A newly emerging financial architecture, which combines state-backed funds with other sources of capital to achieve a common goal, could address the shortfall in defence spending.
Traditional venture capital models are not effective for defence, as the timelines are too long, the customer base is too small, and the risks are too high.
New funds, such as D3, the Nato Innovation Fund, Archangel, Expeditions Fund, and Twin Track Ventures, have emerged, highlighting the shift in investor appetite for defencetech.
Despite this, challenges remain, and a new approach is needed to support innovation in the defence sector.
The full-scale invasion of Ukraine has drastically shifted investor perception of funding defencetech from “taboo” to necessity.
Author's summary: Blended capital emerges as a solution for defence innovation funding.