Bridging the Gap: How Private Capital is Reshaping National Defense
Exploring How Strategic Partnerships Between Public and Private Capital are fueling Innovation and Modernizing the Defense Industrial Base
Private capital is playing an unprecedented role in strengthening U.S. national security by accelerating defense innovation and scaling critical technologies. In my recent conversation with Sam Moyer, Research Fellow at the National Defense Industrial Association’s Emerging Technology Institute, we explored how venture capital, private equity, and strategic collaborations are addressing gaps in defense R&D, production, and supply chain resilience. From Anduril’s $1.5 billion Series F raise to eVAC Magnetics’ $335 million facility for rare earth magnets, private investors are stepping into roles traditionally dominated by government funding—but challenges like mismatched timelines between investors and Pentagon procurement remain. Here’s how leaders can navigate this evolving landscape.
The New Defense Frontier: Where Private Capital Meets National Security
When I sat down with Sam Moyer, a leading voice on private capital trends in defense, one statistic stopped me cold: global venture investments in defense tech surged to $31 billion in 2024, with U.S. firms like Anduril and European players like Helsing securing record-breaking rounds. This isn’t just about dollars—it’s a fundamental shift in how America’s defense industrial base operates.
Why Private Capital Matters Now More Than Ever
The Department of Defense (DoD) faces a dual challenge: escalating threats from peer adversaries and a defense budget that’s shrinking as a percentage of GDP. While Congress allocated $141 billion for RDT&E (research, development, test, and evaluation) in 2025, this alone can’t bridge what Sam calls the “valley of death”—the gap between prototyping and mass production.
Private capital brings more than money. Venture firms like RTX Ventures and Arlington Capital inject commercial discipline, mentorship, and networks that accelerate dual-use technologies. Take Helsing, which raised $487 million to develop AI-powered battlefield sensing systems. Their platform integrates data from drones, satellites, and ground sensors—technology that’s as valuable for disaster response as for military operations.
But alignment is critical. “Investors want ROI in 3–5 years; DoD procurement cycles often take 7–10,” Sam noted. This tension was clear when Anduril pivoted from purely defense contracts to selling its Lattice AI platform to border security agencies-a move that satisfied investors while maintaining national security impact.
Case Study: How eVAC Magnetics Became a Blueprint for Success
One breakthrough example emerged from Sumter County, South Carolina. eVAC Magnetics, a subsidiary of German firm Vacuumschmelze, secured a $94.1 million Defense Production Act grant paired with a $335 million private financing package to build the first U.S. rare earth magnet facility. Here’s why it worked:
Demand Signaling: A 10-year offtake agreement with General Motors guaranteed a market for magnets used in EV motors, while DoD commitments ensured defense applications.
Risk Mitigation: The DoD’s Title III grant de-risked the project for private lenders like BMO and MUFG Bank, who provided non-recourse financing.
Policy Leverage: A $111.9 million Qualifying Advanced Energy Tax Credit highlighted how clean energy incentives can dual-serve national security.
This model - government catalytic capital + private scale-up - is replicable. Sam emphasized similar successes with the Air Force’s AFWERX program, which matches venture dollars to accelerate startups like autonomous drone maker Shield AI.
Navigating the “Valley of Death”: Tactics for Leaders
1. Align Incentives with “Patient Capital”
Traditional VC’s 10-year fund cycles clash with DoD timelines. Solution? Blend capital stacks:
Corporate Strategic Investors: Lockheed Martin’s Ventures arm co-invests in hypersonic startups, ensuring alignment with defense roadmaps.
Sovereign Wealth Funds: Qatar’s $300 million stake in SpaceX Starlink secured priority access for Middle Eastern allies.
Revenue-Based Financing: Companies like Epirus use future contract cash flows to secure working capital loans.
2. Master the Art of Dual-Use
Startups thriving today sell to both DoD and commercial markets. Boston Metal, which raised $120 million for green steel tech, supplies alloys to the Navy while serving manufacturers like Toyota. Sam’s advice: “Design for commercial scalability first, then adapt to defense specs.”
3. Leverage New Policy Tools
The DoD’s Office of Strategic Capital (OSC), launched in 2023, is a game-changer. Its $2.1 billion budget supports:
Loan guarantees for critical mineral projects
Co-investment funds with private equity firms
Testbed Access: Startups like True Anomaly use OSC grants to trial space tech at DoD ranges.
The Road Ahead: A Call to Action
The stakes couldn’t be higher. China invests 43% of its GDP in industrial expansion versus America’s 20%. To compete, we need:
Standardized Contracting: Expand OTAs (Other Transaction Authorities) to reduce legal overhead for startups.
Talent Pipelines: Partner with universities like Purdue’s hypersonics program to build a skilled workforce.
Metrics That Matter: Shift from “cost-plus” contracts to outcome-based incentives for faster fielding.
As Sam put it: “This isn’t about replacing government spending—it’s about multiplying its impact.” For executives, the message is clear: Engage early with DoD’s innovation hubs (NSIN, DIU), explore dual-use partnerships, and advocate for policies that de-risk private investment.
The future of defense isn’t just in Washington or Silicon Valley—it’s in the boardrooms and factory floors where public purpose meets private ingenuity. Let’s build it together.
AJ Bubb is a technology strategist and host of “Facing Disruption” webcast series. Sam Moyer is a Research Fellow at NDIA’s Emerging Technology Institute, where he advises on defense industrial policy.