🔥BONUS - Exclusive Deeptech Investor Report: How Defense Agencies Are Funding Deeptech Startups in 2025
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Deeptech investors who focus only on venture capital and corporate-backed deals are missing one of the most significant funding sources in 2025: government-backed defense investments. While public markets and private investors remain uncertain about deeptech’s long commercialization cycles, defense agencies are quietly pouring billions into startups that can deliver cutting-edge AI, robotics, cybersecurity, and energy storage solutions.
Unlike venture funding, government-backed capital is non-dilutive, long-term, and often the first signal that a startup is on the path to a major acquisition. The European Union, NATO, and U.S. defense agencies alone have allocated over $50 billion in deeptech R&D funding in 2025, with most of this capital flowing into startups operating behind the scenes.
These companies aren’t waiting for IPOs. They are securing high-value military contracts that provide them with steady revenue, strategic validation, and a clear exit pathway through M&A. While mainstream investors remain focused on AI chatbots and consumer applications, deeptech startups backed by military contracts are quietly becoming the next billion-dollar acquisition targets.
This report reveals where the real defense-backed capital is going, which startups are positioned for major exits, and how investors can track these deals before they go mainstream.
The Billions in Defense Funding That No One Talks About
Governments are accelerating their investments in deeptech startups, particularly those working on autonomous systems, AI-driven cybersecurity, and next-gen energy solutions. Unlike traditional defense contracts, which go to legacy contractors like Lockheed Martin or BAE Systems, this new wave of funding is flowing into stealth-mode startups that are innovating faster than established players.
A significant portion of these funds is being directed toward startups developing:
AI-powered military decision-making software that processes satellite, drone, and battlefield sensor data in real time.
Autonomous robotic and drone systems for surveillance, supply chain logistics, and tactical operations.
Advanced battery and energy storage solutions optimized for electric combat vehicles and grid-independent military bases.
AI-driven cybersecurity platforms capable of detecting and neutralizing threats before they occur.
With geopolitical tensions driving increased defense budgets, governments are prioritizing strategic technology acquisitions over incremental upgrades to existing systems. This shift has led to a surge in M&A activity, as corporations seek to acquire startups that have already secured military contracts.
These aren’t speculative investments. Startups backed by defense agencies have stable funding, long-term government contracts, and built-in exit strategies. The smartest deeptech investors are tracking these deals before valuations skyrocket.
The Defense-Backed Startups Quietly Raising Millions
The most attractive aspect of government-backed funding is its non-dilutive nature. Startups that secure military contracts can scale without giving up equity, making them prime acquisition targets once their technology is de-risked and commercially validated.
1️⃣ Helsing AI – The Billion-Dollar Defense AI Unicorn
Helsing AI is rapidly becoming one of the most critical players in AI-driven military intelligence. Its deep-learning models process real-time satellite imaging, drone footage, and battlefield sensor data to provide instant strategic insights to military commanders. The ability to autonomously assess threats and recommend tactical decisions in real time has made Helsing indispensable for European defense forces.
The company has raised €102 million, with backing from the European Defense Fund and NATO. Its current valuation sits at €4.95 billion, and it is actively deployed in Ukraine, where its AI models are being used for battlefield surveillance and tactical coordination.
The European Union recently committed an additional €1.1 billion in defense AI funding, positioning Helsing AI for an even larger role in shaping military technology. The combination of strategic importance, long-term contracts, and AI-driven automation makes Helsing a prime M&A target for major defense contractors looking to integrate real-time AI into their combat systems.
2️⃣ Shield AI – The Autonomous Drone Company with Pentagon Contracts
Shield AI specializes in fully autonomous military drones that do not rely on GPS or human operators. Instead, these drones use advanced AI to navigate, adapt, and execute missions in contested airspace, making them invaluable for high-risk operations.
The Pentagon and U.S. Air Force have integrated Shield AI’s technology into their next-generation combat systems, securing the company a $573 million funding round and a $200 million Series F in 2024.
With direct backing from Pentagon contracts and defense-focused investors like Anduril and Snowpoint Ventures, Shield AI is positioned as one of the most important defense startups in autonomous aerial warfare. Given the 44% increase in the U.S. defense budget for AI-powered drones in 2025, the likelihood of Shield AI being acquired by a major U.S. defense contractor in the next 12-18 months is extremely high.
3️⃣ Fortem Technologies – The AI-Powered Counter-Drone Startup
As drone warfare escalates, anti-drone security systems have become a $17 billion priority for military agencies worldwide. Fortem Technologies is at the forefront of this field, developing AI-driven counter-drone systems that can detect, track, and neutralize aerial threats in real time.
With $120 million in funding from the U.S. Department of Defense and Lockheed Martin Ventures, Fortem’s Skydome System is already deployed in high-security locations, defending military and civilian assets from unauthorized drone activity.
Given the growing urgency for autonomous counter-drone systems, Fortem is widely considered a prime acquisition target for major defense contractors looking to expand their AI and drone warfare capabilities. Expect an M&A exit before 2026.
Tracking the Deeptech Defense Pipeline Before Private Equity & M&A
For most investors, the first time they hear about a high-growth deeptech startup is when it secures a major defense contract or gets acquired. By then, the biggest gains are already priced in. The smartest investors follow these startups much earlier—tracking their funding pipelines, R&D grants, and stealth partnerships before they become M&A targets.
