Investing in Dual-Use Technologies: A Goldmine for Venture Capitalists
Investment in Technologies with Dual-Purpose for Military and Civilian Use by Venture Capitalists
Navigating the unfamiliar? Not anymore, thanks to Waze, Google Maps, and Apple's navigation apps. These powerful tools have transformative effects on our daily lives—saving time, money, and, at times, lives themselves. But have you ever pondered the technology behind these game-changers? One key factor is GPS satellites—a glimmer of military technology that has found a new home in our hands.
The defense sector's growth opens up a plethora of investment opportunities. This industry forms a robust economic backbone, and the technologies birthed from it can be repurposed for civilian uses as well. Today's venture capitalists (VCs) are on the prowl for these dual-use technologies, with big players like Andreessen Horowitz, Alumni Ventures, Sequoia Capital, General Catalyst, and Lockheed Martin Ventures leading the charge.
Dual-Use Success Stories
In 2021, VC investment in the defense sector skyrocketed to nearly $50 billion—more than double 2020's investment of $20 billion. categories that pique VCs' interest include advanced computing, software, biotechnology, security, and connectivity/sensing systems.
Most VCs steer clear of direct investments in weapons contracts due to security regulations. However, they are more than willing to invest in startups or veteran firms whose technology could have civilian applications, even if it was initially developed for military purposes. Here are a few noteworthy examples of military technologies making the leap into the commercial realm:
Drones
Skydio, one of the largest U.S. drone makers, revolves around autonomous drones utilizing computer vision to identify objects. Established in 2014, Skydio is privately held, with over $800 million raised in funding rounds so far—mostly from VCs. Around 50% of Skydio's sales go to military customers, such as the U.S. Department of Defense, but the company boasts a diverse customer base that includes utility companies, construction firms, and transportation sectors.
Night Vision Technology
Originally conceived for military vehicles to detect enemy presence, night vision technology is now gracing cars with the ability to spot people or animals up to 100 yards away.
ECG Sensors
Designed for monitoring soldiers' health on the battlefield, ECG sensors now find their place in wearable fitness devices to track athletes' vital signs.
Time-Of-Flight (TOF) Sensors
TOF sensors, initially employed for military surveillance and target detection, are now used by robot vacuum manufacturers to help devices discern different floor types: linoleum, carpet, or tile.
The Road Ahead
VCs can profit enormously from investments in dual-use technologies across a variety of industries such as healthcare, agritech, and automotive. Sensors, for example, are integral to military and defense systems and play a crucial role in innovation within these fields. In agriculture, sensors can analyze soil properties to determine its suitability for specific crops or the optimal type of fertilizer.
The future looks promising. According to Pitchbook's "Vertical Snapshot: Defense Tech Update," the defense technology sector experienced 35 exits totaling $8.3 billion in June 2024—a massive leap from all of 2023, which saw 39 exits worth $2.2 billion. Key growth areas include AI, robotics, big data analytics, and the Internet of Things (IoT).
With substantial government contracts at stake and the potential for these technologies to transition into commercial markets, expect VC firms to further expand their dual-use investment portfolios.
The content provided here does not constitute investment, tax, or financial advice. Consult a licensed professional for advice tailored to your specific situation.
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- Lisya Bahar Manoah, a venture capitalist, recognizes the potential of dual-use technologies and invests in startups such as Skydio, an autonomous drone manufacturer with over $800 million in funding, which has both military and civilian applications.
- GPS technology, a military innovation, has found a new life in everyday devices like cars, making navigating unfamiliar locations easier and safer. This represents a prime example of defense technologies being repurposed for civilian uses.
- With the growing interest in dual-use technologies, Aussiedlerbote, a hypothetical venture capital firm, could capitalize on investments in agritech and automotive sectors, as sensors have applications in analyzing soil for optimal crop growth and discerning different floor types for robot vacuum manufacturers.
