We get asked regularly about how we evaluate defense technology companies — specifically, how our process differs from the frameworks used by generalist VCs or even commercial technology investors who've recently started looking at the defense sector.
The honest answer is that the differences are significant. Enough that applying a standard commercial due diligence framework to a defense startup will either lead you to pass on legitimate opportunities or invest in companies that look good on paper but will struggle operationally. I've seen both failure modes, and they're both expensive.
This isn't a comprehensive guide to our process — there are elements we don't share publicly. But the framework we use for initial screening and qualification is something we've been willing to discuss because better-informed founders make the fundraising process more efficient for everyone.
The Five Dimensions
Our evaluation framework has five dimensions that we assess in sequence. The sequencing matters: dimensions 1 and 2 are disqualifying if they don't meet threshold. Dimensions 3, 4, and 5 are comparative.
1. Operational Relevance
The first question we ask about any defense startup is: does this technology address an actual operational requirement that the military or intelligence community has identified and funded? Not a theoretical requirement, not a problem that defense analysts have written about — an actual documented requirement with a program budget line or a funded solicitation behind it.
We've seen excellent technology addressing problems the DoD hasn't decided are priorities. Sometimes that technology eventually gets pulled into a program. More often it doesn't. Investment timing in defense tech is directly tied to the government requirements and funding cycle, and we're not in the business of funding technologies and waiting years for the market to develop.
The signal we look for: has any government program office given this company money, in any amount, for any reason? SBIR Phase I, an OTA prototype agreement, a CRADA — all of these indicate that at least one government customer has determined the technology is relevant to something they're funded to do. Absence of any government engagement at a company that's been operating for more than 18 months is a flag.
2. Technical Moat
Is the core technical capability defensible? This isn't just a question about IP protection — it's a question about whether the technology is genuinely differentiated in ways that create durable advantage.
The defense sector has specific IP considerations that commercial sectors don't. Government-funded research often carries march-in rights, license-back requirements, and data rights provisions that can substantially affect a company's ability to assert exclusivity. We do a detailed IP audit on every company we advance past initial screening, and we've walked away from companies with attractive technology because the IP structure meant the government effectively owned the most valuable elements of it.
3. Team Fit
We evaluate the founding team against a specific profile for defense market navigation, not just general startup execution. The relevant dimensions are different from commercial startup teams.
| Capability | Why It Matters in Defense |
|---|---|
| Program management experience | Defense contracts are managed differently than commercial contracts; PM skills directly affect program performance |
| Government acquisition knowledge | FAR/DFARS compliance, proposal writing, contracting vehicles — these aren't learnable on the job at the pace defense programs require |
| Cleared personnel | Access to classified requirements, classified test ranges, and classified program offices — essential for highest-value contracts |
| Operator relationships | Direct access to end-users who can validate requirements and provide candid feedback before programs are locked |
4. Capital Efficiency Path
Defense technology development timelines are longer than commercial. Period. A company that raises a Series A in 2025 should not expect to be generating significant revenue from major defense contracts before 2027 at the earliest, and that's an optimistic timeline. Many programs take longer.
We model capital requirements against realistic program timelines — not the optimistic timelines founders present — and evaluate whether the company can reach meaningful milestones on the capital available, assuming things take 30% longer than planned. Companies that require a perfect outcome on timeline and funding to make it to a self-sustaining revenue position are higher risk than their technology might suggest.
5. Exit Landscape
Defense tech exits happen differently than commercial tech exits. The acquirer universe is defined by ITAR, CFIUS, and strategic industrial policy in ways that commercial tech M&A isn't. A prime contractor acquisition, a government-sponsored strategic investment, or an IPO of a defense technology company with classified programs all have specific structural requirements that affect timing, valuation, and process.
We assess the realistic exit landscape for each company and whether our investment returns can be generated through available exit paths, not theoretical ones. A company with no realistic path to defense prime acquisition and a product that can't go public due to classification constraints is in a structurally difficult position regardless of its technology quality.
What We've Learned Not to Do
Over 15 years, we've made mistakes in each of these dimensions. We've invested in companies with strong technology and no path to a funded program. We've invested in great founders who couldn't navigate the government acquisition process. We've underweighted capital efficiency risk and been burned when programs were delayed.
Every mistake we've made in defense tech investment came from applying assumptions that work in commercial investing and ignoring the ways this market is genuinely different. The market is different. Respecting that difference is the job.
If you're building a defense technology company and want to understand how we evaluate your space, the framework above is a starting point. The best conversations we have with founders are the ones where they've stress-tested their own business against these dimensions before we have to do it for them.
