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Fresh off a banner 2024, venture capital firms investing in national security startups are fine-tuning their approach to both align with the Trump administration's priorities and have broader potential.
I'm Michael Bodley, and this is The Weekend Pitch. You can reach me at https://my.pitchbook.com/n/73093.4973110.2871988 or on X @michael_bodley.
The Department of Defense has proposed a record $1 trillion budget, which is undoubtedly increasing investor interest in defense startups. At the same time, VCs are also hedging their bets by examining startups that do business with both governments and the private sector. And some are even backing related companies that have yet to do business with the government at all.
Behind this contingency planning is some investors' concerns over a brewing valuation bubble. This year, pre-revenue startups in defense hotspot El Segundo, CA, have recorded $100 million pre-money valuations.
Still, VCs are emphasizing the opportunity stemming from a free-spending DOD.
There's already been a hefty $3.2 billion total of US aerospace and defense investment into startups so far this year, according to a recent PitchBook analyst note.
One way for startups to stand out, according to a consultant to US venture-backed startups on national security issues who spoke under the condition of anonymity, is to land a specific DOD grant: the Small Business Innovation Research program.
With a paltry cap of $1.5 million or so per company, it’s earmarked for startups aiding US defense initiatives. Though the capital is inconsequential, it has become common for VCs to favor startups with such grants.
"There is a disconnect between VCs and the government, so VCs will look at something and say, 'This is amazing,' and the government will look at this and say, 'I'm not interested,'" the consultant explained. |
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Navigating 2025’s investment landscape with Lightspeed
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The venture capital market showed growth in 2024, but deals remained concentrated among a few key players. With AI dominating deal value and competition intensifying, traditional dealmaking approaches are under pressure.
VCs must balance relationship-building with data-driven strategies to stay ahead. On May 8 Mercedes Bent, Venture Partner at Lightspeed, and Brian Murphy, Lead Data Scientist at Salesforce Ventures, will share how top investors are adapting to the shifts. Learn how to navigate these changes, identify opportunities more effectively, and implement the strategies that set successful firms apart.
Register now |
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"We look for commercially viable products and services. If there's a regulatory tailwind, that’s great, but we don’t rely on it."
—Erich Becker, an investor at clean energy specialist firm Verdane, on the shifting attitudes amongst European PE investors as their investments in renewable energy reached record highs last year. |
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According to our latest regional snapshot, France registered its worst quarter for VC dealmaking in five years as political uncertainty rocks the country's economy. How much was invested in French startups in Q1?
A) €1.4 billion
B) €3.2 billion
C) € 2.1 billion
D) € 4.4 billion
Find your answer at the bottom of The Weekend Pitch! |
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Keep an eye out for these insights and research reports coming out this week:
- Q1 2025 Germany Snapshot
- Q4 2024 Industrials: Construction & Engineering Report
- Q1 2025 Consumer Retail Report
- Q1 2025 Supply Chain Report
- 2025 Global Fund Performance Report (as of Q3 2024)
- Analyst Note: Takeaways from LSX World Congress Europe
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Real assets lead
private market returns
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Our analysts provide a view of returns across active, closed-end funds—covering data from over $4 trillion in net asset value. Insights and quarterly return benchmarks for the private markets give a snapshot of performance over the quarter.
The standout in Q4 was real assets, encompassing infrastructure and natural resources, with an aggregate 2024 return of over 10%. This outpaced second-place PE, which returned nearly 9% for the year. Our data indicates that returns for VC and real estate have started to improve in recent quarters.
The Q4 2024 Private Capital Indexes also covers indexed returns for private debt, funds-of-funds and secondaries—highlighting risk-modeling data, including adjusted volatility estimates and correlations with public indexes. |
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In the year 2029: Forecasting
private capital's growth
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