The defense technology landscape is undergoing a significant transformation, driven by advances in AI, robotics, communications, and much more. Traditional defense contractors face increasing pressure to modernize and adapt to evolving threats, creating a growing demand for innovative solutions.
Often agile and disruptive, startups are uniquely positioned to capitalize on this shift. With a focus on rapid prototyping, startups can introduce game-changing capabilities to our defense, often with more flexibility and cost-effectiveness than established players.
This combination of speed and innovation is why startups have become critical players in the future of defense tech.
The global defense technology sector presents a significant market opportunity. The 2025 Department of Defense budget includes:
A recent Pentagon announcement about $984 million available in loans for U.S. firms developing “critical’ tech highlights the opportunities for startups and emerging companies alike. These loans are available for innovative defense technologies in 31 areas, covering a wide range of “construction, expansion, or modernization” of defense tech.
Let’s take a look at the opportunities for defense tech startups.
AI, machine learning, and robotics are rapidly transforming defense technology, with autonomous systems playing a crucial role in reconnaissance, surveillance, and combat operations. The robot dog, already deployed to the Middle East, is a prime example of a defense innovation poised to significantly reduce human risk in high-threat environments.
Another example is developing military drone swarm intelligence by Sentient Digital, which combines the collective behaviors of social insects like bees with the coordinated movements of schools of fish. The result is a decentralized, self-organized system, known as a swarm, that can continue to operate even if a single drone is incapacitated.
One of the most successful uses of military AI is Maven, which became an official project of record in November 2023. During testing, the system proved so efficient that XVIII Airborne Corps achieved “a level of efficiency comparable to the time-critical targeting cell used during Operation Iraqi Freedom (OIF), but with only 20 soldiers instead of 2,000.”
While its full operational use is unknown, the Maven Smart System is an advanced AI platform that has been tested extensively and shown enough promise that the U.S. Army awarded a $480 million contract to expand the use of Maven to users across five combatant commands.
Despite the wins in military AI, ML, and robotics, there are still challenges that must be overcome. Trust and validation of AI decision-making processes are paramount, but two other challenges must be solved before widespread use of these technologies is possible across our forces.
Even though we have vast amounts of data, creating accurate and reliable AI models and decision-making requires quantity and quality. Efforts to ensure data integrity and relevance in dynamic military contexts must happen at the same time that we need to respect classification barriers.
This next challenge is as old as technology itself. Integration complexities with legacy defense systems pose major hurdles. Compatibility issues with older hardware and software and cybersecurity concerns require a careful balance between modernization and maintaining readiness.
AI-enhanced modeling, simulation, and training provide personalized learning paths that accelerate skill acquisition while reducing training costs. These technologies also allow for rapid adaptation to new technologies and new threats.
It should be no surprise that U.S. military installations worldwide suffer from aging wireless networks.
The Air Force is leading efforts to connect data-centric information from all service branches, partners, and allies into an internet of military things. Called the Combined Joint All Domain Command and Control (CJADC2), it’s a DoD concept that will allow for quick decisions on the battlefield by making information readily available.
In addition to the expected implementation challenges of cross-service cooperation, cultural and policy barriers, and security constraints, a major stumbling block is connectivity.
The FutureG Office at the Pentagon has expanded the scale of 5G research, testing, and deployment. According to Tom Rondeau, principal director for FutureG at the Pentagon, “It’s all about the reps and the experience of getting this stuff out of the lab and into the real world, understanding the limitations, understanding the difficulties of these radio systems.”
In 2020, the DoD announced that $600 Million would be spent on 5G experimentation and testing at five military installations. Last year, KPMG successfully debuted its advanced 5G-enabled smart warehouse at the Marine Corps Logistics Command in Albany, GA, took place a year after KPMG was selected by the U.S. Department of Defense (DoD) as the sole prototype application developer to create a system aimed at transforming USMC logistical operations.
As with most emerging technologies, integrating existing military systems with 5G technology presents significant challenges due to compatibility issues with legacy infrastructure. Defense tech often relies on older, specialized equipment that may not seamlessly interface with the high-speed, highly mobile capabilities of 5G, which can limit current use cases. Supply chain disruptions have compounded these issues, slowing the rollout of 5G-enabled systems.
With high-speed, low-latency capabilities, 5G enables more realistic and immersive virtual and augmented reality environments. Real-time analysis of performance metrics during training exercises allows for immediate feedback, helping soldiers refine skills during training instead of later during debriefing.
Military 5G also facilitates remote training sessions and collaborative exercises across dispersed locations, enhancing the ability to conduct joint operations and simulations. This connectivity fosters better coordination and more effective training across diverse, geographically separated units.
Mixed reality (MR) training environments combine the immersive features of virtual reality (VR) with the interactive elements of augmented reality (AR), creating highly realistic and adaptable simulations for military human performance training.
A major advantage of MR training is the ability to customize training, such as designing modular training systems that cater to diverse military units. The outcome is personalized experiences that address unique requirements ranging from urban warfare to complex multi-theater operations.
The U.S. DoD has prioritized mixed reality for training and combat readiness, with projections for the military VR/AR market reaching nearly $18 billion by 2030, but there has already been progress in the investment in mixed reality.
Project Tripoli is the Marine Corps’ initiative to modernize their training environment and eliminate gaps between experimentation, the training continuum, and real-world missions. It will be an on-demand LVC training environment consisting of a number of components, including Warfighter Augmented Reality (WAR) capability with Virtual Reality (VR) and Mixed Reality (XR) common hardware.
Despite its promise, MR faces challenges such as network latency, motion sickness, and haptic feedback delays, which can affect the realism and user experience. Integrating MR with legacy systems is also complex, as older technologies may not be fully compatible with new MR interfaces.
Mixed reality training environments can provide data needed for human performance tracking, modeling, and predicting. Because MR environments simulate stressful battlefield conditions and can monitor warfighters’ responses to stress, these platforms can provide valuable insight into mental status and endurance.
Existing defense tech companies and startups, or those in other industries with proprietary innovations with a defense application, can seize today’s opportunities, but success requires a deep understanding of the industry's needs and trends.
For those who can provide solutions that improve operational efficiency, reduce costs, and enhance safety, the defense sector represents a high-potential market for growth and impact. By focusing on areas like AI, robotics, MR, and others, defense tech startups can position themselves to meet the evolving demands of the U.S. defense forces.
Navigating the complex regulatory and procurement landscape is challenging. You’ll need to become familiar with the Federal Acquisition Regulation and the System for Award Management.
At UCF Tech Grove, we collaborate with industry, academia, small businesses, and government representatives nationwide to expand the defense industry base. We offer a calendar of events with opportunities to connect, learn, and discover opportunities to engage in the defense modeling, simulation and training industry.
Ready to get started? Explore University of Central Florida’s Business Incubation Program, which provides business development and operational support to early-stage, technology and innovation-driven businesses.
If you are located in the Central Florida region, they offer two programs. The Traction Program helps new technology and innovation-driven businesses with little to no revenue build their operational foundation. The Growth Program helps technology and innovation-driven companies with existing market traction develop the infrastructure for scaling their business.
If you are outside of the Central Florida region, the Central Florida Incubator’s Soft Landing Program helps international technology and innovation-driven businesses headquartered outside the region support their business development efforts from Central Florida.
To learn more about these three programs — including what each program offers and eligibility requirements — visit the Central Florida Incubator website.