Two weeks ago I sat on a panel on “Defense & commercial revenues of tech startups, how to balance?” — Dual-Use and Defense startups. The other panelists were Jake Chapman @ Marquee VC, Matt Kaplan @ Shield Capital, Chris Moran @ Lockheed Martin Ventures, and Kris Vulgan @ Ferocity Capital. It was a marathon panel session, with questions like
- How startups should balance government and commercial revenues? Why is it important?
- Does selling to the government impact startup valuation?
- What have we learned from the Ukraine war?
- How is it to be a defense VC? What’s the difference comparing to traditional SV tech VCs, if any?
- While 2026 defense budget will reach record 1 trillion (and RDT&E gets a 27% increase), many S&T programs are currently truncated. What opportunities does that bring to defense VCs?
I loved the happy bantering with Jake and Chris and their level-headed view. But I don’t think I was very good at articulating my key view points, or key themes that permeate my investment decisions and strategy. I’m somewhat frustrated about that, about myself. This shouldn’t have been hard. So here they are.
National Resilience comes from aligning capital with production capacity, not just innovation.
Dual-use startups can’t survive—or serve sovereign needs—by chasing contracts or valuations alone. They must build resilient production systems that can scale under stress and adapt to uncertainty. I would frame it as
product innovation is table stakes; production capacity and readiness are competitive strength.
Thinkstorm Thesis
This shifts the conversation from “revenue balance” to “capacity balance”: startups should view government vs. commercial sales as two demand signals testing the same production and scaling system. That can be achieved through different means (early product design for dual use, modular product strategy, product instrumentation, etc.) but I shouldn’t be prescriptive here.
Defense + commercial balance is not about percentages. It’s about building dual legitimacy.
For founders: commercial markets validate speed, usability, and cost discipline. Defense customers validate mission-critical performance and endurance. Balancing both builds long-term legitimacy. For investors: government contracts can look slow and risky, but they establish barriers to entry and sovereign relevance. Commercial revenue proves market adaptability. Together, they de-risk the trajectory. The goal isn’t revenue diversification—it’s aligning with both market and mission. That’s how startups move from venture products to sovereign capabilities. Again: there are many ways to get there, but I don’t want to be prescriptive.