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  • Eashwar Thenpattinam, Zachary Moss, James Palmer, Cael McCormick, Derek Reim, and Sherman Williams

2023 Dual-Use Report

By Eashwar Thenpattinam, Zachary Moss, James Palmer, Cael McCormick, Derek Reim, and Sherman Williams


Welcome to our fourth annual review of the Dual-Use (DU) Technology report, where we maintain and update our existing database of DU companies that have raised over $5 million of Venture Capital funding. We aim to gain insights into trends within the DU landscape by actively monitoring companies within the space. 


In response to the fluctuating and unpredictable market conditions, Venture Capital adapted to the heightened uncertainty and volatility. The economic landscape in 2023 closely resembled that of the previous year. Throughout a significant part of the year, interest rates rose and remained elevated, leading to higher capital costs. As an example, between 2009 and 2021, the average federal funds rate was 0.51%, by the end of 2023, that rate was 5.33%. This dramatic increase in the cost of capital was characterized by a surge in down rounds and share re-pricing among both public and private high-growth firms. A secondary order effect is that startups faced extended funding cycles due to the intensified due diligence requirements, consequently prolonging deal completion timelines. The result was that In 2023, the amount of VC Capital invested in the U.S. dropped down to $170.6B from $242.2B in 2022, a 30% decrease, and the amount invested in 2023 is even lower than the amount of VC capital invested in 2020 (which was the initial pandemic stricken year). 

Despite the absence of groundbreaking legislation in 2023 that directly influenced the dual-use sector, DU companies continued to benefit significantly from the substantial funds and incentives allocated through the Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and the CHIPS and Science Act. The National Defense Authorization Act for fiscal year 2024 introduced notable measures aimed at benefiting established dual-use companies, including streamlined procurement processes for commercial goods and services, extended multiyear contracts, and the New Technology Acquisition Model Pilot Program. This program, designed to grant end-users immediate access to new technologies, promises contract finalizations with private entities within 100 days—significantly faster than standard acquisition periods. Additionally, the National Standards Strategy for Critical and Emerging Technology delineated efforts in both the public and private sectors to utilize the historic $210 billion federal research and development budget. The widespread bipartisan support for these initiatives underscores a keen interest in reinforcing the collaboration between the public and private sectors. 

The ongoing conflict in Ukraine and escalating tensions with China continued to exert substantial influence on the DU Tech industry, mirroring trends from 2022. A noticeable rise in dual-use accelerators, fostering collaborations between the government and the private sector, was observed in Europe. NATO's introduction of the Defence Innovation Accelerator Programme (DIANA), with facilities across nearly all allied nations, signifies a strategic move to bolster innovation. Technologies emerging from DIANA may qualify for investments from the NATO Innovation Fund, a €1 billion venture capital fund. The inclusion of Finland and Sweden into NATO is poised to further emphasize the development of cutting-edge technologies in Europe, leveraging the technological prowess of their highly advanced military capabilities.


This year's analysis encompasses 123 Dual-Use companies that successfully secured funding of $5 million or more in 2023. Our initial dataset was extracted from Crunchbase, followed by a manual screening to exclude firms not aligned with our predefined criteria. Additionally, we consulted additional resources, including PitchBook, LinkedIn, and the companies' official websites.

We categorize DU companies as technology-driven enterprises serving both the government and commercial sectors. This classification omits entities that might potentially cater to government needs in the future but currently lack explicit government-targeted solutions. Moreover, it excludes service-oriented firms and those without technological components. In our updated 2023 database, we've expanded our definition of 'government' to encapsulate utilities, aiming to more accurately reflect government involvement in sustainability and infrastructure initiatives. Our analysis continues to focus on DU companies located in the US and Europe, established post-2000 (this report focuses on 2023), which have amassed over $5 million in VC funding.

Key Findings:

  • California, particularly the Bay Area, maintains its stronghold on the dual-use startup landscape. However, there's a notable shift in funding distribution across the country compared to previous years. While California continues to lead, Colorado emerges as a strong contender in company headquarters.

  • Cleantech and aerospace startups are emerging as pivotal players within the dual-use technology landscape, showcasing remarkable growth and potential. The AI and machine learning industries continue to assert themselves as major players within the dual-use startup space.

