solutions, has the product navigated the certification process and been installed on operational military platforms?
- Does the proposed solution offer demonstrable cost savings, and if so, how does this impact other programs or budget allocations?
It’s not about pessimism or dismissing innovation. It’s about pragmatism and focusing on tangible outcomes rather than superficial signals.
Defense tech startups that demonstrate real traction in these areas — actual installations, verified cost savings, and authentic user enthusiasm — are the ones worth betting on.
The Path Forward: Focus on What Matters
The potential in defense tech is enormous but failing to understand the full scope of challenges could have dire consequences, not just for investors but for national security.
Let’s focus on what truly matters. Let’s cut through the hype, stay grounded in the realities of defense tech, and build companies that don’t just promise transformation but actually deliver it.
By adopting this pragmatic approach and fostering deeper collaboration between investors, startups, and DoD decision-makers, we can bridge the gap between investment enthusiasm and contract acquisition.
This not only serves our financial interests but strengthens national defense capabilities through meaningful technological advancements — ensuring the future of our military is built on real, actionable progress.
Matt George is the founder and CEO of Merlin, a venture-backed ($130 million) defense tech company developing the world’s most capable pilot to deliver on the promise of autonomous flight.
Merlin has several direct engagements with the US Department of Defense (including active deployments on the KC-135), a landmark AI flight certification from New Zealand, and a recently announced $105 million contract with USSOCOM.
The views and opinions expressed here are those of the author and do not necessarily reflect the editorial position of The Defense Post.
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