Over the last two decades, the nature of sovereignty and warfare has been fundamentally transformed by digital technologies and the growing influence of private tech corporations. The state’s historic monopoly on national security and defence as a defining feature of modern nationhood faces unprecedented challenges as military capabilities become entwined with commercially owned digital infrastructures and capabilities.
Marketisation, corporate power, and automation are reshaping the landscape of national security and defence – something I have seen first-hand, operating at the intersection of government, private capital and venture.
The erosion of the state monopoly
Traditionally, states have held the exclusive right to use and authorise activity relating to national security and defence, underpinning their legitimacy and ability to defend national interests. However, the rapid adoption of digital technologies across defence and national security departments has radically altered this reality over the past decade. Modern national security and defence organisations increasingly rely on private tech companies for critical infrastructure, software, and data services.
For some context, 20 years ago, around 2005, defence primes dominated development and integration; and commercial software and COTS hardware played supporting roles rather than core capability. Procurement cycles and ITAR/EU controls kept ecosystems vertically integrated, limiting outsourced dual‑use to niche subsystems. Directionally, in‑house share was higher. The shift is evidenced by later acceleration of software‑defined systems, AI, drones, and cyber as competitive pressure points.
Ten years ago, around 2015, we saw the early wave of COTS sensors, cloud, and software integration emerged. Primes began partnering more with SMEs and adopting commercial stacks. Still, primes retained system leadership, and governments were only starting to pivot policy tools toward dual‑use. Directionally, outsourcing increased versus 2005, but primes remained the centre of gravity.
Then jump to 2024/2025, and the ecosystem is decisively mixed. Primes orchestrate complex systems while sourcing AI, autonomy, ISR, cyber, and space from startups and large tech. Programmes and funds (EDF, NATO Innovation Fund, national innovation budgets) explicitly channel dual‑use into defence, and governments form “new partnerships” with private capital to scale adoption. Outsourcing and co‑development have materially increased relative to 10 and 20 years ago.
This outsourcing has the potential to dilute state control, as essential capabilities are no longer developed or maintained solely within government institutions. The result is a diffusion of power. Corporations – or potentially the countries where those corporations are based – can shape, restrict, or even withdraw services, thereby influencing the state’s ability to wage war or maintain order.
From arms to algorithms
The “marketisation of war” has also shifted because of how technology has evolved. The focus has expanded from a primary focus on traditional arms manufacturing to now also include the rental of computational power and artificial intelligence tools.
National security and defence ministries now subscribe to cloud platforms, AI-driven surveillance systems, and cyber defence solutions provided by tech giants. This transformation turns defence and security into a marketplace where states – which no longer own the frontier of dual‑use innovation – compete like market actors for access to proprietary algorithms, data analytics, and software updates using a combination of funding, regulation and diplomacy.
The shift from ownership to service contracts introduces new vulnerabilities: states are exposed to price fluctuations, contractual restrictions, and the risk of service denial, all of which can undermine operational readiness and autonomy.
Security and defence in a digital age depends on a multi-layered corporate-owned infrastructure. In enterprise, it’s known as ‘the stack’, comprising hardware, networks, cloud platforms, and application ecosystems. But ulike traditional defence assets, these layers are often owned, operated, and governed by multinational corporations whose interests may not always align with those of the state. The stack complicates the notion of sovereignty, as states must negotiate access, security, and continuity with external actors. Control over data centres, network routing, and software updates becomes a matter of diplomatic leverage rather than unilateral authority.
The subscription paradigm
Historically, defence procurement centred on acquiring and maintaining complex physical assets – tanks, aircraft, ships – that could be independently operated and serviced. Today, the paradigm has shifted to subscription-based access to digital platforms and services.
This transition introduces a form of dependence on the goodwill and business decisions of private providers. Unlike tangible assets, digital services can be revoked, altered, or suspended remotely, leaving states vulnerable to strategic or commercial pressures beyond their control. Subscription models also complicate long-term planning and budgeting, as ongoing costs and service terms can fluctuate unpredictably.
The proliferation of data centres and cloud networks has additionally created new centres of power, where sovereignty is exercised through the control of information flows and computational resources. National borders are rendered porous as national security and defence operations depend on trans-national digital infrastructure. This virtual sovereignty raises complex accountability challenges: who is responsible when a cloud service fails, is compromised, or is manipulated? States must grapple with the reality that critical defence operations may be managed from servers located in foreign jurisdictions and governed by private contracts rather than public law.
