Venture Capital and the Militarization of Innovation

Defence budgets are ballooning across much of the world. The Stockholm Institute for Peace Research (SIPRI) has noted the 10^th consecutive year in the rise of global military expenditure to $2,718 billion in 2024. SIPRI called this level of spending “unprecedented” in their news release in April 2025. That headline figure is striking enough. But another river of money, less visible but also transformative, is reshaping the security landscape: the surge of venture capital (VC) into defence technology.

According to McKinsey, in 2024 venture capital investment in defence grew by 33%, reaching $31 billion. As the New York Times notes, Silicon Valley stalwarts, once wary of working with the Pentagon, have discovered their patriotic and profit-making instincts. Andreessen Horowitz pushed $500 million into defence tech in 2023. American investors are leading, but Europe is catching up fast. In 2024, VC investment in European defence and security startups rose to about $5.2 billion, with no indication that interest is slowing. The other major hubs for defence technology include Southeast Asia and the Gulf states.

The U.S. context

The enthusiasm among tech companies in the U.S. is also striking. Barely six years ago, tech companies distanced themselves from defence. Google employees protested against Project Maven, also known as the Algorithmic Warfare Cross-Functional Team, launched in April 2017 to improve the ability of the U.S. Department of Defense to analyze drone footage. As a result, Google decided not to renew the contract when it expired in 2019.

Today, the mood in Silicon Valley is different. The New York Times has called it the “militarisation of Silicon Valley.” Though Silicon Valley roots are closely tied to the Pentagon, there had been a growing gap between the defence and tech sectors in the last few decades culminating with employee protests. But this employee activism has dwindled amid a crackdown on employees who speak out on various issues.

Three trends are converging to create a cascading effect. First, the technology sector itself, after years of hesitation, has embraced the defence market. Motivations range from patriotism to fear of falling behind in great-power competition. Second, venture-capital firms sense opportunity. Conflict in Ukraine, tensions in East Asia, and the promise of hefty government contracts are a reality. Third, the dual-use nature of many emerging technologies, AI, drones, quantum computing, offers investors the best of both worlds: scaling to lucrative military contracts today, commercial applications tomorrow. The result is momentum that feeds on itself: rising defence budgets, swelling venture-capital flows, and a flood of start-ups promising to redefine modern warfare.

Cutting through hype

Company executives are increasingly comfortable with defence partnerships, and some openly embrace the role of technology firms in the future of warfare. Alex Karp, Palantir’s outspoken chief executive, is a regular fixture at high-profile defence gatherings. Eric Schmidt, the former Google boss, warns that Western governments must innovate faster or risk ceding technological leadership to China. Their voices carry weight—amplified by both money and influence.

The influx of venture capital brings risks as well as resources. Elke Schwarz, a scholar at Queen Mary University, warns of “hyperbolic” claims by firms eager to win contracts. Schwarz discuss how the ethos of the start-up world, move fast, disrupt, and market aggressively, does not sit easily with military culture, where reliability, accountability, and procurement rules are paramount. Nor does it mesh well with the democratic values that underpin many of the governments buying this technology.

The contrast is visible at gatherings such as the Responsible Military AI Summit. Tech companies showcase miniature robots for participants to drive around, or video demonstrations of uncrewed sea vehicles. Their executives often take centre stage. Government officials, experts and human rights advocates often outline the very challenges that the technology is ill-prepared to address such as the need to de-escalate conflicts, address any harm caused and ensure stability. The spectacle highlights both the promise and the problem: firms with limited track records in combat, or its aftermath but well-honed marketing skills dominate discussions about the future of warfare.

For governments, the challenge is to resist being dazzled by hype. Procurement decisions made in haste, under pressure from lobbyists and investors, risk leading to costly failures, or worse. A malfunctioning weapon that harms civilians should concern all stakeholders, including venture capital firms. While some investors are committed to responsible practices, and concerns about defence investment have softened in recent years, there remains broad recognition that this is a uniquely sensitive sector requiring heightened scrutiny. The $1 trillion Golden Dome initiative shows how industry—and the investors behind it—can shape weapons programs before governments have even set their requirements.

Democratic accountability

This debate is not only about efficiency but about values. Defence innovation is too important to be left to unchecked capital flows. Democratic governments must ensure that military adoption of emerging technologies does not outpace ethical oversight.

Transparency builds public trust. If citizens suspect that venture capitalists are shaping national security in closed rooms, confidence in both government and military will erode. Clear guidelines and independent oversight help demonstrate that decisions are made in the public interest, not in service of private profit.

International cooperation is also vital. NATO, the European Union, and Canada all face similar challenges. Shared guidelines for evaluating venture-backed defence firms could help prevent a race to the bottom in procurement standards. Canada, with its tradition of arms-control advocacy, is well placed to push for such standards.

Defence ministries must therefore develop sharper tools for assessing claims, testing systems, and regulating partnerships. They must also grapple with the broader implications of private capital shaping military innovation. As money pours in, so does influence. The priorities of investors may not align with national security, let alone humanitarian law.

Ways Forward

Venture capital is reshaping the defence landscape. It claims to bring dynamism, speed, and innovation. But it also brings hype, lobbying, and risks that governments cannot afford to ignore.

Unchecked, the militarisation of new technologies will be guided by the imperatives of profit rather than prudence. When technologies fail in war, the costs are measured not only in dollars but in human lives.

Governments must therefore establish clear guidelines, demand transparency from firms, and build the capacity to scrutinize claims. Only then can they harness the benefits of private investment while safeguarding democratic accountability, humanitarian values, and national security.

 Venture capital can help win contracts. But without oversight, it risks turning defence into a spending race that serves industry and investors, not security.

Photo: In 2018, Google employees protested against Project Maven, also known as the Algorithmic Warfare Cross-Functional Team, launched in April 2017 to improve the ability of the U.S. Department of Defense to analyze drone footage. As a result, Google did not renew the contract. This photograph shows a protestor holding up a sign stating Google’s motto: Don’t Be Evil, at an earlier protest about net neutrality. Protest at Google by Steve Rhodes CC by 2.0.

Published in The Ploughshares Monitor Autumn 2025