  • In contrast to the decrease in diversity observed in 2022, 2023 presents a notable shift as the diversity of women as founders experienced a marked increase. Specifically, the percentage of companies with women on the founding team surged, reflecting a positive trend towards greater inclusivity and representation within the dual-use startup landscape. 

  • In our analysis of the 2023 data pool, approximately one-third of dual-use startups were awarded a Small Business Innovation Research (SBIR) status. The substantial representation of SBIR-awarded startups underscores the importance of government support in driving innovation and fostering growth within the dual-use technology landscape.

Top US Cities:

San Francisco holds a commanding lead in the dual-use technology sector, significantly outpacing other regions. The remarkable growth witnessed in 2021, eclipsing the achievements of the past two decades, is largely due to the city's vibrant and resilient venture capital scene.

California continues to be the epicenter of funding for Dual-Use (DU) companies, a trend expected to strengthen with the growing emphasis on AI/ML (SF) and space technologies and other adjacent hardware-centric companies (LA). Although 2022 witnessed a diversification with companies spreading beyond the Bay Area, 2023 saw a decline in DU funding in all states except for California, Washington, and the District of Columbia compared to the previous year.

Top HQ Countries:

While the United States remains the primary hub for the majority of companies assessed, it's noteworthy that 33 European firms met the dual-use criteria in 2023. We believe this unexpected surge is likely influenced by the ongoing conflict in Ukraine, which has cast a shadow of uncertainty over European security. This development may indicate a significant, positive evolution in Europe's dual-use technology sector. We must also point out that Canada has strong representation in our database.


The trend from 2022 continued with a focus on hardware-centric companies, while the hybrid technology sector experienced a modest increase. Despite a slight decrease in software-oriented firms, the distribution of technology types in 2023 stayed largely stable. The growth in Clean Tech enterprises persisted, driven by substantial government investments (including incentives) in climate and sustainability initiatives amounting to several hundred billion dollars. The aerospace sector saw a significant influx of private capital in 2023, surpassing the figures from 2022, which is reflected in the notable rise in aerospace firms meeting our search criteria. Further, in line with the wider VC industry, AI is heavily represented within our database.

Founding Year:

Relative to 2021 and 2022 companies that were evaluated previously, it appears that there's a trend indicating a tapering in the number of funded DU companies founded in the most recent years. However, we recognize the certain time period necessary for DU companies to mature sufficiently to meet our database’s $5 million funding benchmark. For our 2023 companies evaluated, it seems that the number of companies founded within the past 5 years remains consistent -  averaging 15 companies founded per year. We believe this is due to the Aerospace and Defense Tech sectors experiencing a significant boost in VC investment, reflecting U.S. strategic initiatives to address emerging threats from potential adversaries like Russia and China. This shift underscores a strategic realignment in VC investment priorities in the West, where there is an increasing, and we at AIN Ventures believe, an enduring focus on sectors critical to national security and technological advancement.

Number of Founders:

The number of companies with 1, 2, or 3 founders is relatively even among the companies analyzed in 2023 compared to previous years.

Previous Employers:

Analysis of founders' past affiliations reveals significant patterns in the dual-use technology domain. A notable trend is the increasing shift of founders from AI firms to the sector, heralding a wave of advanced knowledge and innovation in artificial intelligence and machine learning. The marked rise in founders coming from SpaceX in 2023 highlights the growing impact of space technology and its convergence with AI-centric initiatives. Moreover, while not explicitly detailed, a significant number of founders have academic backgrounds, emphasizing the crucial role of educational institutions in nurturing the entrepreneurial talent that propels innovation in dual-use technologies.

Founder Government Experience:

The proportion of founders with government backgrounds has remained relatively stable over the years, showing a slight decline to 6.5% in 2023 from 7.3% in 2022 and 7.6% in 2021. This trend indicates a stable but slightly decreasing engagement of founders with prior government agency experience, coupled with a notable decrease in founders coming from military service branches.


The 2023 data shows a notable improvement in the diversity of founding teams, with diversity rates climbing from 38.2% to 43.1% over the last year. There was a significant rise in the presence of female founders, with the proportion reaching 25.2%, a considerable increase from the 16.5% observed in 2022. Additionally, the representation of Middle Eastern founders saw a marked increase, jumping from 6% in 2022 to 17.1% in 2023. While the representation of Asian founders stayed relatively stable, the percentages of Black and Hispanic founders declined, continuing their status as the most underrepresented minority groups in the Dual-Use industry. By 2023, minority representation among DU company founding teams was 43.1%, accounting for 21% of the total number of founders.


