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The venture capital industry is funneling record private capital into American defense technology startups — a sector once considered controversial — in a shift that national security insiders say is transforming the U.S. military-industrial landscape.
Public and private defense technology companies such as Anduril, Palantir, Shield AI and Saronic have raised more than $14.6 billion in private investment so far this year, according to Crunchbase, an artificial-intelligence-powered dashboard and search engine that tracks private and public companies.
This represents a notable uptick from the $9.6 billion raised in 2025, and a staggering surge from the $1.6 billion secured by the sector in 2020.
Michael Cadenazzi, assistant secretary of defense for industrial base policy, lauded the trend at a recent Center for a New American Security event, noting that investor hesitancy toward advanced defense startups has all but evaporated.
“The department asked private equity and venture capital companies to come play in the defense sector, and other than maybe Palantir, they all said no,” said Mr. Cadenazzi, referring to the publicly traded data analytics and defense technology company co-founded by investor Peter Thiel that has made global headlines over the past decade by securing billions of dollars in military contracts.
A growing number of other venture capital firms and private investors have “all migrated to a position where they want in,” Mr. Cadenazzi said. “They’ve come with companies, they’ve come with capital, products and incredible talent, and they want in the front door.”
In just six years, investment has grown to nine times what companies in the defense tech space received in 2020. The shift has dramatically accelerated since the start of the Trump administration, fueled by public calls from the Pentagon and government for more venture capital and investment in new technologies.
Mr. Cadenazzi called the moment a “generational opportunity” to strengthen the stability of the U.S. defense industrial base. He said investors see a stable market as an opportunity they cannot pass up.
Anduril Industries, a California-based defense firm, is well ahead of the pack this year, having raised $5 billion in private investment in May during its last funding round. The company has openly stated its goal of becoming publicly listed.
With Anduril’s valuation having reached $61 billion after its May funding round, speculation is surging that the company may go public by the end of this year, investors say.
Anduril’s recent 10-year contract with the U.S. Army, valued at up to $20 billion in products and services, has positioned it as a major player challenging rivals in the defense market, including publicly traded powerhouses RTX (formerly Raytheon) and Lockheed Martin.
Meanwhile, Mach Industries, a drone manufacturer based in Huntington Beach, California, has raised $300 million in 2026, tripling its funding from private investors.
The Pentagon’s Defense Innovation Unit recently awarded Mach Industries a contract for a new large-scale drone designed to operate from Navy warships without large flight decks, according to reports.
Industry insiders say Mach Industries and Anduril have the potential to take market share from traditional large military contractors, known as “the primes,” such as Boeing, Northrop Grumman and General Dynamics.
Beyond Anduril and Mach Industries, other new entrants are securing massive capital. San Diego-based Shield AI raised $2 billion in March in a funding round co-led by Advent International and J.P. Morgan. Autonomous boat company Saronic, based in Austin, Texas, raised $1.75 billion in March.
Saronic drew international attention this month when one of the company’s Corsair drone boats was used to locate and recover two U.S. Army pilots whose Apache attack helicopter went down near the Strait of Hormuz. President Trump has said the helicopter was shot down by Iran.
Such companies are considered new entrants on the defense industrial landscape. Mr. Cadenazzi said he sees them as potential pathways to major cost savings for the Pentagon.
“Sometimes they’re not only one order of magnitude cheaper, but two orders of magnitude cheaper,” he said. “So if you believe in the ’mass is a quality all its own’ sort of framing, these companies have already dealt with the manufacturability problems. Many times, they’ve created their own supply chains.”
Those supply chains are another area of significant investment, as the Pentagon turns its attention to securing rare earth minerals to counterbalance China’s market dominance. Phoenix Tailings recently received $500 million in private capital investment, which the company says will be matched by a $500 million loan from the military to expand critical metal production at its facilities in Massachusetts and New Hampshire.
“The market has worked against us to the point we’re 95% dependent upon China for rare earth, and left to itself that number would go from 95 to 96 tomorrow and 97 the day after that,” said Mr. Cadenazzi. “That is not providing a resilient baseline for which to go ahead and address industrial issues for the [Defense Industrial Base] number one, but also for the broader macro economy.”
Nick Myers, the CEO and co-founder of Phoenix Tailings, who appeared on The Washington Times’ “Threat Status” podcast last year, said that although the U.S. is still at the forefront of defense technology, China’s dominance of the rare earth market poses a threat.
Vulcan Elements, a Cambridge, Massachusetts-based rare earth magnet company, has raised more than $430 million in private funding this year, according to the company. Vulcan said it reached a $1.4 billion deal late last year as part of the funds raised to build a magnet facility capable of producing 10,000 tons of magnets each year.
The more than $14.6 billion in total investment in the first half of 2026 may be just the beginning, as investors align with companies competing for a slice of the largest U.S. defense budget in more than half a century.
“Whatever the portion of the industrial base we’re talking about. … You name it, there are new approaches being applied,” Mr. Cadenazzi said. “New energy and vigor, which is really being driven by the leadership’s commitment to solving these problems once and for all.”
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