The NatSec100 reflects the changing face of the U.S. defense innovation base. Over the past three years, most companies on the list have focused on technologies like advanced computing, software, AI, cyber, and space—technologies that attract strong private investment and that are aligned to some of the Department of Defense’s (DoD) critical technology priorities.
But this concentration also raises important questions. Are we doubling down on a few familiar lanes of innovation at the cost of building a more balanced industrial base? Despite national strategies that call for leadership in areas like quantum, biotech, and clean energy, those sectors remain underrepresented on the list—even when companies in those fields show real promise and are ranked highly on our list.
We have a couple big choices to make. Software companies have broken into Defense and continue to improve outcomes faster than hardware programs and traditional performers. The key indicator of lasting success will be who is involved on the government side. Two choices pose an outsized bearing on where our ecosystem is headed. First, how do we scale to the rest of the acquisition apparatus what's working in the parts of DOD that are successfully transitioning, adopting, and scaling innovation? And second, can we use software momentum to spur breakthrough partnerships and progress across the rest of our critical and prioritized technology areas?
Justin Fanelli
Chief Technology Officer, U.S. Navy
This lack of balance has consequences. We can’t build a resilient defense innovation base on software alone—even if it remains central to modernization efforts.
We’re also seeing consolidation within sectors. Space, traditionally a fast-moving area for dual-use innovation, now shows fewer breakout companies beyond SpaceX—likely due to more government and investor dollars flowing to fewer players. At the same time, interest in AI and autonomy continues to dominate the conversation and funding landscape.
Still, we should not ignore major signs of progress. Companies like Netskope and Cerebras are eyeing IPOs in 2025, pointing to the reality of strong dual-use national champions with roots in the defense technology venture ecosystem. Where and when the USG policy environment supports long-term growth, the U.S. wields globally competitive firms that deliver for national security.
The concentration of investment in select tech categories may reflect potential structural realities:
Limited government demand or follow-through in capital-heavy tech areas.
A mismatch between VC models and technologies that require long development timelines, frequent access to capital, and major hardware investments.
A continued reliance on traditional defense contractors for hardware, while newer startups are mostly tapped for software.
Policy Takeaway
To unlock the full potential of the NatSec100 ecosystem, federal investment must look beyond short-term innovation wins, and focus wholly on innovation adoption. That means scaling proven procurement templates from PEOs with strong innovation adoption track records, elevating adoption as the Department’s focus, reducing risk around deep tech investment, and building lasting pathways for companies to scale.
Finance Takeaway
Hard tech needs more than VC—it needs greater participation from institutional investors, private equity, and Wall Street. It also needs more frequent access to non-dilutive capital, which means expanding the range of financial tools available to the defense innovation ecosystem.