Defense Tech Valuation Surge Sparks Concern Over Exit Reality

The current environment for defense startups mirrors the velocity of consumer app funding during peak cycles, yet the industry faces a unique friction: government sales cycles that rarely align with the rapid pace of venture capital. According to Carta’s Q1 2026 report, fewer than 20% of 2017-2018 vintage funds have returned 1x DPI (Distributed to Paid-In capital), underscoring that a valuation is merely an estimate until an exit occurs.

Asman argues that founders often fall into the trap of pricing rounds based on industry hype rather than specific milestones. By prioritizing headline-grabbing valuations over liquidity, companies risk losing credibility when market conditions shift. Backswing Ventures emphasizes a more disciplined strategy, focusing on measurable outcomes like government contracts and product validation. For the firm, the focus remains on DPI—the actual cash returned to investors—rather than the speculative IRR or paper gains that currently dominate the defense tech narrative.