Defence giants provide record backing for military start-ups

The world’s largest defence companies have invested a record amount into military start-ups this year as they try to adapt to the rapidly evolving face of modern warfare.

So-called defence primes, with longstanding ties to western governments and militaries including Lockheed Martin and BAE Systems, have participated in a record $4.1bn in venture capital rounds so far this year, according to data compiled by Dealroom.

“The recent conflicts have highlighted the need for a modern type of warfare whereby existing established platforms coexist alongside new disruptive technologies,” said Gwen Billon, a partner at advisory-focused investment bank PJT, who helps lead aerospace and defence coverage.

“New defence technologies are here to stay and defence primes want to make sure they have exposure to these technologies.”

That shift was on display at this year’s flagship industry event in Farnborough outside London, where a record half of the 1,636 exhibitors were from the defence sector, where traditionally civil aerospace dominated.

Defence technology start-ups, which used the event to showcase their latest offerings, were being courted by bankers and potential investors, among them the biggest names in military hardware.

Quantum Systems’ Strila quadcopter © Sean Gallup/Getty Images

Governments have stepped up military spending in the face of recent conflicts, in particular the war in Ukraine, which has underlined the need for weapons that are faster and cheaper to produce, from interceptor missiles to autonomous drones.

The total value of global defence-related deals, including mergers and acquisitions and fundraisings, has already topped $40bn this year, putting it on track to smash the previous full-year record of $59bn in 2019, according to data compiled by Dealogic.

The biggest arms manufacturers are increasingly having to compete with more nimble, technology-focused rivals looking to ride a wave of increased government spending and rapid transformation. The total…