Why Veteran Founders Win in Defense Tech (and Why the Market is Just Catching Up)
Defense tech is having a moment. Capital is flowing, new companies are forming, and the conversation has shifted from “why now?” to “who wins?” But in the rush to fund the next generation of defense startups, one group of founders has been hiding in plain sight: veterans.
For decades, veterans have been building businesses at scale—but not in the parts of the economy venture capital pays attention to. According to the Small Business Administration, at the end of 2024 veterans owned between 1.6 and 1.9 million businesses in the United States, employing millions and generating nearly $1 trillion in annual revenue. These businesses are overwhelmingly concentrated in traditional sectors—construction, logistics, services—where discipline, reliability, and execution matter more than venture-style growth. The result is a massive entrepreneurial base, but one that is historically disconnected from venture capital.
At the same time, venture capital itself is highly selective and structurally narrow. Out of roughly 2 million new businesses created each year in the U.S., according to the National Venture Capital Association, only 14,320 received venture funding in 2024—roughly 0.7%. That funnel is already tight—and it has historically favored founders with proximity to Silicon Valley networks (nearly 35% in 2024), not those emerging from military service. This is not a consequence stemming from a lack of veteran entrepreneurship, but a mismatch between where veterans build and where capital flows.
That mismatch is particularly striking in defense technology. The same qualities that make veterans successful operators—mission focus, comfort with ambiguity, and execution under constraint—are exactly what early-stage defense startups require. Veterans also bring something that cannot be taught or easily replicated: direct understanding of the end user. They have lived the problems defense companies are trying to solve. They understand procurement realities, operational friction, and the gap between capability and deployment. In an industry where credibility matters as much as innovation, this is a structural advantage.
And yet, until recently, the market largely ignored it. Veteran-owned businesses make up only a small share of total U.S. firms—roughly 4–5% of all business owners—and have been declining as a percentage over time. But that statistic masks a more important shift: where veterans are building is changing. As defense tech becomes a legitimate venture category, more veterans are entering startups—not just as operators, but as founders. The cultural perception of “service” is expanding beyond the military itself and into building companies that support national security.
There are three key trends behind this:
The highest percentage of veterans since WWII now have combat experience--and they've got ideas on how to do things better. Surprisingly, some studies show that as much as 78% of this generation of veterans have deployed to a war zone at least once—higher than in Vietnam and Korean wars.
Veterans are getting their MBAs at a higher rate—and going to better B-schools.
Defense tech is booming. With defense spending across the globe at levels not seen since the mid-1980s, coupled with contracting changes that even the playing field for smaller companies, defense start-ups are in the spotlight.
Veteran Ventures has been writing about this since 2018, and these facts underscore the structural reason for our fund's existence. This is fundamentally where we believe the opportunity is. The venture ecosystem has spent the last decade optimizing for software-focused founders solving consumer or enterprise problems. Defense tech requires a different archetype—one that combines technical ambition with operational realism, with a hard eye to large, extremely complex problems rather than individual consumer behavior. Veteran founders sit at that intersection. The fact they have been underrepresented in venture-backed outcomes is not a reflection of capability—it is a reflection of access.
At Veteran Ventures, we see this as a market inefficiency. Anecdotally, the vast majority of companies we see each year have some level of combat or operational experience. That's extremely valuable to the next generation of defense companies. While engineers and repeat founders will continue to build great companies, having a veteran on the leadership team is a competitive edge—these will be companies that understand the mission firsthand. The market is catching up to that reality. The question is not whether veteran leaders will win in defense tech, but rather how long investing in veterans will be a niche market.