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National Security and Defense Market
The US govt will spend $858B on defense in 2023. Hundreds of founders are now building for the defense sector. From AI & autonomy to space & public safety, here's what this ecosystem looks like today.
The US government will spend $858,000,000,000 on defense in 2023. $34 billion, or 4%, will go to startups for early-stage research and development.
Hundreds of startups are building in the defense sector, but defense tech is just one part of a broader “National Security Ecosystem” of companies working to improve our economic, societal, military, and technological foundation. This sector is evolving rapidly, so I created a market map to better understand the current state of the entire defense & national security startup ecosystem. Whether you are a startup founder, venture capitalist, or defense industry operator, this market map will provide a clear view of the ecosystem today.
Autonomous Systems & Autonomy
Autonomous systems, also known as autonomy, refers to the capability of a system or machine to operate independently without human intervention. In the context of the military, autonomy involves the use of robots, drones, and unmanned vehicles that can operate independently to perform a wide range of tasks, from reconnaissance and surveillance to target identification and engagement. These systems can perform with a high degree of precision & can operate in environments that are too dangerous for people. Autonomous systems can also operate continuously without the need for breaks and can process and analyze large amounts of data quickly, allowing them to make decisions faster. This can help improve military operations' efficiency, flexibility, and safety. Companies here fit into four subcategories:
Awareness & Security: These startups build technology that enables autonomous systems to perceive, understand, and navigate the environment. It also includes companies building tools for airspace management, including traffic management, collision avoidance, and navigation in restricted airspace.
Unmanned Aerial Systems (UAS): Companies in this subcategory design, develop, and manufacture a wide range of unmanned aerial vehicles, commonly known as drones, that can be used for reconnaissance, surveillance, and other military applications.
Counter-Drone / Counter-UAS: Businesses here develop tools that detect, track, and neutralize drones that may pose a threat to military or civilian infrastructure.
Maritime Autonomy: These startups develop autonomous systems for maritime operations such as underwater vehicles, surface vessels, and other naval & coastal operation platforms.
Artificial Intelligence (AI) & Machine Learning (ML)
AI & ML are important for national security because they can be used to analyze large amounts of data, identify patterns, and make predictions that would otherwise be difficult or impossible for humans to detect. This can be used to improve decision-making, automate tasks, and provide real-time insights into potential security threats. Today, AI & ML are being used on everything from predictive maintenance of hardware and optimizing logistics to missile tracking & autonomous systems. The two main subcategories here are Infrastructure or user facing Applications. There are hundreds of other companies building in the AI & ML space, but often they do not explicitly focus on supporting military & government use cases. I only included companies where I could confirm support for this ecosystem.
Geospatial Intelligence (GEOINT)
GEOINT provides a visual representation of data using a variety of sources, including satellite imagery, aerial photography, and maps. This information can be used for things like monitoring natural disasters, tracking the movement of troops or vehicles, and identifying potential security risks. GEOINT is normally used to support intelligence, surveillance and reconnaissance (ISR) operations, providing real-time information to support military operations, disaster relief, and more. GEOINT plays a crucial role in providing situational awareness & enabling decision making.
Space is a critical domain for US national security, with many military capabilities such as surveillance, communication, navigation and missile defense that are heavily dependent on it. The US military must maintain a strong and capable space presence in order to protect its interests. I’ve split companies into six subcategories here:
Launch Services: These companies provide a range of services to launch payloads such as satellites and spacecraft. This includes developing, building and operating the launch vehicles, as well as providing the necessary support services such as ground-based systems and operations, integration, and testing.
Domain & Situational Awareness: Companies here help detect, track, and identify objects like satellites, debris, and other items in space by using radars, telescopes, and sensors. These companies also provide software and services that use this data to create a comprehensive understanding of the space environment, such as space situational awareness (SSA) and space traffic management (STM) systems. These tools provide critical information to military and civilian organizations to help them manage the space environment and mitigate potential collisions, interference, and other hazards.
