Defense has moved back to the center of national planning.  

This shift is visible in how governments allocate capital, how they buy systems, and critically, how they think about innovation.  

For the last few decades, the Western world operated on a distinct assumption: Large-scale state conflict is unlikely.  

Borders were stable, conflicts were limited, defense budgets stagnated, and procurement optimized for long lifecycles rather than rapid adaptation.  

That assumption no longer holds.  

This is Part 1 of the Ace / Key1 Defense Series, where we examine the mechanics of this shift:

• Part 1 (The Macro Thesis): Why Aerospace & Defense is a permanent fixture of the tech landscape.  

• Part 2 (The Tech Differentiator): Distinguishing the mechanics of the defense tech. 

• Part 3 (The Investment Reality): The pros, challenges, and complexities of capitalizing this sector.

We begin with the macro thesis.

I. Geostrategy: Why Defense Returned to the Center  

For decades, Western strategic planning focused on containment and counter-terrorism. Today, three simultaneous arenas have forced a return to state-level defense planning:  

1. The Middle East: The Arab-Israeli conflict has existed for decades, but since October 7 it has become one of the most strategically significant conflicts globally, shaping regional and international security thinking.  

2. Europe: Russia’s invasion of Ukraine marked a strategic milestone. European nations that had effectively paused serious defense planning since World War II were forced to reconsider scenarios they had not actively prepared for in decades.  

3. The Pacific: Tension between China and Taiwan has become the top strategic priority for the United States. One consequence is decisive: Western militaries are unwilling to adopt Chinese technology. Nothing. Zero. This creates a parallel defense ecosystem, where supply chains from semiconductors to drone components must be secured within trusted, allied nations.  

‍As these realities set in, defense budgets rise.  

Germany committed a €100 billion special defense fund. Japan approved roughly $100 billion in additional spending. The United States and others are allocating tens and hundreds of billions more. In Germany, defense moved from being outside the top ten national priorities since World War II to one of the top two, possibly number one. These are just a few examples of many.  

This is not ideology, it is mechanics. Money flows to defense. Innovation follows the money.

II. The Speed Gap: Why Innovation Is Required

Rising budgets alone do not explain what is happening. The constraint is time.  

For years, most conflicts were low- or medium-intensity. Nations relied on air power, cyber capabilities, and proxies. Large-scale ground conflict between states was not the planning baseline.  

Defense procurement was built for a slower world: large platforms. Long development cycles. A small set of prime contractors. These incumbents remain essential; only they can build fighter jets and submarines. But modern conflict operates on a different timeline. Threats adapt in weeks. Software evolves in days. The traditional model was not designed for rapid iteration.  

The same gap appeared in industrial readiness. During COVID, when global supply chains stalled, governments discovered they lacked visibility into basic questions:  

• How much ammunition is actually in storage?  
• How quickly can production scale?  

The response has been a shift in acquisition strategy. Governments recognized that a 10-year cycle is a strategic liability. They are rewriting the rules to bring startups into the fold. The mandate is practical, not philosophical: They are trading "process" for speed, looking for solutions deployable in 6 to 12 months, not five years.

This is not a replacement of the old system; it is an urgent expansion of it.

III. The Domains: The "Dual-Use" Reality

Governments have realized they cannot build the future inside a closed loop. By opening the door to startups to solve the speed gap, they have inevitably opened the door to Dual-Use technology.

The result is convergence. The startups entering the defense market aren't just building for the military; they are building infrastructure capabilities. Capabilities like autonomous logistics and AI may serve national security today, but they will serve the commercial market tomorrow. This includes:

• Aviation: Air power was once limited to nations with large budgets. Today, low-cost aerial systems (UAVs, loitering munitions) provide capability at a fraction of the cost. The Dual-Use: The autonomy software powering these systems is the same baseline required for civilian aerial logistics and future transportation networks. In many cases, defense is the first customer for capabilities that later appear in civilian logistics, monitoring, and transportation.

• Space: Space is now an operational domain for communication, navigation, and resilience. It requires deep capital and long time horizons, but it is the ultimate strategic layer.

• Cyber: Cyber is no longer a standalone capability; it is embedded in every kinetic operation.

• Lasers: Laser systems are changing the cost equation of defense, providing a sustainable way to intercept low-cost threats.

The Discipline of Defense

This is not a short cycle driven by enthusiasm. It is a structural reset driven by necessity.

Nations must rebuild ammunition stockpiles, UAV fleets, ground systems, and industrial capacity. Even relatively simple components are constrained by production capacity. Building readiness takes years. Training forces takes years. Integrating new domains takes years.

Defense is now planned on a long horizon.

Operating in this environment requires more than technical talent. It requires understanding how militaries define requirements, how procurement actually works, and how systems are evaluated under operational pressure. That perspective is difficult to acquire from the outside.

Those of us writing this series have lived inside the system.

We were responsible for capability planning, procurement decisions, and operational readiness. We know the difference between a compelling concept and a capability that stands up to real conditions. That experience shapes how we look at defense technology, and why we believe this sector demands a different level of discipline from founders, investors, and partners alike.