Israeli firm Protego Ventures has closed a $125 million fund to invest in defense technology. The firm targets startups creating dual-use products for both civilian and military markets. This move highlights rising institutional interest in defense-tech, driven by the global demand for modern and agile security solutions.
Protego Ventures, an Israeli venture capital firm, has closed its first defense-focused fund with $125 million in capital. The firm plans to use these funds to back early-stage startups that develop dual-use technologies. These are products that can serve both commercial and military needs, such as drone systems and advanced situational awareness software. Backed by Ares Management, the firm aims to invest in companies requiring ticket sizes between $5 million and $50 million.
The focus on dual-use technology represents a shift in how defense-tech startups are built. In the past, military technology was often developed exclusively for government contracts. Today, startups are increasingly creating software or hardware that can be sold to both civilian industries and defense departments. This approach helps reduce the risk of relying entirely on government budgets, which are often unpredictable and involve long, drawn-out sales cycles.
Protego has already built a portfolio that includes companies like XTEND, a drone developer that has listed on the New York Stock Exchange, and ASIO, a firm working on situational awareness. By betting on technologies that address modern, smaller-scale warfare needs—such as drones and data analytics—the firm is positioning itself to capture value from the shift toward more agile and tech-heavy defense solutions.
For investors, the defense-tech sector is becoming a significant area of interest, but it comes with distinct challenges. Unlike traditional software businesses, defense-tech companies often face high barriers to entry, including strict export controls, the need for deep technical expertise, and long timelines to secure government approval or defense contracts. Success often depends on whether a startup can navigate these regulatory hurdles while keeping development costs manageable.
The involvement of institutional players like Ares Management signals that defense technology is no longer just a niche interest. It is being treated as a core part of the innovation economy. However, the business model remains capital-intensive and subject to geopolitical risks. Changes in government policy, shifts in conflict zones, or delays in contract awards can all impact the growth path of these startups.
Looking ahead, Protego is already laying the groundwork for a second fund expected in early 2027. This next phase is expected to expand the firm’s reach by including early-growth stage American defense companies. The primary monitorable for investors interested in this sector will be the ability of these startups to bridge the gap between initial technology development and securing stable, long-term government or commercial contracts. The long-term success of this fund will depend on whether these companies can turn modern warfare needs into sustainable, revenue-generating businesses.