ADIV is poised to benefit from the U.S. administration’s shift towards dual-use and deep tech in aerospace and defense.

In the ever-evolving landscape of aerospace and defense, change is the only constant. The U.S. administration is driving a dramaitc shift, moving away from outdated, cumbersome mechanisms toward innovation and cost-effectiveness, largely fueled by the private sector. At the core of this transformation are dual-use and deep technologies, which are increasingly meeting—and exceeding—market demands. As strategic partners, the U.S. and Israel are leading this charge, and ADIV embodies the strength of this alliance. In this post, we explore the latest developments reshaping our sector and how ADIV is not just adapting but thriving in this dynamic environment.

Key Developments Shaping Aerospace & Defense

The aerospace and defense (A&D) sector is undergoing a profound transformation, propelled by bold policy shifts and robust market trends:

• DoD Budget Shifts: The Department of Defense (DoD) is reallocating resources with precision, trimming $0.5 billion from outdated programs and redirecting a substantial $50 billion toward cutting-edge priorities like AI, autonomy, and cybersecurity. With a total fiscal 2025 budget of $849.8 billion, the DoD is sending a clear signal: the future belongs to innovation.
• Corporate Investment Moves: Industry leaders are aligning with this vision. GE Aerospace is investing nearly $1 billion in U.S.-based manufacturing and innovation, while Boeing has secured a $16 billion contract for the Next Generation Air Dominance (NGAD) program. These moves underscore a surging demand for advanced, next-generation defense systems.
• Venture Capital Boom: The investment landscape is buzzing with activity. The U.S. and Canada now dominate 83% of global private equity and venture capital (VC) investments in A&D, bolstered by Wall Street’s growing focus on A&D deals.

Navigating Challenges, Seizing Opportunities

These shifts present both challenges and opportunities for ADIV as we navigate this rapidly changing terrain:

Constructive Challenges

• Budget Cuts: The DoD’s cuts to legacy programs may strain startups reliant on traditional contracts. Yet, this pivot reinforces ADIV’s investment thesis, which is firmly aligned with the U.S.’s new doctrine of innovation over obsolescence.
• Heightened Competition: The VC surge has intensified competition for top-tier A&D deals, especially in the early-stage space where ADIV thrives. While challenging, this validates the sector’s potential and keeps us sharp.

Opportunities

• DoD Innovation Push: The $50 billion reallocation to innovative fields such as AI, autonomy, and cybersecurity is a golden opportunity. ADIV’s portfolio companies are well-positioned to compete for contracts and funding in these high-priority areas.
• Corporate Demand: With GE and Boeing seeking innovative suppliers, ADIV’s startups—specialists in manufacturing, materials, and next-gen systems—are ideally suited to meet this growing need.
• M&A Potential: Wall Street’s heightened interest in A&D deals signals a ripe environment for mergers and acquisitions, opening promising exit pathways for our investments.

How ADIV Stands Out

ADIV isn’t just reacting to these dynamics—we’re proactively shaping our future. Here’s how our strategy sets us apart:

• Aligned with DoD Priorities: Our startups target the DoD’s key focus areas—AI, autonomy, and cybersecurity—ensuring we’re in lockstep with funding flows and insulated from legacy program cuts.
• Strengthening Supply Chains: We invest in companies delivering innovation in manufacturing, materials, sustainability, and next-gen defense systems. These startups are becoming vital partners to industry giants like GE and Boeing.
• Dual-Use Strengths: With 80% of our portfolio focused on dual-use technologies, we serve both defense and commercial markets. This diversification reduces risk and enhances our appeal to investors and buyers.
• Prepared for Exits: By backing startups with proven technologies and clear value propositions, we position them as prime candidates for M&A in a market eager for A&D innovation.
• Focused Niche: Our concentration on early-stage A&D deep tech with a dual-use lens, sets us apart from broader VC players. This is enhanced by our initial focus on Israel. This sharp focus enables us to seize high-impact opportunities swiftly, avoiding overcrowded segments.

Conclusion

In summary, ADIV is more than a participant in the aerospace and defense sector—we’re a driving force for its future. Our alignment with DoD priorities, relevance to corporate supply chains, dual-use approach, exit readiness, and niche focus empower us to turn challenges into advantages. As the A&D landscape continues to evolve, ADIV remains committed to delivering strong returns while pushing the boundaries of innovation, solidifying our role as a leader in this transformative era.

Legal Notice

This communication is for general informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities. ADIV is not currently offering or accepting investments. No commitments, offers, or indications of interest will be accepted, and no money or other consideration is being solicited. Any discussion herein is exploratory and intended solely to share insights and facilitate conversations around the aerospace and defense innovation ecosystem. Past performance of any referenced entities or individuals is not indicative of future outcomes.This content may include topics relevant to institutional or accredited investors, but is not directed solely at such individuals and is not part of any fundraising activity.