Venture capital funds have poured $12.3 billion into defense technology startups since the start of 2026, nearly doubling the amount raised over the same stretch last year. According to the Financial Times, this figure already exceeds the $9.95 billion the sector attracted across all of 2025, signaling how quickly investor appetite for drones, autonomous vessels, and battlefield artificial intelligence has grown. Conflicts in Ukraine and the Middle East have exposed an urgent demand for weapons systems that are cheaper and faster to build, turning military hardware into one of the year's most sought-after bets.
The capital is concentrated among a small group of active investors, with Gaingels, Alumni Ventures, and Andreessen Horowitz ranking among the most prolific check writers in the first quarter. As reported by PitchBook, the surging valuations come as funds increasingly treat defense as a lasting opportunity. Daniel Rudnicki Schlumberger, head of JPMorgan's security and resiliency initiative for Europe, the Middle East, and Asia, noted that the surging valuations reflect the most important change in warfare arguably ever.
The defense rush stands in stark contrast to crypto, where venture investment has cooled sharply. According to Galaxy Research, VCs deployed about $4 billion across 355 crypto deals in the first quarter, marking a 50% drop in capital from the prior quarter. The decline was driven primarily by a drop in very large, later-stage financings, with the number of completed deals falling much less than the amount of capital invested, indicating that smaller early-stage and seed rounds continued despite the overall decline.
Annualized, the defense sector pace implies roughly $16 billion in 2026, below last year's near-$20 billion total. Meanwhile, crypto-focused venture funds drew about $1.1 billion in the first quarter, spread across just eight vehicles, marking the slowest quarter for new fund launches since the third quarter of 2020. Galaxy Research attributed part of the shift to spot exchange-traded products and digital asset treasury firms, which now compete with venture funds for allocator capital, though the firm affirmed that 'crypto venture activity remains relatively healthy overall'.
