Private Capital & Defense: Reshaping Innovation Funding
Explore how $440B+ in private capital is redefining defense innovation. Uncover the shift in funding, its implications, and how it impacts national security. Learn more!
Futurist AJ Bubb, founder of MxP Studio, and host of Facing Disruption, bridges people and AI to accelerate innovation and business growth
The global security landscape is shifting faster than most people realize - and with it, the demands on our national defense capabilities are escalating in ways that don’t always make headlines. I’ve been thinking a lot about this intersection of finance, technology, and national security, and I recently had a conversation that genuinely changed how I see it.
For the second time on Facing Disruption, I sat down with Sam Moyer from NDIA’s Emerging Technologies Institute - and this time, he came with the completed findings from his comprehensive report on private capital in the defense industrial base. I’ll be honest: even I wasn’t prepared for the numbers.
We’re talking approximately $440 billion in private capital activity flowing into the defense sector over just the last five years.
Let that sink in.
The Scale Nobody’s Talking About
When most people think about defense funding, they picture government budgets, procurement contracts, and congressional appropriations. That’s understandable - but it’s only part of the picture. What Sam’s research reveals is that private equity, strategic investment groups, and venture capital are collectively pouring somewhere between $20 billion and $50 billion into the defense sector every year.
That’s not a niche story. That’s a fundamental shift in how defense innovation gets funded, and it has real implications for anyone whose work touches advanced technology, manufacturing, or national policy.
What struck me most in our conversation was what this scale of investment actually signals. It tells us that the defense industrial base - often painted as slow-moving and bureaucratic - is genuinely attractive to sophisticated private investors. It also highlights something Sam pointed out that I think gets underappreciated: America’s financial services sector, which processes roughly 49% of the world’s equity filings, is itself a strategic asset. The diversity and depth of our capital markets give the defense ecosystem access to funding that most other nations simply can’t replicate.
Risk, and Why It’s More Complicated Than It Looks
One of the things I appreciate about talking to Sam is that he doesn’t oversimplify. When we got into how investors actually evaluate defense opportunities, he broke risk down in a way that I think is really useful.
There’s the familiar market risk - will customers buy the product, will supply chains hold. But in defense, the “customer” is the U.S. government, which introduces its own wrinkle: Congress, not market forces, controls the budget. A company can develop a genuinely impressive technology and still lose its funding stream because legislative priorities shifted. That’s a risk that requires a different kind of thinking from investors.
Then there’s technical risk - particularly acute in areas like quantum computing or hypersonics, where the science itself is still maturing and scaling up production can introduce entirely new engineering challenges.
And here’s what I kept coming back to after our conversation: even with all this capital flowing in, smaller companies and startups often struggle to access the financial services they need to grow. Long sales cycles, unconventional revenue profiles, and limited track records make them a poor fit for traditional commercial lenders - even when their technology is exactly what the DoD needs. That gap is one of the more urgent problems in the ecosystem right now.
The Two Levers That Matter Most
Sam introduced two concepts in our conversation that I think every executive, investor, and policymaker in this space should understand: demand signals and catalytic capital.
Demand signals are how the DoD communicates what it needs - and when. In a commercial market, demand signals are relatively clear: sales trends, consumer research, price signals. In defense, they’re layered and often ambiguous. The DoD might identify hypersonics or AI as a “critical technology area,” which tells you there’s strategic interest - but it doesn’t promise a contract. For a company that needs a 5 to 10 year return horizon, that ambiguity is a real problem.
The most durable form of demand signal, as Sam explained, is something like an offtake agreement or a price floor - a long-term purchasing commitment that gives private investors the stability they need to commit significant capital. These tools can extend a reliable signal out to ten years, which changes the math entirely for investors.
Catalytic capital is the government’s way of using its own investment to unlock larger private flows. It’s not about replacing private money - it’s about de-risking deals enough to bring private money in. A government loan that enables a company to secure additional private financing. A grant that reduces upfront costs. Equity investments through programs like the Industrial Base Fund, DPA Title III, or the Office of Strategic Capital.
The real power, and Sam was clear about this, comes when you combine both. A long-term demand signal alongside catalytic capital transforms a marginal deal into an investable one. That’s how you turn strategic national priorities into actual innovation.
Where the System Is Still Getting in Its Own Way
None of this means everything is working perfectly. Sam’s research also surfaced some persistent friction points that I think deserve more attention.
The private sector has moved quickly to develop new financial tools - private credit, for example, has grown to rival traditional bank lending. But government mechanisms haven’t kept pace. That’s not necessarily a failure of intent; it’s a speed problem. And in a sector where timing is everything, slow adaptation creates missed opportunities.
There’s also a communication gap around demand signals that’s surprisingly straightforward to fix. Acquisition officers are experts at reducing cost and time - but they’re often not trained or tasked to communicate long-term demand in a way that actually guides private investment. Sam’s recommendation is to develop clear “safe harbor” guidelines that let acquisition professionals share strategic intent without compromising procurement integrity. That’s low-hanging fruit.
And the catalytic capital programs that do exist suffer from fragmentation. Each program has its own application process, its own timeline, its own requirements. For agile private capital that moves fast, that siloed approach is a dealbreaker. Sam’s proposed solution - an always-on portal that can triage and route requests to the right program - is elegant in its simplicity. It’s the kind of fix that doesn’t require reinventing anything; it just requires coordination.
What I Think This Means for All of Us
Here’s my takeaway from this conversation: the defense industrial base isn’t struggling for capital. It’s struggling for coordination.
The money is there - $440 billion over five years is not a struggling ecosystem. But too much of that capital is flowing around unnecessary obstacles, and too many of the companies that could benefit most are getting left out. Closing those gaps doesn’t require a revolution in policy. It requires clearer communication, smarter use of existing tools, and a genuine willingness from government, industry, and the investment community to learn each other’s language.
If you’re leading a defense company, the job is to understand your capital landscape and become fluent in how the government signals demand - not just through RFPs, but through budgets, policy documents, and strategic communications. If you’re an investor, the job is to develop a real thesis on defense risk - one that accounts for government procurement cycles and actively seeks out catalytic capital partnerships. And if you’re in government, the job is to make it easier for the private sector to find you, understand you, and build alongside you.
This conversation with Sam was one of those reminders of why I do this show. The defense industrial base touches everything - technology, economics, global stability, national identity. And the more clearly we can see how it actually works, the better positioned we all are to contribute to it meaningfully.
You can hear the full conversation with Sam Moyer on Facing Disruption wherever you listen to podcasts.