The Tech Defense today attracts the feverish (even opportunistic) attention of many investors. After cryptocurrencies, artificial intelligence and tech climate, speculation extends to the military. Throughout Europe and the United States, dedicated funds, specialized vehicles and startups are created to capture a portion of rapidly growing budgets. Analysts are already warning: only a few elected officials will survive. But this thesis, although based on the industrial history of the Defense, underestimates several forces which could reshape the landscape of the sector.
The myth of an ultra-lived selection
Traditionally, defense has always been an oligopole market. The barriers to entry – technological, institutional, political – are overwhelming. Contracts, massive and multi -year, require absolute reliability and strategic alignment with states. In this environment, only a few startups in segment, by technology and by region can claim to emerge.
However, the current dynamics do not exactly reproduce the cycles of the past and marks a break. The War in Ukraine testified to a deep mutation with solutions designed in a few months which are already operational on the ground. Drones, tactical communications, electronic war: so many areas where field adoption has shown that the historic rigidity of military acquisitions could be bypassed during emergency periods.
The result is that more players could reach a strategic viability threshold, without necessarily being giants, but by imposing critical innovations on tactical niches.
Institutional acceleration is real
The idea that the sales cycles in the defense are immutably slow is now spurned. Under geopolitical pressure, the acquisition mechanisms are evolving. New accelerated programs are emerging in Europe and the United States. Specialized units emerging to identify, test and quickly integrate rupture technologies.
This development opens the door to startups capable of meeting immediate tactical needs, even without going through the long traditional public market procedures. The very notion of “premium at first reliable” takes on a new strategic weight.
Opportunistic capital, useful imbalance factor
The massive arrival of external investors in the sector is perceived by many as a risk of artificial inflation of valuations. However, this “tourist” capital could play a paradoxically positive role: by forcing the influx of means, it pushes institutions and industrialists to open their innovation process faster and to confront new forms of competition.
In a historically locked sector, this influx could break inerties installed for decades. The history of commercial space, upset by the arrival of SpaceX, recalls that sometimes the impatience and naivety of the outsiders generate significant accelerations.
Towards a strategic market fragmentation
Rather than a small circle of industrial oligarchs, defense-tech could give birth to a fragmented ecosystem:
-
- Specialized startups in very precise areas (sensors, logistics robots, electronic war);
- Duales companies, capable of addressing both civil and military markets;
- Regional actors, aligned with the operational specificities of their local armed forces.
This hybrid model, between strategic concentration and tactical diversity, could produce not some giants, but a constellation of intermediate companies, each critical on its vertical.
What thesis can we develop from there?
Investing today in defense is neither a free field, nor a simple repetition of past cycles and practices. It is a new bet where two dynamics clash: the history of institutional inertia and the urgency of modernization of the combat forces imposed by geopolitical threat.
Bet only on a few “obvious winners” could be as risky as to disperse its investments without discern. Good luck to the new entrants.
