Why Is Private Capital Becoming the Backbone of National Security Innovation?

From 2020 to 2024, private capital invested over US$230 billion in cyber, space, and autonomous systems, while defence procurement increasingly sourced capabilities from commercially scaled platforms. Data from SIPRI and OECD indicate that more than 40% of newly deployed defence capabilities in advanced economies during this period originated from civilian markets. This represents a structural shift in the financing of strategic technologies. Capability development has advanced beyond doctrine, with capital markets now influencing the pace, direction, and architecture of national security systems. 

For investors, this transition has changed the basis of competitive advantage. Sole reliance on defence contracts is no longer sufficient. Sustainable value is concentrated in platforms that have become operationally essential in both commercial and sovereign environments. 

Cybersecurity Has Become Strategic Infrastructure

 

Cybersecurity now operates as national infrastructure rather than merely enterprise tooling. Governments have aligned their cyber resilience frameworks with commercial zero-trust architectures, cloud-native security, and AI-driven threat detection and mitigation. Market leadership increasingly reflects the ability to fulfil sovereign assurance requirements without fragmenting commercial platforms. 

Palo Alto Networks, based in Santa Clara and generating over US$8 billion in annual revenue, exemplifies this convergence. Its sustained growth across the public sector, critical infrastructure, and regulated industries is supported by a unified platform strategy rather than defence-specific product lines. Investors have rewarded this approach with premium valuations, reflecting confidence in scalable compliance and long-term relevance. 

A similar trend is evident in firms that did not originate from defence ecosystems. Darktrace, founded in Cambridge and operating globally, has integrated its AI-driven cyber defence platform across government networks and regulated enterprises without bespoke sovereign variants. The investment signal is clear: cyber platforms designed for convergence scale more rapidly, protect margins more effectively, and maintain relevance as national cyber strategies evolve. 

Space Investment Now Prioritises Persistence and Resilience

 

Investment in space has shifted decisively away from launch economics towards persistent capability. Defence and intelligence agencies increasingly prioritise redundancy, assured access, and continuous data flows, aligning directly with commercial demand for low-latency connectivity and real-time Earth intelligence. 

SpaceX’s valuation reflects this integrated model. With Starlink exceeding 2.5 million active users globally while supporting defence, emergency response, and intelligence operations, the company controls a vertically integrated space services stack. Governments have become anchor customers, but commercial scale remains the driving economic force. 

Mid-scale operators reinforce the same investment logic. Planet Labs operates one of the world’s most prominent commercial Earth-observation constellations, providing data to clients in agriculture, energy, and urban analytics, while serving defence and intelligence agencies with high-frequency imagery. This blended revenue model has enhanced cash-flow stability and increased strategic relevance, both essential attributes for long-term investors. 

Autonomy Rewards Deployment Depth, Not Technical Novelty

 

Autonomous systems represent the most capital-intensive layer of the dual-use stack. Here, value is realised only where autonomy can be deployed safely and repeatedly within operational, regulatory, and ethical constraints. Technical performance alone has proven insufficient to sustain investor confidence. 

Anduril Industries, founded in 2017 and now valued at over US$20 billion, has built its growth on operational systems deployed across border security, maritime surveillance, and military installations. Revenue is linked to deployed capability rather than experimental pilots, creating predictability that investors increasingly value. 

At the infrastructure level, NVIDIA’s role exemplifies why capital tends to concentrate around control points. Through Jetson and DRIVE, NVIDIA supplies compute platforms embedded across commercial robotics, automotive, aerospace, and defence programmes globally. This positioning maximises the addressable market while minimising regulatory friction, enhancing its appeal to both public markets and sovereign investors.  

Time-Horizon Alignment Shapes Investment Outcomes

 

The primary risk in dual-use investing is not political scrutiny or ethical debate; rather, it is the potential for unintended consequences. It lies in the misalignment between commercial scaling timelines and defence procurement cycles. Companies that fail to reconcile these dynamics often face delayed revenue realisation and reduced returns despite technical strength. 

Capital structures are adapting accordingly. Strategic investors, such as In-Q-Tel and the NATO Innovation Fund, are increasingly co-investing alongside growth equity and late-stage venture funds, thereby reducing regulatory uncertainty and accelerating adoption. Exit pathways have diversified, with long-term strategic partnerships and minority acquisitions now rivalling IPOs as preferred outcomes in cyber and space. 

Conclusion: Convergence Is Now the Investment Thesis

 

The dual-use stack is no longer merely a thematic overlay; it is the operational foundation of advanced technology markets. Cyber platforms underpin national resilience. Space systems define connectivity and intelligence advantages. Autonomous technologies shape productivity and security across domains. 

For investors, the directive is clear: support platforms designed for convergence from the outset. Underwrite regulatory fluency alongside unit economics and prioritise deployment depth over theoretical capability. 

The next generation of category leaders will not choose between civilian and defence relevance. They will be structurally indispensable to both, and capital that recognises this convergence early will influence not only returns but also the architecture of strategic technology for the decade ahead.