Policy Convergence Creates Exit Clarity?
23 July 2025 - A Weekly Publication by New North Ventures
Government Policy Signals Sustainable Growth
While defense tech valuations have raised eyebrows across Sand Hill Road, we're seeing unprecedented government policy alignment coupled with commercial demand that suggests this isn't speculative froth—it's structural market evolution.
Three concurrent developments have created real demand-side momentum. Trump’s AI executive orders eliminated regulatory barriers that previously cost companies $500K-$2M annually in compliance overhead. The SPEED Act accelerates DoD procurement from 6-10 years to 90-150 days, fundamentally favoring commercial-first approaches. Most tellingly, Congress allocated $49+ billion across AI, space, and cybersecurity—categories that directly map to leading venture portfolios.
While we are watching with caution, it is becoming increasingly clear that these changes aren’t typical government lip service. The SPEED Act creates a Requirements, Acquisition and Programming Integration Directorate specifically to fast-track commercial solutions. The $16 billion "Scaling Innovation" budget line explicitly targets "defense technology startups who have demonstrated readiness to start building products at scale." When DoD mandates commercial-first procurement and Congress funds it with four-year spending stability, that's demand-side clarity most sectors rarely receive.
Portfolio companies are already seeing this translate into real traction. AI-cyber deals are closing faster, space companies are fielding Golden Dome inquiries, and traditional primes are partnering rather than competing. While implementation risks remain—bureaucratic resistance, clearance bottlenecks, personnel turnover—the policy convergence is unprecedented.
For dual-use investors, this government signaling provides the exit pathway clarity that venture-scale returns require and increases optimism and confidence among limited partners. Watch for Q4 contract awards under new authorities, DIU engagement acceleration, and OTA consortium expansion. The opportunity window is opening wider than it's been in decades.
Booz Allen Ventures Invests $200MM in Defense Tech Startups
The Booz Allen announcement reinforces the government signaling trends we've been tracking. A century-old defense contractor just tripled their venture arm to $300 million, targeting startups in AI, drones, and manufacturing technology. Their CFO's observation was particularly telling—the best startups "don't need capital, what they need is help to grow faster or get access to the government." This highlights a key shift in how traditional defense contractors are approaching the market. Rather than competing directly with startups, they're positioning themselves as government access facilitators. This also represents a tangible move from policy announcements to actual capital deployment behind commercial-first defense strategies, showing how incumbents are adapting to the new procurement environment. It also expands the target surface for VC to co-invest with Booz Allen in disruptive new technologies.
More links to explore:
Burgeoning Hedge Strategy Amplifies Commercial Technology In Defense
Opinion: Christian Brose on the Coming Revolution in Military Tech
HawkEye 360's Chief Strategy Officer Patrick Zeitouni co-authored a compelling piece in The National Interest on commercial space's role in national security. The article opens with Chinese spacecraft conducting "dogfighting in space" maneuvers—a stark reminder that the next military frontier is already here. Patrick and his co-author Kyle Peterson make the case that America's defense advantage depends on harnessing commercial space innovation, noting that US defense and dual-use space startups raised $35-36 billion in 2022-2023, matching the Pentagon's entire R&D budget. They advocate for allocating 10-20% of procurement budgets to emerging entrants and emphasize that replacing satellites could soon be cheaper than destroying them. It's a strong articulation of why commercial space represents a generational opportunity for defense modernization.
In this episode of the 'Securing Our Future' podcast, hosted by New North Ventures, Jeremy interviews Jennifer Ewbank, a former Deputy Director of the CIA for Digital Innovation, about her storied career, the importance of private-public partnerships, and navigating transitions from a high-stakes government role to the private sector. They delve into Jennifer's insights on the importance of purpose, the role of technology, and her personal journey post-retirement.
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