Defense tech could be entering its awkward teenage years. Is the boom a bubble?

Consider 2018: Googlers were storming out over their company’s involvement in the AI military initiative Project Maven, and Anduril was the anomaly, a multi-million defense-focused startup soon to be headlined as “the most controversial startup” in tech. VCs touched defense rarely, if at all.

Today, they can’t get enough. Anduril, now valued at $61 billion, is joined by a growing class of “neo-primes,” from autonomous shipbuilder Saronic, last valued at $9.25 billion, to drone maker Shield AI, at $12.7 billion. Defense has exploded into a consensus growth area among VCs, seen as ripe for AI-fueled innovation. The numbers bear it out: in the first quarter of 2026, VCs deployed a record $19.8 billion into defense tech across 262 deals, according to PitchBook. (For comparison: That number in Q1 2024 was $5.7 billion, and in Q1 2025 about $17 billion.)

The vibe shift is sending valuations into the stratosphere. Early-stage defense startups are raising millions and fetching multiples from 17 times to 50 times revenue (sometimes even higher). 

With the market running so hot, the inevitable question that emerges: Are we in a bubble? At Fortune’s Brainstorm Tech conference in June, Anduril CEO Brian Schimpf answered with a nuanced but decisive “Yes.” 

“When there are successful companies, you have lots of other companies and investors chasing that, and [there can be] very risky behavior,” Schimpf said onstage. “We’ve been very careful at every stage to manage this, but it’s easy to chase those valuations if you’re not being careful. So, I do think there’s a bit of a bubble. Capital’s cheap, and it’s great if you can get capital as an advantage—go for it. But do understand the consequences for your company when you do: You put expectations through the roof of what you can deliver on.”

Given how far ahead valuations have gotten from the fundamentals of many startups, it’s tough to argue that there’s not a bubble in at least some corners of the defense tech market. But that’s not to say these aren’t real businesses or that the market is on the verge of imploding.   

“Is there a bubble in defense tech? It’s always a hard question,” said Peter Wilczynski, Vantor’s chief product officer. “It’s obvious to say yes. But the people who say yes then are always wrong, so it’s complicated.”

I think the more interesting series of questions goes something like this: What parts of defense tech funding, as it exists today, are fragile, and what is likely to prove resilient? Are traditional Silicon Valley investors actually equipped, in mindset and business models, to underwrite and ride out the gulf between defense (and D.C.) economics versus the economics of consumer apps or enterprise software? And, if there is a bubble, is that actually bad? 

No matter what, there’s certainly friction ahead. 

“We’re probably close to the adolescent period, for sure,” said Wilczynski, who previously spent 12 years at Palantir. “There are going to be teenage years in defense tech, and it’s going to be awkward.”

Read the whole story here: a good faith examination of a possible defense tech bubble and the ways it does (and doesn’t) matter.

We’re back on July 6, happy Fourth, and have a great weekend,

Allie GarfinkleX: @agarfinksEmail: [email protected]

Submit a deal for the Term Sheet newsletter here.

Joey Abrams curated the deals section of today’s newsletter. Subscribe here.

VENTURE CAPITAL

– Together AI, a San Francisco-based AI infrastructure company that develops and hosts open-source models and tools for building generative AI applications, raised $800 million in Series C funding. Aramco Ventures led the round and was joined by Vista Equity Partners, General Catalyst, Emergence Capital, NVIDIA, and others.

– EquiLibre Technologies, a Prague, Czech Republic-based AI lab building reinforcement-learning trading agents and algorithmic trading systems for quant funds, raised $500 million in Series A funding. Creandum led the round.

– TwelveLabs, a San Francisco-based video intelligence company, raised $100 million in Series B funding. NEA and NAVER Ventures led the round and were joined by Amazon, Radical Ventures, Korea Investment Partners, Index Ventures, Quadrille Capital, and Red Bull Ventures.

– Aligned, a New York City and Tel Aviv, Israel-based workspace platform that helps revenue teams streamline sales processes and deal management, raised $60 million in Series B funding. PeakSpan Capital led the round and was joined by NFX, Hetz Ventures, and JAL Ventures.

PRIVATE EQUITY

– Monomoy Capital Partners acquired Jiffy Lube International, a Houston, Texas-based chain of fast oil change and automotive maintenance service centers, for $1.3 billion.

– Amplix, a portfolio company of Gemspring Capital, acquired CORE Communications, a Suffield, Conn.-based technology advisory and expense management firm. Financial terms were not disclosed.

– New Mountain Capital acquired a majority stake in SAM, an Austin, Texas-based provider of geospatial and inspection services to the utility and critical infrastructure markets. Financial terms were not disclosed.

– Sunrise Produce acquired Family Tree Produce, an Anaheim, Calif.-based produce company. Financial terms were not disclosed.

EXITS

– ACON Investments acquired YumEarth, a Stamford, Conn.-based organic candy brand, from The Riverside Company. Financial terms were not disclosed.

– Arcline Investment Management agreed to acquire Avantus Aerospace Group, a Valencia, Calif.-based provider of engineered shims and fasteners for the global aerospace and defense industries, from Inflexion. Financial terms were not disclosed.

– Harvest Partners acquired Integra Testing Services, a Mentor, Ohio-based HVAC testing company, from Keystone Capital Management. Financial terms were not disclosed.

IPOs

– Bending Spoons, a Milan, Italy-based company that acquires software products and digital brands and seeks to improve and operate them long term, raised $1.7 billion in an offering of 58 million shares priced at $29.

– ITG, a Fort Lauderdale, Fla.-based contractor that builds, installs, and maintains broadband and fiber networks for telecom and utility providers, raised $312 million in an offering of 19.5 million shares priced at $16 on the Nasdaq.

– Neutron Holdings, the San Francisco-based operator of Lime scooters, raised $174 million in an offering of 7 million shares priced at $25 on the Nasdaq.