We’d be the first to tell you that it’s been a banner year in defense tech.
As it turns out, the numbers back up our—and, if you’re reading Tectonic, your—excitement. According to a Q3 report from Pitchbook, defense tech venture capital is on track to close out the year “firmly in expansion mode.”
We’re not gonna say it’s because the year started with Tectonic’s launch, but there is a correlation…
Money talks: On the deal front, 2025 was a “fewer, bigger, later-stage” year for defense and dual-use deals, according to Pitchbook. Through Q3 2025, capital deployment into the sector hit $39.9B, compared with $18.1B for the same period in 2024. Factoring in Q4 deals, we’ve blown well past 2024.
Defense and dual-use deal sizes rose across the board, but more mature startups got the bulk of the cash:
- Seed valuations held steady at $17M, while deal size rose slightly from $3.9M to $4.3M.
- Early-stage median valuations rose from $72M in 2024 to $103M. Venture-growth rounds totaled $20.4B through Q3.
- Capital deployment in Q3 was more concentrated in large late-stage and venture-growth rounds. Late-stage median valuation jumped from $95M in 2024 to $169.2M, and late-stage rounds totaled $14.7B YTD through September.
“All this momentum is kind of crystallizing in a real structural form of asset class,” Ali Javaheri, Pitchbook emerging tech analyst and the report’s author, told Tectonic. “I think there’s going to continuously be a lot of investment, at least for the next couple of years.”
Fan favorites: On a trailing-twelve-month (TTM) basis, three sectors snagged the biggest share of venture capital cash through September:
- Advanced computing and software: $17.8B through 128 deals.
- Autonomous systems: $12.3B through 175 deals.
- Sensing, connectivity, and security: $7.9B through 142 deals.
All about autonomy: Autonomy had an excellent year.
For late-stage deals, autonomous systems startups had a median pre-money valuation of $401M, up from $156M in 2024 and $115M in 2023. Advanced computing and software came in at a distant second, with a median late-stage valuation of $298.5M in 2025 while commanding the highest median deal value at $37.3M. So, when we say autonomy is all the rage, we mean it.
“I do think that there is some concentration risk [in autonomy], and there are some sectors that could probably get more attention,” Javaheri said, but “right now, that aligns with the demand signals the Department of War is putting out there.”
A nice niche: Defense-specific startups also had a good year, posting 234 percent year-over-year (YoY) growth in deal value and a nearly 60 percent YoY rise in deal count. That’s been driven by a 300 percent YoY jump in missiles and munitions VC deals, and the data doesn’t even count Castelion’s monster $350M Series B in Q4.
All this points to investors getting comfier with companies that only sell to government customers.
New money: It’s worth noting that 2025 also saw the launch of several new defense-focused venture funds, including Point72, Booz Allen Ventures, and JP Morgan’s multibillion-dollar Security and Resiliency Initiative, plus all the fun boutique stuff.
But, despite big names entering the scene and the number of deals and median valuations ticking up, Pitchbook found that the number of first-time defense investors is consolidating. Unique investors have dropped from a peak of 3,655 in 2021 to 2,193 YTD through Q3 2025, which reflects a “shift from speculative inflows to a more persistent base of strategics, defense-focused funds, and large asset managers.”
Money moves: Investors in defense certainly didn’t walk away empty-handed this year. Exit activity was up in 2025, and all signs point to that continuing next year. Exits jumped from nine in Q2 to 19 in Q3, and total exit value has risen from $18.2B in 2024 to $22.6B through Q3 2025.
That’s been driven by a boost in IPOs, according to the report. In the defense, space, and dual-use sectors, six companies went public in 2024, and by September 2025, that number had already hit eight.
“I expect exit activity to ramp up as interest rates decline and as the IPO market just opens up broadly,” Javaheri said. “As competition heats up, you’ll also see a lot more consolidation, too.”
With Q4 ending next week, we’ll be the first to let you know how big a year it’s really been for defense tech. Our hunch is that it’s been preeettyyyy good.