In the Dual-Use sector, the correlation between founders' undergraduate institutions and their venture success remains negligible. However, it's noteworthy that universities located in California consistently appear among the top 10 institutions. This trend underscores the state's ongoing influence and prominence in the DU industry despite the broader lack of correlation across the sector.

In 2023, MIT, Columbia, and Stanford emerged as the top three graduate schools for founders, marking a departure from previous years when the leading institutions were a mix of public and private institutions. A shared trait among these schools is their strong engineering programs, highlighting the importance of technical expertise in the entrepreneurial landscape of the Dual-Use sector.

In 2023, there was a notable uptick in founders holding advanced technical degrees, rebounding from the previous year where PhDs dominated. Simultaneously, there's been an increase in founders who have pursued entrepreneurial paths without graduate degrees. Meanwhile, the prevalence of founders with MBA degrees has remained consistent over the last three years, indicating a stable trend in the educational backgrounds of business leaders in the sector.


In 2023, the previously prominent venture capital firms from 2021, such as Insight Partners, Sequoia Capital, and Lightspeed Ventures, along with the top VC funds of 2022, have shown a marked decrease in their presence among the top six investors in the capitalization tables of evaluated companies. Notably, no VC fund appeared more than twice across all companies assessed. This significant reduction in mentions can be attributed to the challenging macroeconomic conditions and a strategic shift by investors towards reallocating their capital into more conservative asset classes, leading to their reduced visibility in the cap tables of the reviewed firms.

The percentage of companies evaluated year after year that attend accelerator programs remains relatively stable as Y Combinator, Creative Destruction Labs, and Techstars yield the most dual-use graduates within our database. The drop in companies from Venture Kick, a Swiss accelerator that invests in Swiss-based university start-ups, can be explained by the fact that only 3 companies that fit the criteria for 2023 were headquartered in Switzerland.

On the Horizon for 2024 and Early 2025

The US economy has outperformed expectations, showing favorable trends in labor markets, optimism, and inflation, leading experts to speculate that a recession may have been averted. Overall market volatility is expected to remain high, in part due to the upcoming US presidential election, and the economic growth observed in the latter part of 2023 is not necessarily expected to extend into 2024 and early 2025. While a return to the ultra-low interest rate environment of 2020 and 2021 is highly unlikely, the outlook for 2024 is not anticipated to mirror the conditions of 2022 or 2023, with a generally optimistic economic forecast prevailing. The presence of significant unallocated capital in both public and private sectors is atypical. The era of inexpensive capital has passed, prompting startups to recalibrate to more realistic valuations. This financial landscape is poised to create a dynamic and potentially lucrative climate for venture capital investment in 2024.

The dual-use sector will continue to grow as heightened geopolitical tensions around the globe continue to intensify as the ongoing conflict in Ukraine has caused the US and Europe to evaluate the role of rapidly deployable advanced technologies into conflict. The ongoing conflict has highlighted the problems with the US government acquisition process, likely prompting the pilot program in the 2024 NDAA to compress the timeline. The Ukraine conflict has also highlighted the importance of Unmanned Autonomous Vehicles in modern warfare as well as a slew of shortcomings with the technology that the government will rely on the private sector to address. Additionally, continued Russian cyber attacks against Ukraine have showcased the importance of a robust cybersecurity infrastructure, an issue of keen interest to the US and Europe alike. We expect the dual-use tech ecosystem to continue to garner attention from lawmakers and VC funds alike and not to be as influenced by volatile markets or macro VC environments.  

Healthcare, biotechnology, quantum computing, sustainability, and advanced manufacturing are also considered dual-use technologies due to their increased significance in national security. All of these areas were mentioned in the National Standards Strategy for Critical and Emerging Technology, and we believe that the trend of investing in these industries will continue. The broad applications of dual-use technologies allow for some fantastic investment opportunities, although navigating the industry is complex and requires a thorough understanding. AIN aims to assist investors and companies alike and continue to offer wonderful opportunities to invest in this space.


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