Deep Tech Goes Public: What the Aerospace, Defense, and Space Capital Market Shift Means for Founders

The FORGE Series highlights the founders and experts driving Deep Tech innovation. Hosted by Stifel Bank’s Venture Banking team, these conversations explore industry trends, investment insights, and the challenges of building transformative companies. This piece builds on a session from the October 2025 FORGE Conference: “From lab to listing: Deep tech in the public markets.”

The Aerospace, Defense, and Space sector is having a capital markets moment unlike anything seen in the past decade.

More of these companies have entered or are actively preparing for the public markets in the past 18 months than in the prior ten years combined. For founders and investors who have been building through a long, quiet period of private capital accumulation, the shift is significant. Now, everyone is asking whether this is a durable structural change or a window that closes.

The answer, increasingly, looks like both. 

The forces driving this moment are structural. But that doesn’t mean the window is unlimited. The playbook is being written in real time, and founders who move with intention will find the environment more receptive than at any point in recent memory.

Tom Dyszkiewicz is a Managing Director in Stifel’s Diversified Industries Investment Banking group. Tom, who heads up Aerospace & Defense coverage, unpacks what’s actually driving this moment — and what it means for founders deciding how and when to move.

The IPO window is open, and it’s big

The pipeline of companies going public or actively preparing to do so has expanded, and the drivers behind this pipeline expansion are more structural than cyclical. 

A generation of Deep Tech, A&D, and Space companies stayed private through the post-2021 capital tightening. They were waiting for the right moment as they matured operationally and commercially. That moment has arrived. 

Investor demand for exposure to defense and space infrastructure has expanded the addressable market dramatically. Additionally, the significant volume of VC and private capital that has entered the sector over the past several years is creating its own pressure to provide returns. Public markets are the primary path to doing that.

2026 has already delivered. SpaceX went public on June 12 in the largest IPO in history, at a $1.77 trillion valuation. What’s important to understand about SpaceX is that its story isn’t only about launch capability. It’s an AI and data business built on space infrastructure. That reframing is now the operating thesis for the sector—analysts point directly to the SpaceX listing as the catalyst re-rating aerospace and defense around software-enabled, dual-use, space-based capability. The valuation conversation for every company in adjacent markets has already shifted.

OpenAI’s potential public market entry in late 2026 or early 2027 introduces a different dynamic. There’s a reasonable concern that a debut of their scale will draw institutional attention and capital allocation away from other Deep Tech opportunities temporarily. But the more likely outcome is that a successful OpenAI IPO validates appetite for large, mission-driven technology businesses and expands the overall investor base for the category. 

Defense Tech unicorns are on the horizon, though many are demonstrating an ability and preference to stay private longer. That selective patience says that the companies with the strongest fundamentals aren’t rushing. They’re timing their entries deliberately, which is a healthier dynamic than a race.

The “how” is changing

Traditional IPOs remain a viable path, but the mechanics of going public in Aerospace, Defense, and Space have diversified. 

Reverse mergers and SPACs, once viewed with skepticism as backdoor mechanisms, are being rehabilitated as legitimate options for the right company profile. The appeal is straightforward: speed and cost advantages in a volatile market, greater operational flexibility in the path to listing, and suitability for businesses with established revenue that may not fit the conventional underwriting profile of a traditional IPO.

The backdrop driving all of this is the massive expansion in defense spending. U.S. and European defense budgets are growing, global conflict has materially expanded the addressable market, and procurement timelines are accelerating. 

Many businesses accessing public markets today are scaled companies with real revenue, real contracts, and operational histories that have matured to the point where public market liquidity is the natural next step.

Pay attention to this mix. Some recent IPOs in this space are traditional private equity buyouts, others are venture-backed breakouts — and profitability profiles vary widely across both. Context beyond the headline matters. The IPO window being open doesn’t mean every company walking through it looks the same. 

How venture capital finally found defense tech

Historically, venture capital’s relationship with defense has been an uncomfortable one. With long procurement cycles, limited dual-use optionality, unpredictable contract timelines, and ethical concerns, defense was a poor fit for traditional fund models. 

That has changed, and it started with procurement.