In 2025, early-stage deeptech investing is all about timing. The startups securing non-dilutive defense funding today will be the prime acquisition targets within 12-24 months. That’s why tracking government-backed deeptech grants, research partnerships, and stealth contracts is the real competitive edge.
Where the Deeptech Pipeline Starts: Early-Stage Defense Funding
Most investors don’t realize just how structured and predictable defense-backed deeptech funding is. Before a startup lands a $50M+ military contract, it almost always starts by securing early-stage government R&D grants, defense accelerator funding, or strategic pilot programs.
Here’s how the deeptech defense pipeline works:
1️⃣ Pre-Seed & Research Grants – Startups receive initial non-dilutive funding from DARPA, SBIR/STTR, the European Defense Fund, or NATO Innovation Programs. These early funds are often under $5M but act as a critical validation signal for future deals.
2️⃣ Defense Accelerator & Pilot Programs – Companies that successfully demonstrate early capabilities are invited into military-backed accelerators or strategic pilot programs. This is when startups begin working directly with defense agencies on classified or high-value applications.
3️⃣ Mid-Stage Contracts & Private Investment – Once a deeptech startup proves its tech in real-world defense scenarios, it becomes eligible for multi-million-dollar military contracts. This is where private investors (VCs, private equity, and family offices) start making moves.
4️⃣ M&A or Large-Scale Deployment – Startups that secure multi-year defense contracts become prime acquisition targets for defense giants like Lockheed Martin, Northrop Grumman, or Airbus. This is where deeptech investors see their biggest exits.
The Defense-Backed Startups in Early-Stage Funding Now
Most deeptech investors focus only on later-stage companies, but the real advantage comes from identifying startups still in the early R&D or pilot phase—before private equity and M&A players move in.
Here are three startups currently in the early-stage defense pipeline that could break out into major acquisition targets within the next 24 months.
1️⃣ Kapta Space – The Future of Military Satellite Imaging
Kapta Space, a Seattle-based stealth startup, is building next-generation electronically steerable radar satellites that provide real-time, high-resolution imaging for defense applications. Their technology scans and tracks enemy assets faster than traditional satellite imaging systems, making them a critical player in next-gen intelligence and surveillance.
Funding Trajectory:
Seed Round: $5M led by MetaVC Partners (2024)
Government Grants: $1.8M from U.S. Department of Defense
Expected Valuation Growth: 3-4x within 18 months
Why It’s Important:
Kapta is already working with a prime defense contractor on classified radar missions.
Its low-cost, high-speed imaging network could replace legacy satellite systems.
An acquisition by Lockheed Martin or Raytheon is highly likely within 24 months.
2️⃣ Key Ward – AI for Aerospace & Automotive Engineering
Berlin-based Key Ward is developing AI-powered engineering software that accelerates the design and simulation of aerospace and automotive systems. By automating complex engineering processes, Key Ward’s AI allows defense and commercial aircraft manufacturers to optimize performance faster than ever.
Funding Trajectory:
Pre-Seed Round: €1M led by Wellstreet VC (2024)
Defense Partnerships: Actively working with a European aerospace manufacturer on AI-driven aircraft simulation.
Expected Valuation Growth: 5x in the next 12 months
Why It’s Important:
Aerospace giants are investing heavily in AI-powered engineering automation.
Startups in this space are prime M&A targets because their software can scale rapidly.
Key Ward is already in stealth conversations with major defense investors.
3️⃣ Saronic – Autonomous Maritime Defense Systems
Saronic is one of the most promising startups in autonomous naval operations. Its AI-driven unmanned surface vessels (USVs) are designed for coastal defense, anti-submarine warfare, and military logistics. With maritime security becoming a top defense priority, Saronic’s technology is positioned for rapid adoption.
Funding Trajectory:
Total Raised: Undisclosed (Stealth mode)
Defense Partnerships: Working with a NATO-aligned naval research division.
Expected Valuation Growth: 6x post-first major military contract
Why It’s Important:
Unmanned maritime defense is a $10B+ growth market.
Saronic is already testing its AI-powered vessels in classified military trials.
An acquisition by a defense contractor or strategic investment from a private equity firm is highly likely.
How Investors Can Track These Early-Stage Startups Before M&A
The deeptech investment cycle is shifting. Investors who focus only on Series B+ startups are missing the biggest opportunities. The smartest investors are tracking startups in the military R&D pipeline before they become acquisition targets.
Here’s how to get ahead:
Follow government defense grants and innovation programs—these signal which startups are getting early validation.
Track stealth-mode startups landing early-stage contracts with defense agencies.
Watch for startups in military pilot programs—these companies will land major contracts within 12 months.
Key Insight: The startups that private equity firms and defense contractors will acquire in 2026-27 are being funded by military R&D programs today. Investors who position themselves early will secure the best valuations and fastest exits.
Final Thought: The Deeptech Defense Pipeline Is Where Real Exits Start
Most investors track deeptech when it’s already hitting later-stage venture rounds or M&A deals. The smarter play is getting in before these companies become known acquisition targets.
The best signals for future deeptech unicorns aren’t in VC term sheets—they’re in military R&D budgets, stealth contracts, and government pilot programs.
This is the intelligence you won’t find anywhere else—only here.
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