The valuation gap between defence companies that serve one customer and those that serve two is not a rounding error. It is a structural signal about how sophisticated private capital thinks about concentration risk in defence technology investment in 2026.
A perspective from Open Doors Partners
Private capital is paying a measurable premium for dual-use defence technology companies — those whose technology earns revenue in both commercial and defence markets — over pure-play defence contractors that serve only government customers. That premium is not sentiment. It is a considered structural view on customer concentration, revenue durability, and the particular risks of building a business whose only buyer is a procurement office. Understanding why that premium exists, and why it is growing, is one of the more instructive exercises available to allocators thinking about private market positioning in defence technology in 2026.
Defence technology funding reached $49.1 billion globally in 2025, nearly double the $27.2 billion recorded the prior year. Headline totals in a category defined by a handful of outlier rounds can obscure the more instructive pattern underneath — which is not how much private capital is moving into defence, but where within the category it is concentrating, and on what structural basis.
The answer, consistently, is dual-use.
A pure-play defence contractor has one type of customer: a government procurement office operating on budget cycles measured in years, subject to political priority shifts, and historically resistant to the revenue predictability that late-stage private markets prefer. Gross margins at the traditional aerospace and defence primes run between 8 and 10 percent. The contracts are large and the pipelines are long, but the economics reflect the friction of that single-customer relationship.
A dual-use defence technology company operates differently. It sells the same core technology into commercial markets — logistics, infrastructure, industrial operations, sensing — where procurement is faster, contracts are shorter, and the feedback loop between product and customer is tighter. Defence contracts, when they materialise, layer on top of a commercial revenue base rather than replacing it. The result is a business with more than one avenue to scale, more than one path to margin, and materially lower exposure to any single government’s spending priorities.
The private market is pricing that structural difference explicitly. Traditional aerospace and defence primes trade at roughly 1.6 to 2.7 times revenue in public markets. Private capital is assigning dual-use defence technology companies with software architecture and commercial traction multiples an order of magnitude higher. Helsing, the European battlefield AI company, raised €600 million at a €12 billion valuation in 2025. Saronic, the autonomous shipmaker, quadrupled its valuation in a single round. Neither is being priced like a defence contractor. Both are being priced like high-growth strategic platforms whose defence contracts are one of several compounding revenue sources — with gross margins structurally closer to software than to manufacturing.
The broader funding data confirms that the dual-use premium is structural, not company-specific. Venture capital investment in dual-use defence technology from non-traditional contractors reached $56 billion in 2025, according to the 2026 National Security Innovation Base Report Card. In the same period, the Pentagon obligated $4.3 billion toward the sector — less than one percent of its procurement budget. Private capital is deploying into dual-use defence technology at roughly thirteen times the rate of government procurement. The market has made a clear judgment about where durable value sits, well ahead of formal procurement processes catching up to it.
Dual-use defence technology startups consistently raise at higher valuations than pure-play defence counterparts at equivalent funding stages. The premium reflects two factors the market has priced deliberately: extended development cycles, which dual-use companies tend to require, and technology sovereignty imperatives, where governments are willing to pay for domestic capability regardless of near-term commercial returns. Both factors support valuations that pure-play defence economics alone cannot justify.
The Deloitte analysis of this investment category identifies the underlying structural reason with precision. Dual-use technologies — autonomy, AI-enabled decision systems, simulation, sensing — combine deep-tech innovation characteristics with the software scalability that defines modern private investment theses. A fund carrying reputational or ethical constraints around pure defence exposure can participate in a dual-use company’s commercial trajectory without taking a position on any specific weapons programme. That optionality has a price, and late-stage private capital in defence technology is paying it consistently.
European private capital arrived at the same conclusion through a different route. Russia’s full-scale invasion of Ukraine in 2022 forced a rapid reassessment of European defence investment priorities. European defence and resilience startups raised $8.7 billion in 2025, with AI-focused dual-use companies drawing the largest share. The companies attracting the largest rounds — building in autonomy, AI-enabled systems, and sensing — share a consistent structural characteristic: they are not building for a single procurement customer. They are building dual-use platforms with commercial traction alongside government applications.
Manufacturing-focused defence investment rose to $4.7 billion across 39 deals in 2025, nearly doubling the prior year. Manufacturing — once an afterthought in venture-backed defence companies — is now where competitive durability is being tested. Companies that can convert capital into repeatable production output are capturing both funding and contract velocity simultaneously. The dual-use premium applies here too: manufacturing platforms with commercial applications alongside defence contracts are valued above single-customer production facilities.
The pattern holds across geographies and across subsectors. Private capital in defence technology investment concentrates where the technology has more than one home.
What the dual-use valuation premium reveals about private market thinking goes beyond the defence technology category itself. It reflects a broader shift in how serious late-stage capital approaches concentration risk at the business level — a structural preference for companies where core technology creates multiple independent paths to revenue, rather than a single, however well-funded, dependency.
The private capital moving into defence technology investment is not simply backing a geopolitical theme or a government spending headline. It is making a considered distinction between businesses whose durability depends entirely on one customer’s continued commitment and businesses whose technology has earned a position across multiple markets simultaneously. That distinction, and the premium it commands, is among the more durable structural signals in private markets in 2026.
The firms building positions in this category are not simply backing defence. They are backing the structural features of businesses that compound across more than one market. That is, quietly, the work.
What is the dual-use premium in defence technology investment? The dual-use premium refers to the higher valuations private capital assigns to defence technology companies that generate revenue in both commercial and government markets, compared to pure-play defence contractors that serve only government procurement customers. In 2026, traditional defence primes trade at 1.6 to 2.7 times revenue in public markets, while dual-use defence technology companies in private markets are commanding multiples significantly higher — Helsing’s 2025 round implied roughly 20 times revenue at a €12 billion valuation.
Why do dual-use defence technology companies command higher valuations? Dual-use defence technology companies carry lower customer concentration risk than pure-play defence contractors. A company serving both commercial and government customers has multiple independent revenue paths, faster commercial feedback loops, and reduced exposure to government budget cycles and procurement delays. Private capital prices that structural durability at a premium over single-customer defence businesses.
How much did private capital invest in defence technology in 2025? Venture capital investment in dual-use defence technology reached $56 billion in 2025, according to the 2026 National Security Innovation Base Report Card. Total defence technology funding across all categories reached $49.1 billion (PitchBook), nearly double the $27.2 billion recorded in 2024.
What is the difference between dual-use and pure-play defence technology companies? Pure-play defence technology companies serve exclusively government and military customers. Dual-use defence technology companies develop technology with both commercial and government applications — autonomy systems, AI-enabled sensing, simulation platforms — and generate revenue across both markets. The distinction has a direct and measurable impact on private market valuation multiples.
Open Doors Partners LLC does not publicly offer or solicit investment opportunities. All investments are made through private placements under Rule 506(b) of Regulation D. Accredited investors only. Past performance is not indicative of future results.