Since 2022, three flaws in European defence policy have been exposed. The US will not always underwrite European security. Defensive industrial capacity does not scale on demand. And warfare has fundamentally changed, while most European militaries, including the UK’s, remain structured for a world that no longer exists.
I joined Triple Point over two years ago now, and in that time we have looked at a number of early stage businesses building in defence. The thing that consistently proves tricky is getting comfort around the procurement process. It is opaque, routes to market are limited, and if you are selling in the UK the MoD is essentially your only end customer. The MoD is making a concerted effort to reform how it procures defence technology, opening the door, in theory at least, to smaller, more innovative businesses. So I thought I would explore what the current UK procurement landscape looks like, and what Anduril and Helsing’s UK market entries tell us about what the system actually rewards.
First Though, Have We Hit Peak Defence Hype?
I think we probably have, in the public markets. Defence stocks have been on a massive run since 2022, but since the turn of the year momentum has begun to cool.
That might seem counterintuitive given events in Iran, but the geopolitical picture has begun to shift. Trump’s Beijing visit pointed, at least rhetorically, toward near term stabilisation rather than escalation. Polymarket odds on a Chinese invasion of Taiwan by the end of 2026 peaked at 30% in late 2025 and today sit in the single digits. A few weeks ago on the All-In Podcast, Chamath Palihapitiya argued that China’s SMIC may be as little as 18 months away from sufficient domestic fab capacity, meaning Taiwan and TSMC will likely no longer be the single point of failure in advanced chip fabrication. If SMIC closes the gap, China’s strategic interest in Taiwan becomes less pressing.
A subtler, and for now less geopolitically contentious, version of the same dynamic sits one rung further up the AI supply chain with ASML in the Netherlands, which dominates the lithography machines fabs like TSMC depend on. That concentration creates a strategic chokepoint, which could theoretically create similar strategic tension in the future, given the assumption that chips equal compute, compute equals intelligence, and intelligence is the path to strategic dominance. However, a number of large rounds have been raised by startups attacking that bottleneck, which should dilute ASML’s strategic importance over time.
Over in Ukraine, Putin is facing mounting domestic economic pressure and ceasefire talks are being tentatively floated, while the conflict in Iran seems to be edging slowly towards some form of a conclusion, with the Strait of Hormuz due to reopen.
So perhaps we have hit peak defence hype in the public markets, if the generalisation we are making is that buying has been driven mainly by an anticipation of further escalation rather than what comes after it. But more importantly for businesses actually building in the space, we have entered a structural rearmament phase. All 32 NATO members now meet 2% of GDP, with commitments to reach 5% by 2035. Whether they all get there is a different question, but Bessemer estimates a 3.4x increase in European defence spending over the next six years.
This has been reflected in private market activity. PitchBook’s Q1 2026 defence tech report recorded the largest quarter on record for VC investment, with $19.8 billion across 262 deals, and trailing twelve month deal value more than doubling year on year.
So public market momentum has cooled, Europe is rearming, and private market investment is building. That means there are a lot of exciting companies still to be built. But importantly, the nature of what gets built is changing. We are moving away from hardware heavy, manned architectures with long procurement cycles, towards software defined, autonomous capabilities that are cheaper and more scalable by design.
When I think about what defence really means, bolstering sovereign capacity to look after oneself, two things feel very important: building resilient, scalable industrial capacity, and leveraging autonomous systems across land, air, and sea, which matter increasingly for resource constrained nations like the UK. Startups will play a significant role on both fronts, and procurement structures are being forced to change to foster the kind of innovative businesses that can deliver these solutions.
What Has Actually Changed in the UK
Last year’s Strategic Defence Review and Luke Pollard’s recent appearance on Defence Talks paint a pretty consistent picture. The MoD has consolidated its procurement bodies under a single investment budget, ringfenced £400 million annually for defence innovation through the new UK Defence Innovation organisation, launched a Defence Office for Small Business Growth, raised the threshold at which contracts fall under the single source regulations from £5 million to £25 million, and stated an ambition to halve procurement timelines. Whether all of that actually lands is a different question, but the intent to open the system to new entrants is real, and it is backed by structural reform rather than just rhetoric.
Pollard also emphasised that procurement decisions should be driven by the extent to which a technology increases military capacity, adaptability, and readiness, rather than whether it fits the traditional heuristic, the standard buy a platform and replace it after 30 years approach. The question becomes how much a technology improves the military’s ability to do something it actually needs to do. That is, at least, what is being signalled, and I think it is a useful framework for assessing companies building in defence more broadly. How much something improves operational leverage should be a core determinant of future value, rather than the typical VC heuristics around market size etc.
Routes to Contract
If you are building in the space, you probably have five main routes to securing a contract in the UK as it stands today.
Direct MoD Tendering leads to the largest, most durable contracts, but it is the hardest to break into cold. Requirements get shaped through months of preliminary market engagement before the formal tender drops, and the companies that present at that stage carry a significant informational advantage. Under the Procurement Act 2023, evaluation is now based on Most Advantageous Tender rather than cheapest price, which in theory allows competition on innovation and operational effect. Worth noting that many of the most consequential opportunities in autonomy, tactical networking, and energetics are not priced tenders at all. They are pipeline notices and market engagement signals. The MoD is often shaping these markets years ahead of contract.