Martial imaginary and ideological convergence
The convergence of military and startup ideologies is evident in the shared emphasis on optimisation, efficiency, and disruptive innovation.
Defence and security planners increasingly adopt concepts from the tech sector such as agile development, rapid prototyping, and data-driven decision making, while tech companies embrace increasingly martial rhetoric to market their products as essential for national security (see Anduril’s latest media campaign across the UK as an example). This ideological overlap blurs the boundaries between public defence and private enterprise, raising questions about accountability, transparency, and the prioritisation of returns over public interest.
Responsible innovation in a digital age
Early-stage companies entering the defence and national security space must grapple with the profound ethical implications and impact of their work.
Many technologies such as artificial intelligence, quantum technologies, biosecurity, advanced manufacturing and cybersecurity tools, are all inherently dual-use, meaning they can serve both civilian and military purposes. This creates the risk that innovations designed for protection or efficiency could be repurposed for harm, or have other unintended consequences (see the misuse of deepfake technology which has been exploited for fraud and deception as an example).
The rise of autonomous systems further complicates accountability, as decisions once made by humans may now be delegated to algorithms. Choosing customers and partners carefully is essential. Ultimately, startups build trust with investors, regulators and the public through transparency about intended uses and safeguards to prevent misuse that can have significant consequences for national security.
The legal landscape for defence and dual use technology is equally complex and potentially unforgiving.
Export controls, such as International Traffic in Arms Regulations (‘ITAR’) in the United States or dual-use regulations in Europe, strictly govern the sale and transfer of military-related technologies. Startups must ensure compliance not only with national laws but with international humanitarian law, avoiding products that could facilitate unlawful targeting or war crimes. Handling sensitive defence data demands adherence to stringent cybersecurity and privacy standards, while contractual obligations with governments often impose strict liability, secrecy, and performance requirements. Companies must also anticipate potential liability if their technology fails or is misused, whether through negligence or deliberate abuse and underlines the importance of rigorous governance, KYC / AML procedures in engaging new customers. Legal compliance is not simply a box-ticking exercise: it is a core pillar of credibility and survival in the national security and defence sector.
The opportunity
Yet there is another, more recent shift happening. Europe’s industrial policy now favours “strategic autonomy” tech with numerous large-scale public / private partnership initiatives emerging.
Across AI, semiconductors, synthetic biology, space, cyber, autonomy, energy, and critical infrastructure, the UK and EU are shifting to a position of technology leadership and ownership. Defence-adjacent or dual-use technologies sit exactly in that strategic autonomy sweet spot.
Entities such as InvestEU and the European Investment Fund are increasingly open to dual-use projects, including via instruments like the planned Scale-Up Europe Fund.
Clearly, multiple national procurement systems, regulations, and cultures make Europe challenging from a scaling perspective. But specialist funds that build cross-border networks (across MoDs, agencies, primes, integrators, infra operators) will have a defensible advantage in aiding portfolio companies navigate this fragmentation and exploiting arbitrage from emerging ecosystems (Nordics, Baltics, CEE, Iberia) where world-class teams are building in relative capital scarcity.
Ultimately, trust is the central cornerstone of any relationship between governments and the private sector. Without trust, states may impose heavy restrictions that stifle innovation, or conversely, leave dangerous gaps in oversight.
Governments need assurance that private firms won’t inadvertently enable adversaries through exports, partnerships, or weak compliance. Trust allows for collaboration rather than restrictive regulation, enabling innovation to flourish while risks are managed.
Conclusion
The war in Ukraine has shown us that the future of conflict will likely be characterised by autonomous systems, both connected and attritional, propelled by continuous private sector innovation and rapid adoption by government agencies. The erosion of the state’s monopoly on national security and defence outcomes, the marketisation of military power, and the rise of virtual sovereignty present both clear opportunities and challenges.
Those are not the only challenges: governments spend significantly less on R&D than corporations. The imperative for greater alignment between the public and private sectors has never mattered more.
This comes with a responsibility on both sides. Governments must create the right environments for private industry to flourish, whilst also clearly articulating their problems to incentivise those building solutions and companies to incorporate appropriate safeguards and the responsible use of that technology.
Hugo Jammes is a former soldier who has spent the last decade working across corporate finance and venture capital. He is the co- founder of EDT Ventures and previously served as Managing Partner and Head of Investment for the UK National Security Strategic Investment Fund (NSSIF).
