The best early-stage venture capital (VC) investors in defense and resilience over the next decade will outperform by doing what current mainstream VC still structurally avoids: investing with operational patience, systems-level clarity, and moral clarity — under radical uncertainty. Here’s what they’ll get right, and the key success factors that enable >5x+ returns, true alpha, not just market beta.
1. Build Conviction Outside the Hype Cycle
The best investors won’t chase today’s defense-tech meme stocks or platform plays that map neatly onto existing VC categories (e.g., “the Palantir of XYZ”). Instead, they’ll:
- Focus on undercapitalized infrastructure layers and non-obvious system-of-systems adjacencies — such as manufacturing automation for energetics, digital twin interoperability across coalition command, or low-TRL sovereign supply chains.
- Find value where narrative hasn’t arrived yet (or can’t).
“Default to small, true signals. Ignore hype. Look for authenticity in effort, not aesthetics — in code, not pitch — in tension, not polish.”
[Thinkstorm Operating Principles]
2. Invest in Trajectories, Not Just Tech
High-return defense/resilience investing isn’t about betting on a technology. It’s about identifying teams and systems with the ability to evolve toward critical capability inflection points — and allocating capital to accelerate those trajectories.
Technologies are tools. Trajectories are paths. What delivers durable alpha is not owning the tool — but backing the team on the path to relevance, before the path is legible to others.
Avoid investing in point solutions or narrow vertical “wedge” products. Instead:
- Back teams on a credible trajectory toward a systems-integrated capability.
- Choose startups that can bridge tactical needs (today’s op tempo) with strategic posture (10+ years of deterrence, doctrine, or treaty relevance).
- If a geopolitical or doctrinal event happens (Taiwan, Arctic logistics, undersea sabotage), does this company become systemically necessary?
- Underwrite the arc, not the pitch: This arc often spans 5–10 years and depends on shifts in doctrine, regulation, supply chains, or warfighter adaptation curves — not just commercial KPIs.
- Evaluate Time-to-Relevance, Not Just Time-to-Revenue: In defense and dual-use, revenue ≠ relevance. Some capabilities generate revenue but have no national strategic leverage. Others may have near-zero initial revenue but are directly upstream of mission-critical capability.
“Early-stage technology. Late-stage consequences.”
[Thinkstorm Tagline]
3. Edge Insight + Access: Operate with Unique Intelligence Loops
The best investors and founders will:
- Maintain close proximity to SOCOM, DIU, NIF, service labs, and relevant NATO/EU formations. They can adapt to change macro environments based on operator feedback loops (warfighters, industry partners, foreign MoDs). And they build across time horizons (example: Initial application may be drone countermeasure; long-term ambition may be national EW infrastructure).
- Translate end-user signal (warfighter intent, factory constraints, cyber doctrine) into capital allocation frameworks — before the data hits the pitch decks.
- Invest Before the Doctrinal Lock-In: Once a capability becomes enshrined in procurement doctrine (e.g., JADC2, Replicator, AMTC), capital floods in. By then, valuations are inflated and risk/reward asymmetry vanishes.
The best returns come from:
- Backing companies before the doctrine exists — but after the operators start building bottom-up demand.
- Recognizing the intent of defense leadership before the policy and budget line item exist.
See CJCS Gen. Dan Caine’s formulation:
“I think today’s algorithm of winning for us and our allies is the actions of the SOF forces, plus the actions of the rest of the joint force, plus the actions of the interagency, plus the actions of our allies and partners, plus the actions of the private sector all together to create exponential return on time and exponential return on capital.” — Gen. Dan Caine, CJCS, in his first public remarks as Chairman of the Joint Chiefs of Staff, delivered at SOF Week in May 2025.
4. Defense + Dual-Use Means Production-First, Not Pitch-First
Great investors will:
- Invest in manufacturing stack startups with deep IP and hardware mastery, not just software-led wrappers.
- Prioritize companies that master both design and build. This avoids the trap of “lightweight MVPs” in domains that require sovereign readiness, not SaaS velocity.
“It’s not that we can’t build — we just don’t know who should.”
[Thinkstorm blog]
5. Construct Anti-Consensus Cap Tables
The returns will flow not to those who “get in early” but those who structure early well. The highest-alphas will:
- Work with under-the-radar, technically elite, commercially awkward founders.
- Avoid bidding wars, instead structuring milestone-triggered capital with shared downside and asymmetric upside.
“Venture’s distribution reckoning” has begun. Most firms will underperform because they’ve conformed to tech-tourist cap tables.
[Thinkstorm blog]
Alpha Through Asymmetry: Where Defense VC Diverges from Mainstream Tech VC
| Mainstream VC Assumptions | Defense VC Reality |
|---|---|
| “Product-market fit drives scale.” | Capability–doctrine–production fit is primary. PMF is necessary but insufficient. |
| “Software eats the world.” | Software + sovereign manufacturing + integration eats the world. |
| “LPs want liquidity in 7-10 years.” | Real alpha demands long-duration vehicles and strategic patience. |
| “Founders should optimize for speed.” | Builders must optimize for credibility, dual-capability, and compliance trustworthiness. |
| “TAM defines opportunity” | Capability gaps and geopolitical pressure drive funding. TAM is not defined yet. |
| “Is this a $10B market?” | Is the absence of this a $10B loss? |
| “Move fast and break things” | Insecure tech can kill people or breach sovereignty. |
| “Iterate based on A/B tests” | Iterate based on classified feedback and operational need |
| “Scaling = GTM playbook” | Scaling = manufacturing, export controls, compliance, logistics |
| “What’s your CAC to LTV ratio?” | What’s your cost to system failure ratio? If your agtech fails in drought zones, people starve. |
| “Disrupt incumbents” | Integrate with doctrine. Value accrues by enabling warfighters, not undermining them. |
| “The best founders are obsessed with users.” | The best founders are obsessed with capabilities. “Users” in defense don’t click buttons; they fly planes, fire missiles, and win battles. |
| “Make something people want.” (YC mantra) | Make something your country cannot afford to live without. |
| “Let the market decide.” | Resilience is a public good. The market won’t build seed banks, grid redundancy, or pandemic response unless forced. |
| “Low-margin sectors aren’t VC-backable.” | Margins don’t matter when the alternative is societal failure. Food, water, and energy don’t follow SaaS rules. |
| “We need hypergrowth.” | We need hyper-stability. Not everything should grow exponentially — some systems should just not fail. |
| “Capital-efficient models win.” | System-efficient models survive. Real infrastructure is capital-intensive — and non-negotiable. |
| “Let’s Uber-ize food/health/climate.” | Systems with externalities can’t be frictionless — they must be accountable. |
Mental Models for Outperforming
“Radical Uncertainty” > Probabilistic Risk
David Tuckett and Herbert Simon both argue most economic actors misprice uncertainty because they seek computable models instead of ecologically valid judgment systems.
Good defense investors accept that true value arises under radical uncertainty — and build decision frameworks accordingly.
“Commander’s Intent” as Investment Logic
Like Aftragstaktik, defense VC must decentralize execution while aligning to clear, minimally constraining intent. This allows teams to adapt without daily investor handholding.
Strategic Alpha Is Earned When You:
- Fund production before policy forces others to react.
- See doctrinal gaps as investable spaces.
- Know which capabilities matter in a conflict before public RFPs emerge.
- Price uncertainty instead of playing spreadsheet VC with backward IRR models.