Defense Technology Investing
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Private Markets | Defense Technology

Defense Technology: From Prototype to Production

Private capital is increasingly shaping the next generation of defense technology. As governments prioritize aerospace, autonomy, AI infrastructure, and dual-use innovation, many of the companies developing these capabilities remain privately held and are scaling rapidly from prototype to production.

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Why Defense Technology Is Becoming A Major Private Market Theme

Defense technology has evolved beyond early-stage experimentation into a rapidly scaling segment of the private market ecosystem. Venture funding accelerated significantly in recent years as governments and investors increased focus on modernization, industrial capacity, and next-generation national security infrastructure.

Chart illustrating two times funding growth in defense technology venture funding
~2X

Funding Growth

Defense technology venture funding nearly doubled from 2024 to 2025.[1]

87%

Late-Stage Concentration

Most capital flowed toward venture growth and late-stage companies focused on scaling production.[1]

$1.5T

Proposed FY2027 Budget

Recent federal budget proposals continue reinforcing modernization priorities across defense systems and infrastructure.[2,3]

1 PitchBook

2 Yahoo Finance: Trump’s $1.5T military budget

3 Tectonic Defense: The $1.5T defense budget

The Institutional Shift: Accessing the Private Defense Ecosystem

The defense sector has moved beyond early-stage speculation into an established category of private equity defense exposure. With capital increasingly concentrated in venture growth and late-stage deals, the market is prioritizing late-stage private companies that have demonstrated proven manufacturing capacity.

This evolution highlights a structural gap in many traditional portfolios. While legacy defense primes are accessible via public markets, the specialized firms driving the prototype to production pivot are choosing to remain private for longer. Understanding how to access these high-barrier private assets is now a critical part of evaluating next-generation industrial growth as the sector shifts toward scaling critical national security infrastructure.

How Defense Technology Companies Are Scaling From Prototype To Production

The defense technology ecosystem is increasingly shifting from research and testing toward deployment and scaled production. Procurement pathways are evolving, manufacturing capacity is expanding, and private companies are playing a growing role in aerospace, autonomy, communications, and AI-enabled systems.

This shift is changing how investors and financial professionals evaluate innovation occurring within private markets.

Why Private Markets Are Playing A Growing Role In Defense Technology

Many companies shaping modern defense capabilities remain privately held for longer periods of time. Venture growth and late-stage private capital have enabled companies to continue scaling operations outside public markets while expanding manufacturing, infrastructure, and deployment capabilities.

As innovation increasingly develops within private ecosystems, investors are evaluating how private market exposure may complement broader portfolio discussions.

This is covered more in depth in the full white paper. Request your copy here.

Aerospace, AI, and Autonomy in Defense Technology

Modern defense innovation increasingly overlaps with broader commercial technology ecosystems.

  • Aerospace & Space Infrastructure: Launch systems, satellite infrastructure, and communications networks continue shaping modern defense capabilities.
  • Artificial Intelligence Infrastructure: AI systems and advanced computing are becoming increasingly integrated into defense and autonomy applications.
  • Autonomous Systems: Autonomous vehicles, drones, robotics, and next-generation navigation systems continue attracting investment and procurement focus.
  • Dual-use Innovation: Many technologies now operate across both commercial and defense applications, accelerating scalability and adoption.

The Growing Investment Focus on Defense Technology

As private companies continue scaling next-generation technologies, many investors and financial professionals are evaluating how innovation occurring within private markets may influence long-term portfolio positioning. This trend is occurring alongside broader shifts including:

  • Companies remaining private longer
  • Increasing late-stage capital formation
  • Evolving procurement priorities
  • Growing overlap between AI, aerospace, and defense infrastructure

Late-Stage Private Market Exposure Through The Private Shares Fund

The Private Shares Fund is a 1940 Act closed-end interval fund focused on late-stage private growth companies across sectors including aerospace, defense technology, and AI data infrastructure. The Fund offers:

  • Diversified private growth company exposure
  • Daily NAV
  • 1099 tax reporting
  • A, L and I share class options
  • $2,500 minimum for A and L share
  • No accreditation requirements

To learn more about The Private Shares Fund, explore the current portfolio, or get in touch with the sales team.

Investment in the fund involves substantial risk. The fund is not suitable for investors who cannot bear the risk of loss of all or part of their investment. The fund is appropriate only for investors who can tolerate a high degree of risk and do not require a liquid investment.

FAQs

What is defense technology?

Defense technology refers to technologies and systems developed to support national security, military modernization, aerospace infrastructure, communications, autonomy, cybersecurity, and related capabilities. The category increasingly overlaps with commercial innovation areas such as artificial intelligence, robotics, satellite infrastructure, and advanced manufacturing.

What are dual-use technologies?

Dual-use technologies are technologies that can serve both commercial and defense-related applications. Examples may include satellite systems, AI infrastructure, autonomous systems, communications networks, robotics, and advanced computing platforms.

Why are many defense technology companies still private?

Many defense technology companies continue raising venture growth and late-stage private capital rather than entering public markets early in their lifecycle. Remaining private longer may allow companies to continue scaling operations, manufacturing capacity, and infrastructure while developing technologies over extended time horizons.

