Dual-Use Deep Tech: The Defense-Adjacent Growth-Equity Playbook for Founders

01Dual-Use Deep Tech: The Defense-Adjacent Growth-Equity Playbook for Founders

The most interesting companies I'm seeing right now are not purely commercial and not purely defense. They sit in the overlap — and founders who learn to operate in that overlap are compressing timelines, de-risking early capital requirements, and arriving at Series B with both government validation and paying commercial customers. The ones who ignore it are leaving serious non-dilutive capital on the table and, increasingly, handing a defensibility advantage to competitors who picked it up first.

02Why the Dual-Use Frame Has Changed in the Last 24 Months

The policy landscape shifted fast. The Biden-era CHIPS and Science Act, the National Security Memorandum on AI, and the IRA's domestic-content provisions all pushed the same direction: the federal government decided that strategic commercial industries — advanced semiconductors, biotech, clean energy, AI infrastructure — are national security assets. That framing did not disappear with a change of administration. It hardened. The fiscal-year 2025 National Defense Authorization Act extended and expanded the Defense Innovation Unit's authority to execute Other Transaction Agreements, which are the contracting vehicle that lets DoD buy commercial technology without the full FAR/DFARS overhead that made traditional defense contracting a graveyard for startups.

What this means practically: if your technology touches autonomous systems, biological threat detection, critical-infrastructure resilience, advanced materials, or AI-enabled logistics, there is a pathway to a paying government customer that does not require you to become a defense contractor in the legacy sense. You do not need a cleared facility on day one. You do not need a BD team with 20 years of Beltway relationships. You need a technology that works, a founder who can write a compelling capability brief, and a willingness to engage an acquisition process that now explicitly prefers commercial-first companies.

03The Non-Dilutive Stack That Most Deep-Tech Founders Are Under-Using

Before you take a dollar of growth equity, map your non-dilutive ceiling. For most deep-tech companies in life sciences, materials, or applied AI, that ceiling is higher than founders assume.

SBIR/STTR Phase I awards cap at $305,000 for most agencies; Phase II awards run to $2 million with some DoD agencies now offering Phase II enhancements that push that number toward $3–4 million on a single project. DARPA's program structure operates somewhat differently — its Proposers Days and Broad Agency Announcements fund teams at levels that routinely reach $5–10 million for multi-year programs. ARPA-H, which launched with a $2.5 billion congressional authorization, is now funding health-security programs that explicitly anticipate civilian and defense-adjacent applications in areas like pandemic-countermeasure manufacturing and autonomous surgical systems. If you are a life-sciences founder who has not looked at ARPA-H's open solicitations in the last 90 days, look now.

The pattern I see in companies that execute this well: they use Phase I SBIR to fund a specific technical milestone that de-risks their core IP, they sequence that into a Phase II that generates the validation data that a growth-equity investor will actually weight heavily in diligence, and they arrive at a Series A or B with 18–24 months of government-validated performance data. That is a fundamentally different risk profile than a company that spent the same period burning venture dollars on the same experiment.

04What Dual-Use Actually Means for Your IP and Export Control Posture

Here is where founders often create problems they discover late. If your technology is export-controlled under the Export Administration Regulations or the International Traffic in Arms Regulations, that has real consequences for your cap table, your hiring, and your eventual M&A options. Taking DARPA funding on a core algorithm does not automatically ITAR-taint your whole company, but it can constrain how you structure foreign national participation in your research program and what you can discuss with international commercial partners.

The right time to get an export-control counsel review is before you submit your first federal proposal, not after you receive the award. The Commerce Department's Bureau of Industry and Security publishes commodity classification guidance, and a classification determination on your core technology — even if it comes back as EAR99 (no license required) — is an asset in due diligence. It tells an acquirer or an investor that you have done the work. Companies that have not done it signal the opposite.

Also worth watching: the CHIPS Act's guardrails on foreign entities of concern. If you are in advanced semiconductors, photonics, or quantum and you have taken CHIPS funding or plan to, your foreign investment and technology-transfer restrictions are now statutory, not just policy. The NIST CHIPS Program Office has published detailed guidance on these restrictions. Read it before you close your next round if a foreign strategic is on your cap table.

05The Commercial Sequencing Problem: Defense Revenue Is Not Recurring Revenue

I want to be direct about a trap I see regularly. Founders who successfully land an OTA contract or a DARPA program sometimes mistake government validation for commercial traction. They are not the same thing. A DoD OTA does not renew automatically. A DARPA program ends. The government customer who championed your technology may rotate to a new role. Contract-dependent revenue at the time of a growth-equity raise will compress your multiple, not expand it.

The founders who execute the dual-use playbook correctly use defense and government contracts to fund development and generate validation, while simultaneously building the commercial revenue motion that will anchor the Series B narrative. For a life-sciences company, that might mean your ARPA-H manufacturing contract de-risks your COGS at scale while your commercial pipeline runs through hospital systems or large pharma partners. For a clean-tech company, a DOE Loan Programs Office conditional commitment validates your project finance assumptions while your commercial offtake agreements with utilities provide the recurring revenue that a growth-equity investor actually underwrites.

The sequencing discipline is: government capital funds the technology, commercial contracts fund the business. When you arrive at a growth-equity conversation with both, you are not pitching a defense company or a startup — you are pitching a business with multiple validated demand vectors and a non-dilutive funding history that shows you can execute in a high-accountability environment. That combination is rare. It is also exactly what the best dual-use companies look like at the point of institutional investment.

The founders who will define this category over the next five years are the ones treating dual-use not as a fundraising narrative but as a deliberate operational architecture — sequencing the right capital source against the right development milestone, managing the IP and regulatory posture in parallel, and building commercial revenue that does not depend on a contracting officer's annual budget cycle. That architecture is buildable. It requires planning 18 months ahead of where most founders plan. Start the map now.

Nothing in this piece is investment, legal, tax or accounting advice, and nothing in it is an offer to sell any security. Fund I is offered only as stated on the Fund I page.