Frameworks and Dynamic Markets are pre-approved supplier panels the MoD can call off from. For firms in digital, comms, cyber, and modular hardware, these are often a more realistic entry point than standalone tenders. Under the Procurement Act 2023, the landscape is shifting toward Dynamic Markets, which are effectively always open, allowing SMEs to join at any time rather than waiting for application windows. Not all frameworks serve the same purpose though. Some are procurement mechanisms (CCS, G-Cloud), some are technical marketplaces (R-Cloud), and some are supplier assurance systems like JOSCAR, the Joint Supply Chain Accreditation Register, which acts as a mandatory pre-qualification gate for most major primes. If you are not on JOSCAR, BAE, Leonardo, and others will not engage with you regardless of your technology.
DASA and UKDI Competitions are the easiest place to win something small. Defence Rapid Impact contracts sit around £200,000 to £300,000 over 12 to 18 months, with innovation loans up to £1 million. But a successful DASA project does not automatically become a production contract. The valley of death between demonstration and procurement remains the weakest link in the system. The SDR talks a good game about pulling innovation through to the front line at speed, but there is not yet a reliable mechanism to actually do that. Adjacent to this, dual use grants through Innovate UK, often jointly with DASA, can fund development for technologies with both civilian and military application, but they do not build a relationship with the MoD or get you closer to a production contract. For many critical defence capabilities there is no meaningful commercial market, and dual use can become a convenient fiction that delays the harder question of how to sell directly to defence.
Direct Funding from a Service’s Own Development Arm is usually the practical next step after a DASA win, and the main way to avoid the valley of death. In the maritime space it is the Royal Navy’s Develop Directorate, and specifically its Disruptive Capabilities and Technologies Office, which brought together NavyX, the CTO office and the Navy AI Cell to cut the confusion the old patchwork created for industry. It is this kind of service-level funding that carries you from a DASA win to something bigger. The Army has ARIEL, its Research, Innovation and Experimentation Laboratory, closely linked to the Army BattleLab, and the RAF has its Rapid Capabilities Office. These routes are underused by early stage companies, many of which simply do not know they exist. The best approach is direct and problem led: find the relevant team, understand the operational need, and propose a small, tightly scoped trial you can grow from. Openings often come late in the financial year when budgets have underspend, but the relationship matters more than the timing.
Prime Contractor Supply Chains are the quickest route to revenue at scale if you are building payloads, support software, autonomy modules, or logistics tools that plug into larger systems. The recent major awards tell the story: Boeing’s £879 million rotary wing support deal, Leonardo’s £1 billion helicopter contract, Digital Allies’ £113 million logistics modernisation. All went to large delivery entities, but the underlying innovation often sits lower in the stack. The issue is that IP can be threatened, primes gatekeep customer relationships, and you become dependent on someone else’s bid winning.
The tension running through all of these is the same. The system is genuinely opening up, the reforms are real, but the structural barriers that make it difficult for early stage companies to convert innovation into revenue have not yet been fully dismantled. The valley of death after DASA, the IP risk inside prime supply chains, the gap between stated intent and proven mechanism, these are still the things that make the space hard to underwrite.
Anduril and Helsing: What the UK Market Actually Rewards
The entry of Anduril and Helsing into the UK is informative, because both went straight after operational gaps that the incumbents, the traditional primes, were too slow to fill. They moved faster and delivered more cheaply and scalably than those primes could, which let them embed themselves in the system and then scale from there. A lot of the detail that follows draws on Defense Brief’s breakdown of how the new primes won, which is worth a read.
Anduril started with a roughly £4 million jHub contract with UK Strategic Command, trialling its Lattice operating system at RAF Akrotiri, and has since been down-selected as one of four industry partners on Project NYX, the British Army’s programme for autonomous drones that will team with its Apache helicopters, with up to two of the four expected to progress to the prototype phase this autumn. Helsing, a German company, stood up a UK entity as soon as it entered the market and now manufactures out of Plymouth. Both rapidly fielded live capability on Project ASGARD, part of the UK’s wider digital targeting web, Anduril with its Lattice mesh and Ghost drone, and Helsing with its Altra software and HX-2 strike drone.
The MoD wants defence spending to translate into UK jobs, supply chain resilience, and industrial capacity, and both companies structured their entry around exactly that. Social value and UK industrial benefit weigh meaningfully in bid scoring. But the preference for sovereign suppliers is not just about social value. European governments are increasingly treating dependence on foreign software and infrastructure in defence as a strategic vulnerability in its own right, and are becoming willing to pay a sovereignty premium for domestically controlled alternatives, even where those alternatives are less mature.
To lead classified programmes you need List X status, which requires UK incorporation and a physical UK site. Without it, you are a subcontractor regardless of how good your technology is. So Helsing hired Nick Elliott, the former Director General of the UK Vaccine Taskforce, as its first UK CEO, and brought on a four star general, Sir Chris Deverell, as an advisor. Anduril committed to a UK factory and has run 19 meetings with government officials since 2023. The MoD now seemingly regards Helsing as a British company.
The fact that two foreign companies had to go to these lengths to appear British is a positive signal for UK based startups. The system structurally favours domestic companies, and that preference will only deepen as sovereign capability becomes a strategic priority rather than just a procurement criterion. It also reveals exactly what the system rewards: sovereign credibility, speed, and products that deliver real operational leverage against the MoD’s stated priorities. For anyone building in defence at the early stage in the UK, I believe those are the things to optimise for.
If you are building in the space, and found any of this remotely interesting, I would love to speak! freddie@triplepoint.vc