Transport & Navigation: Companies in this subcategory enable space transportation and navigation by using tools such as propulsion systems, guidance and control systems, and software that enable spacecraft to move and navigate in space. This includes developing and deploying reusable launch systems, new propulsion tech, and in-orbit servicing capabilities.
Satellites & Connectivity: These are satellite-based solutions for communication, surveillance, navigation, and other services that are critical to national security & military operations. Companies here design, build, launch and operate satellites for applications such as providing internet connectivity to remote areas, monitoring the earth from space, and supporting military operations with real-time intelligence.
Manufacturing: These startups specialize in the design, development, and production of components, subsystems and complete systems for space and aerospace applications. This includes the production of launch vehicles, satellites, and other space-related equipment such as solar panels, antenna systems, and thermal control systems.
Hypersonics: Hypersonic technology refers to vehicles and weapons that can travel at Mach 5 and above. Companies in this subcategory focus on the research, development and production of hypersonic tech for both military and civilian use. They aim to develop systems such as glide vehicles, cruise missiles, and reusable hypersonic aircraft that can travel at high speeds and altitudes, making them difficult to detect and intercept.
Mission Planning & Decisioning Tools
Startups in this category help the military, Department of Defense, and the broader government make better & more informed decisions. By providing decision makers with higher-quality information, they can improve the speed & accuracy of decision-making, which leads to better outcomes and reduced costs. These tools are especially useful in complex, multi-agency missions where improved collaboration & communication is needed.
Cyber & Industrial Resilience
Attacks against the US's cyber infrastructure or industrial base could cause significant damage to the country's economy. The consequences of such attacks could range from short-term disruptions to long-term economic damage. The US's critical infrastructure such as power grids, financial systems, and communication networks are essential to the functioning of modern society. It is crucial that the US protect this type of critical infrastructure from disruption, in order to ensure continuity of services and minimize the potential for economic damage. There are three subcategories I’ve broken out here:
Cybersecurity: this is a massive category with hundreds of other companies. I decided to include only companies I could verify that support the military & government sectors. Feel free to view CB Insight’s cybersecurity market map for a more detailed view
ICS/OT & Supply Chain: Industrial control systems (ICS) and operational technology (OT) are considered a subsector within cybersecurity, but I decided to call out these startups and group them with supply chain as a standalone category for simplicity.
Threat Intelligence: Companies in this subcategory provide information about potential or existing threats to an organization's security. Data is collected, analyzed, and disseminated to inform security decisions. It can include information on adversaries, their tactics and vulnerabilities, as well as specific threats. It helps organizations identify, prioritize, and mitigate potential attacks and improve incident response.
Workforce Development & Training
The US must have a skilled & capable workforce that can effectively operate and maintain the systems that are critical to our country. Workforce placement & training can help address labor shortages and skill gaps in industries that are critical to national security, such as defense, aerospace, and technology. Investing in workforce development can also help to promote economic stability and can also reduce dependence on foreign countries for skilled labor and technology.
Technology in this category improves the ability of first responders & other public safety personnel to protect & serve their communities. These tools can improve communication & coordination, increase situational awareness, and enhance the ability of first responders to respond to emergencies quickly & effectively. This not only leads to cost savings for municipalities and other government entities, but also supports better relationships with communities and improved service for them. The two subcategories within Public Safety include Law Enforcement, which covers companies working to support police departments, and Physical Security, which is used for things like security screening in public areas or live security.
The Bottom Line
Startups will play a critical role in shaping the future of US national security & defense. As competition between the US and China intensifies, it is crucial that the US continues to invest in cutting-edge technologies and in the training & education of a work force that will design, develop, and operate these systems for decades to come. Though there are many challenges investing in the defense sector, it’s vital that VCs do so. By investing in this ecosystem, not only can we ensure that the US remains a global leader, but we can also help create generational, sustainable businesses that are a force for good in the world.
I’m excited to back founders in these categories as they work to tackle our nation’s biggest problems. If you’re building something here, please reach out at firstname.lastname@example.org