Aerospace & Defense Growth Accelerators, 2024 2026

Scope of analysis:

This market is growing due to the dramatic increase in defense budgets amid global destabilization and the penetration of emerging technologies in the defense sector.

• Institutional accelerators usually originate from governmental agencies and leading defense OEMs. Investment funds' roots are in the private sector and rely on business concepts and models better suited to the commercial market.
• The study provides insights into the global landscape. It focuses on the most dominant and active areas for emerging defense industry trends, including regional breakdowns for North America (NA), Europe, the Middle East (ME), and Asia-Pacific (APAC).
• The study includes sustainable and leading emerging accelerators and VCs that fundamentally contribute to the defense industry. The report does not provide a full and comprehensive market overview; it focuses on hybrid commercial entities that support the market environment. The study derives 25% of its information and insights from secondary research and contributions from vendors, channel partners, and other industry stakeholders.
• All provided revenue estimations are attributable to the analysis and modeling.

Competitive Environment

The Impact of the Top

Transformative Megatrends

WHY: 

• The defense sector is experiencing a convergence of non-conventional players and emerging start-ups who are introducing cutting-edge technological solutions and drawing substantial venture capital investments. Currently, established defense OEMs are expanding their investment in corporate ventures to tap into these nascent technologies, further amplifying this transformative trend in the A&D industry.

Frost Perspective 

• Defense accelerator use is emerging as a significant trend in the global defense industry, aimed at fostering innovation and collaboration between start-ups, tech companies, and traditional defense global leading OEMs. Between 2019 and 2023, private capital investment in defense technology surpassed the growth of overall venture spending, highlighting a robust interest from investors. This trend will surge globally during the next five years.

Competitive Intensity

WHY:

• Start-ups concentrating on defense technologies are rapidly emerging, with several achieving significant valuations and attaining unicorn status, such as Anduril, Hawkeye 360, Palantir, and Shield AI. As such, the defense industry is deeply changing. Alongside the massive leading defense OEMs, new forms of A&D start-ups are arising that focus on improving the military end-user experience through features like high-end technological solutions for an array of military utilities (from unmanned platforms to AI). This intense market pressure calls for increased efficiency, cost-effective solutions, and a strong emphasis on meeting evolving end-user needs.

Frost Perspective 

• The shift towards a vibrant defense-tech ecosystem presents expanded opportunities for

the defense industry. However, this transition necessitates enhanced risk management and
evaluation protocols to ensure a resilient R&D and procurement process. These refined processes must effectively meet the operational requirements of end users in a relevant timeline. With vendors reducing solutions/service prices, A&D start-ups’ solutions will become more accessible. This will make them more affordable for integrators and defense OEMs.

Disruptive Technologies

WHY:

• Disruptive technologies are shaking up the aerospace and defense market, requiring adaptation in advanced high-tech military solutions and adjustment to operational military end-user needs. Most new technologies come from outside the massive A&D OEMs from young companies and start-ups and accordingly require appropriate business posture.

Frost Perspective

• As such, A&D businesses globally will shift investments from traditional M&As to more agile business models that avoid large expenses and prefer to engage young companies via accelerators.

Growth Drivers

The Russo-Ukraine War 

• The war dramatically increased NATO member defense budgets by over 2% of their individual GDPs. Countries at the forefront of the conflict with Russia, such as Poland, Finland, and Germany, have begun to build local defense industries. The acceleration of European military buildup fuels demand for disruptive technologies and increased flexibility in the required defensive products. These are leading to a boom in NATO member business models for defense growth, setting the ground for accelerators and investment funds to thrive.

Growth Restraints

Dual-Use Challenges
 

• Defense start-ups understand that dual-use technology practices can catalyze business attractiveness for investment funds looking for new defense industry venues. However, start-ups pursuing both defense and civilian applications struggle to demonstrate and prove a clear value proposition, making it challenging to raise funds and bypass natural reluctance and ethical dilemmas. Hence, VCs and accelerators encourage start-ups to focus on dual-use technologies rather than focus solely on weapon systems and platforms.