Defense technology startups recorded their best funding year ever in 2025, with venture capital deals jumping to a record $49.1 billion from $27.2 billion the previous year, according to PitchBook data. Equity funding more than doubled to $17.9 billion, reflecting investor appetite for autonomous systems and artificial intelligence applications for the battlefield.
Funding Highlights
- Total VC Deals: $49.1 billion (2025)
- Previous Year: $27.2 billion
- US Equity Funding: $14.2 billion (tripled)
- European Funding: $2.48 billion (up 38%)
- Anduril Raise: $2.5 billion at $28B valuation
US Dominates Deal Flow
The United States dominated deal flow, with equity funding nearly tripling to $14.2 billion from $5 billion. This surge included Anduril's $2.5 billion raise in June, valuing the California-based autonomous systems maker at approximately $28 billion. European defense tech funding also grew, rising 38% to $2.48 billion.
Manufacturing Scale Key to Success
Manufacturing scale has emerged as the critical competitive battleground. PitchBook senior analyst Ali Javaheri predicts 2026 will see "a concerted push to expand throughput through investments not just in new facilities, but in the production toolchain itself, including robotics and software-augmented manufacturing."
Focus on Production Capacity
Manufacturing-focused defense investment rose to $4.7 billion across 39 deals in 2025, concentrated in drones, space systems, and defense electronics. Much of this capital went to companies building production capacity for autonomous aerial, maritime, and ground vehicles.
Consolidation Expected
Industry consolidation appears imminent. Javaheri expects to see "a major venture-backed defense tech startup acquired by a traditional prime contractor in the first half of the year as incumbents look to buy proven capabilities rather than build them from scratch."
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