The U.S. military has moved deliberately toward faster development cycles, AI integration, and advanced manufacturing. In doing so, the military has signaled clearly that it wants best-in-class capability, not just the lowest-cost incumbent. That opens the door to newer entrants in ways the old system simply didn’t allow. 

Ukraine’s rapid development of drone capability became a proof point that the broader defense establishment took seriously. Nimble, innovative companies can outpace traditional defense contractors in specific capability areas, and speed of development matters as much as scale of production.

For venture investors, dual-use technology is a clear winner. Companies that can serve both commercial and defense markets command higher valuations, access a broader investor base, and reduce the binary risk of government contract dependence. 

The DoD has been explicit about this preference. It wants the best available technology, and it’s increasingly willing to pay for it even when it doesn’t directly fund the development.

The risk-reward calculus has shifted, but founders should enter with clear eyes. Accessing the government market is more open than it has ever been, but contract risk is real — winning a development contract is not the same as winning a production contract, and building a capital strategy on the assumption that one leads automatically to the other is a common mistake.

This is the “Valley of Death” that defense tech talks about constantly: the gap between early development wins and the production volume needed to justify scaling manufacturing capacity. It’s real, the transition is hard, and not every company makes it across.

 Defense agencies are increasingly aware of this dynamic and are working through how to structure support for companies trying to bridge it.

The reshoring tailwind and the sovereign technology trend

One of the most underappreciated drivers of this capital markets moment is the global push for sovereign technology and domestic manufacturing. Governments on both sides of the Atlantic are investing in domestic aerospace and defense capability. 

In the U.S., government and defense procurement increasingly favors domestic supply chains. This limits some export opportunities but creates a stronger and more predictable domestic floor. 

In Europe, the dynamic is similar: governments that previously relied on U.S. systems are investing in indigenous capability, creating new opportunities for European founders and reshaping the competitive landscape for U.S. companies operating in those markets.

The net effect is more capital flowing into the sector at higher valuations and into a market that was significantly underfunded relative to its strategic importance. 

For founders, the addressable market is larger than it has ever been.

What this means for founders

The capital environment for Deep Tech, A&D, and Space founders is, by most measures, the most supportive it has ever been. Private capital is available at scale. Public markets are validating the sector with meaningful valuations. The path from venture-backed startup to public company has real case studies and a well-worn route.

But the window rewards preparation, not improvisation. The founders navigating it most effectively share a few common traits.

Founders know their path. A traditional IPO, a reverse merger or SPAC, and a strategic acquisition each require different financial infrastructure, governance, and investor narratives. Companies that arrive at these decisions without having thought through the options tend to find themselves reacting to circumstances rather than shaping them.

Founders understand the contract risk dynamic. Building a capital strategy around anticipated government revenue without accounting for the difference between development contracts and production volume is a common and costly miscalculation. The founders who raise efficiently walk investors and lenders through a realistic picture of how government revenue converts, and what the timing actually looks like.

Founders position for dual-use early. Rewards in this space are for businesses with commercial applicability, recurring revenue potential, and technology that serves multiple markets. Founders who build that narrative into their company architecture consistently access better terms and broader investor interest.

Founders watch for category crowding. Being first to market beats being third or fourth. Early movers get investor novelty and define the category; later entrants face compressed valuations and a higher bar to prove they’re different. Founders should track how crowded their specific niche already is before assuming the window is wide open for them too.

A durable shift, not a temporary window

The forces driving this capital markets moment in Deep Tech, A&D, and Space aren’t cyclical. Defense spending growth, the sovereign technology investment wave, the convergence of AI and data with space infrastructure, and the maturation of a generation of venture-backed companies are structural trends with long tails. 

The window isn’t infinite, but it isn’t closing imminently.

Nine months ago, many of these companies were asking whether the public markets were ready for them. Now, the markets are ready. The capital is there. The case studies are being written. What matters presently is whether founders are ready to move with the kind of intention and preparation that this moment rewards.

Stifel Venture Banking is a division of Stifel Bank, Member FDIC. For informational purposes only. Stifel Bank does not provide legal, tax, or other advice.