Why are private markets important in defense technology?

Many next-generation defense and aerospace technologies are being developed by privately held companies. As capital increasingly flows toward late-stage private companies, private markets are playing a growing role in funding innovation, deployment, and production scaling across the defense technology ecosystem.

How are aerospace and AI influencing defense innovation?

Aerospace systems, satellite infrastructure, autonomous platforms, and artificial intelligence are increasingly integrated into modern defense capabilities. Many emerging technologies now operate across both commercial and national security applications, accelerating development and adoption across multiple industries.

Why are investors paying attention to defense technology?

Investors and financial professionals are increasingly evaluating defense technology as governments prioritize modernization, procurement acceleration, industrial capacity, autonomy, AI infrastructure, and aerospace systems. Venture funding and late-stage private capital formation have also expanded significantly in recent years.

What is an interval fund?

An interval fund is a type of closed-end investment fund that periodically offers to repurchase a limited percentage of outstanding shares at net asset value (NAV). Unlike traditional mutual funds, interval funds are generally designed to invest in less liquid assets, including certain private market investments.

What is The Private Shares Fund?

The Private Shares Fund is a 1940 Act closed-end interval fund focused on late-stage private growth companies. The Fund invests across sectors including aerospace, AI infrastructure, autonomy, and defense technology. Read more about the Fund’s strategy here.

Important Disclosure

Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus with this and other information about The Private Shares Fund (the "Fund"), please download here, or call 1-855-551-5510. Read the prospectus carefully before investing.

The investment minimums are $2,500 for the Class A Share and Class L Share, and $1,000,000 for the Institutional Share

Investment in the Fund involves substantial risk. The Fund is not suitable for investors who cannot bear the risk of loss of all or part of their investment. The Fund is appropriate only for investors who can tolerate a high degree of risk and do not require a liquid investment. The Fund has no history of public trading and investors should not expect to sell shares other than through the Fund's repurchase policy regardless of how the Fund performs. The Fund does not intend to list its shares on any exchange and does not expect a secondary market to develop.

All investing involves risk including the possible loss of principal. Shares in the Fund are highly illiquid, and can be sold by shareholders only in the quarterly repurchase program of the Fund which allows for up to 5% of the Fund's outstanding shares at NAV to be redeemed each quarter. Due to transfer restrictions and the illiquid nature of the Fund's investments, you may not be able to sell your shares when, or in the amount that, you desire. The Fund intends to primarily invest in securities of private, late-stage, venture-backed growth companies. There are significant potential risks relating to investing in such securities. Because most of the securities in which the Fund invests are not publicly traded, the Fund's investments will be valued by Liberty Street Advisors, Inc. (the "Investment Adviser") pursuant to fair valuation procedures and methodologies adopted by the Board of Trustees. While the Fund and the Investment Adviser will use good faith efforts to determine the fair value of the Fund's securities, value will be based on the parameters set forth by the prospectus. As a consequence, the value of the securities, and therefore the Fund's Net Asset Value (NAV), may vary.

There are significant potential risks associated with investing in venture capital and private equity-­backed companies with complex capital structures. The Fund focuses its investments in a limited number of securities, which could subject it to greater risk than that of a larger, more varied portfolio. There is a greater focus in technology securities that could adversely affect the Fund’s performance. The Fund's quarterly repurchase policy may require the Fund to liquidate portfolio holdings earlier than the Investment Adviser would otherwise do so and may also result in an increase in the Fund's expense ratio. Portfolio holdings of private companies that become publicly traded likely will be subject to more volatile market fluctuations than when private, and the Fund may not be able to sell shares at favorable prices, such companies frequently impose lock-ups that would prohibit the Fund from selling shares for a period of time after an initial public offering (IPO). Market prices of public securities held by the Fund may decline substantially before the Investment Adviser is able to sell the securities.

The Fund may invest in private securities utilizing special purpose vehicles ("SPV"s), private investment funds (“Private Funds”), private investments in public equity ("PIPE") transactions where the issuer is a special purpose acquisition company ("SPAC"), and profit sharing agreements. The Fund will bear its pro-rata portion of expenses on investments in SPVs, Private Funds, or similar investment structures and will have no direct claim against underlying portfolio companies. PIPE transactions involve price risk, market risk, expense risk, and the Fund may not be able to sell the securities due to lock-ups or restrictions. Profit sharing agreements may expose the Fund to certain risks, including that the agreements could reduce the gain the Fund otherwise would have achieved on its investment, may be difficult to value and may result in contractual disputes. Certain conflicts of interest involving the Fund and its affiliates could impact the Fund’s investment returns and limit the flexibility of its investment policies. This is not a complete enumeration of the Fund's risks. Please read the Fund prospectus for other risk factors related to the Fund.

The Fund may not be suitable for all investors. Investors are encouraged to consult with appropriate financial professionals before considering an investment in the Fund.

Companies that may be referenced on this website are privately-held companies. Shares of these privately-held companies do not trade on any national securities exchange, and there is no guarantee that the shares of these companies will ever be traded on any national securities exchange.

The Private Shares Fund is distributed by FORESIDE FUND SERVICES, LLC

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