Key Takeaways
- • Global defense-tech investment reached a record $40.8 billion in the first half of 2026, according to a State of Defense Report released by Israel-based Protego Ventures and shared with The Jerusalem Post.
- • Global defense-tech funding hit a record $24.4 billion in Q1 2026 alone, with the firm estimating nearly $70 billion invested over the past 12 months.
- • Israeli defense, space, and quantum tech drew approximately $846 million in H1 2026, 11.6% of Israeli tech funding and the third-largest category behind cybersecurity and enterprise software.
- • Capital is concentrating in a few large deals: Anduril's $5 billion Series H accounted for nearly one-third of global defense-tech funding in Q2 2026, while only an estimated 5% to 6% of 15,000+ NATO-market dual-use scaleups have won government contracts.
- • Exits are validating the category, led by Motorola Solutions' $1.5 billion acquisition of counter-drone firm D-Fend Solutions in August and the NYSE debut of XTEND at roughly $1.5 billion a month later.
Summary
Global investment in defense technology reached a record $40.8 billion during the first half of 2026, according to a new industry report from Israel-based venture capital firm Protego Ventures. The State of Defense Report, shared with Defense & Tech by The Jerusalem Post, attributes the surge to heightened geopolitical tensions, rising military spending, and demand for autonomous systems and deployable battlefield technologies. The firm estimates global defense-tech investment has climbed to nearly $70 billion over the past 12 months, with $24.4 billion raised in the first quarter, the strongest quarter on record. Capital is increasingly concentrating in fewer, larger deals, and major defense start-ups are attracting unprecedented valuations. Median pre-money valuations for venture-growth companies in the sector reached $1.4 billion in Q1, nearly triple the 2025 median.
By category, autonomous systems, including drones, unmanned surface vessels, and unmanned ground vehicles, captured 24% of funding. Sensing, connectivity, and security followed at 16.8%, and weapons and munitions, including directed energy weapons, at 14.4%. Autonomous systems also captured more than 42% of total quarterly investment. Anduril's $5 billion Series H round accounted for nearly one-third of global defense-tech funding in Q2 2026.
The boom is reshaping Israel's start-up ecosystem. According to Protego, defense, space, and quantum technologies accounted for 11.6% of Israeli tech funding in H1 2026, roughly $846 million, making it the country's third-largest technology category. Five years ago the sector represented less than 2% of Israeli venture funding. The report says one-third of Israeli defense-tech start-ups were founded after October 2023, and the ecosystem has grown to about 350 active companies from around 150 eighteen months earlier. More than 100 have had technology adopted directly into IDF operations. Protego co-founder and managing partner Lital Leshem said many founders are reservists or recent soldiers who "understand battlefield challenges firsthand," adding that such companies "get validated in the field long before a normal procurement cycle would allow." The Defense Ministry's MAFAT directorate placed NIS 1.08 billion in orders from defense tech start-ups in 2025, with 25% from foreign customers, a decline from NIS 1.22 billion the previous year.
The report also highlights structural challenges. Of more than 15,000 dual-use scaleups across NATO and allied markets, an estimated 5% to 6% have secured government contracts. Protego co-founder and general partner Lee Moser argued that Israeli firms' export-oriented design gives them an advantage, noting that "systems built here work anywhere."
Exits are cited as evidence of maturation. In August, Motorola Solutions completed its $1.5 billion acquisition of Israeli counter-drone company D-Fend Solutions, roughly 22 times the $67 million it had previously raised; the report calls it the most expensive Israeli defense tech exit on record. A month later, XTEND, a Protego portfolio company, debuted on the New York Stock Exchange at a valuation of approximately $1.5 billion. The report suggests Israel could become a key supplier of next-generation defense technologies to allied nations.
By category, autonomous systems, including drones, unmanned surface vessels, and unmanned ground vehicles, captured 24% of funding. Sensing, connectivity, and security followed at 16.8%, and weapons and munitions, including directed energy weapons, at 14.4%. Autonomous systems also captured more than 42% of total quarterly investment. Anduril's $5 billion Series H round accounted for nearly one-third of global defense-tech funding in Q2 2026.
The boom is reshaping Israel's start-up ecosystem. According to Protego, defense, space, and quantum technologies accounted for 11.6% of Israeli tech funding in H1 2026, roughly $846 million, making it the country's third-largest technology category. Five years ago the sector represented less than 2% of Israeli venture funding. The report says one-third of Israeli defense-tech start-ups were founded after October 2023, and the ecosystem has grown to about 350 active companies from around 150 eighteen months earlier. More than 100 have had technology adopted directly into IDF operations. Protego co-founder and managing partner Lital Leshem said many founders are reservists or recent soldiers who "understand battlefield challenges firsthand," adding that such companies "get validated in the field long before a normal procurement cycle would allow." The Defense Ministry's MAFAT directorate placed NIS 1.08 billion in orders from defense tech start-ups in 2025, with 25% from foreign customers, a decline from NIS 1.22 billion the previous year.
The report also highlights structural challenges. Of more than 15,000 dual-use scaleups across NATO and allied markets, an estimated 5% to 6% have secured government contracts. Protego co-founder and general partner Lee Moser argued that Israeli firms' export-oriented design gives them an advantage, noting that "systems built here work anywhere."
Exits are cited as evidence of maturation. In August, Motorola Solutions completed its $1.5 billion acquisition of Israeli counter-drone company D-Fend Solutions, roughly 22 times the $67 million it had previously raised; the report calls it the most expensive Israeli defense tech exit on record. A month later, XTEND, a Protego portfolio company, debuted on the New York Stock Exchange at a valuation of approximately $1.5 billion. The report suggests Israel could become a key supplier of next-generation defense technologies to allied nations.
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