The defense technology industry has been getting increased attention from both the government and private investors. U.S. Defense Secretary James Mattis recently stated that he is looking for help from private technology companies to make the US military as effective as possible.
The Republican administration recently tripled funding for the Defense Innovation Unit Experimental (DIUx), a relatively new division within the US Department of Defense (DoD) that has been charged with getting technology startups to help the military achieve its goals. The division already appears to be making an impact – it has had its software deployed in the Middle East for use in on-the-fly targeting of weapons systems.
DIUx has awarded $100mm in government contracts to 45 projects. While these investments appear modest, private investors have put $2bn into these companies, showing that they believe in the viability of their technologies. One private equity firm, Veritas Capital, has raised $3.5 billion to fund future investments in technology-focused middle-market companies that support government-related activities across various sectors, e.g. government services, aerospace, defense, and national security.
The increased interest in defense spending is not limited to the United States. The NATO Communication and Information (NCI) Agency plans to invest 3 billion EUR through 2019 to strengthen cyber, air and missile defense. Also, Chinese investment companies with ties to the Chinese government have been investing in U.S. start-ups with cutting-edge technologies that may have military applications. Neurala, a Boston based artificial intelligence company stands out and received support from a state-run Chinese company.
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