The once-dormant intersection of defense and venture capital has ignited into a vibrant, record-setting sector, with dealmaking in defense technology VC hitting an unprecedented high in the first quarter of 2026. This surge has spurred the creation of new venture capital firms globally, dedicating their focus exclusively to nurturing and investing in defense startups. Among these pioneering entities is Israel’s Protego Ventures, a two-year-old firm that proudly positions itself as the nation’s first and largest dedicated defense technology venture capital fund.
In an exclusive revelation, Protego Ventures announced the final close of its inaugural fund, securing $125 million in capital commitments. This substantial financial backing empowers the firm to make significant investments, ranging from $5 million to $50 million per company. Their strategic mandate is clear: to address and bolster the critical defense and security needs of Israel and the international community.
The Genesis of Protego Ventures: A Response to Evolving Threats
The establishment of Protego Ventures was directly influenced by the profound impact of the October 7, 2023, Hamas attack on Israel. Lital Leshem, a co-founder of Protego, shared that Ares Management, a significant limited partner with a $30 million investment, encouraged her and co-founder Lee Moser to unite and launch the firm. The conviction was that in the face of escalating and evolving threats, innovative technologies would be paramount to enhancing Israel’s defense capabilities.
Leshem’s personal experience underscores the urgency. Deployed as a reservist on October 7th, even while pregnant, she witnessed firsthand how the battlefield dynamics had shifted dramatically from her prior decade of experience. This firsthand exposure to the evolving nature of warfare provided a powerful impetus for her involvement in a venture capital firm focused on cutting-edge defense solutions.
Strategic Investment Philosophy and Portfolio Highlights
Protego Ventures’ investment strategy is designed to maximize impact. The firm’s $125 million fund size, while substantial, allows for a more concentrated approach. This strategy is exemplified by their decision to fall short of a $150 million target. As Leshem explained, a smaller fund can amplify the return on investment from a single breakout success. The firm’s first portfolio company, drone manufacturer XTEND, which recently went public on the NYSE, is already exhibiting the characteristics of a "fund maker" – an investment with the potential to return the entire capital deployed by the fund. "Nobody wants to share the pie," Leshem remarked, articulating the strategic advantage of having a significant stake in such a promising venture.
XTEND’s successful IPO is a testament to the burgeoning success of defense tech startups and Protego’s ability to identify and support high-potential companies. Beyond XTEND, Protego’s portfolio includes other promising ventures such as ASIO. ASIO is at the forefront of developing advanced situational awareness systems and has already forged a significant partnership with Anduril, a prominent American defense technology company. This collaboration highlights the interconnectedness and growing synergy within the global defense tech ecosystem.
Leadership and Network Advantage
The leadership team at Protego Ventures brings a formidable combination of venture capital acumen and deep defense sector expertise. Lee Moser, a seasoned venture capitalist, maintains her role as a managing partner at AnD Ventures, a generalist VC firm. This dual role provides Protego with access to a broader venture capital network and diverse investment strategies.
Lital Leshem complements this with her own entrepreneurial success and extensive background in military and intelligence. Her experience co-founding a startup that was acquired for $625 million in 2025, coupled with 11 years in the military and intelligence field, offers Protego a unique perspective on the operational needs and technological demands of modern defense. This blend of financial and operational expertise is crucial for navigating the complex defense procurement landscape and identifying technologies that offer genuine strategic advantages.
Leshem has noted a strong positive reception from within defense circles. "On the military side, there is a lot of respect, and people are coming – even under the radar – to talk to us, to learn from us, to train with us, and for sure get our technology and innovation," she stated. This indicates a clear demand for the type of advanced solutions that Protego aims to foster.
The Evolving Defense Tech Investment Landscape in Israel
Protego Ventures is not alone in recognizing the burgeoning opportunities in Israeli defense tech. The Israeli government has also signaled its commitment to fostering innovation in this critical sector. In a significant move, Israeli authorities have allocated approximately $33 million in state guarantees to VC firms Adir Capital and Sling Capital. These funds are earmarked for investment in military and dual-use technologies, reflecting a national strategy to bolster its defense industrial base through private sector investment. Several other funds are also actively raising capital for similar strategic investments, indicating a broader trend of increased governmental and private sector support for defense technology.
While Protego was too advanced in its own fundraising to participate in the government’s tender, this initiative underscores the growing recognition of defense tech as a vital area for economic growth and national security. The increased competition and investor interest are likely to accelerate the pace of innovation and bring more advanced solutions to market.
Looking Ahead: Future Funds and Global Ambitions
Protego Ventures is already charting its course for the future. The firm is actively planning its second fund, with a target launch in the first quarter of 2027. This future fund is expected to attract backing from Israeli institutional investors and has already secured a significant commitment from a large U.S.-based investor. Notably, the scope of the second fund will broaden to include early-growth American defense-tech companies, signaling Protego’s ambition to become a key player in the global defense technology investment arena.
The expansion into the U.S. market is a strategic move, leveraging the vast innovation ecosystem and significant defense spending in the United States. By investing in both Israeli and American companies, Protego aims to build a diversified portfolio and foster cross-border collaboration in defense technology development.
Broader Implications for the Defense Industry
The rise of specialized venture capital firms like Protego Ventures signals a significant paradigm shift in the defense industry. Traditionally, defense procurement has been characterized by lengthy government contracts and established prime contractors. However, the accelerating pace of technological change, driven by advancements in artificial intelligence, robotics, cybersecurity, and unmanned systems, has created a fertile ground for agile, innovative startups.
These startups, often more nimble and adaptable than traditional defense behemoths, can develop and deploy cutting-edge solutions much faster. Venture capital plays a crucial role in bridging the funding gap for these companies, providing the capital necessary for research and development, scaling production, and navigating the complex regulatory and sales cycles of the defense sector.
The increasing overlap between venture capital and defense technology has several key implications:
- Accelerated Innovation: The influx of private capital injects a competitive dynamic into the defense sector, encouraging faster development cycles and the adoption of disruptive technologies.
- Dual-Use Technologies: Many innovations emerging from the tech sector have dual-use applications, benefiting both commercial and defense markets. VC funding can accelerate the development of these technologies, providing a broader market for startups.
- Talent Attraction: The allure of working for innovative startups, backed by well-funded VC firms, can attract top engineering and technical talent away from traditional defense contractors.
- Geopolitical Significance: The concentration of defense tech innovation and investment in certain regions, like Israel, has significant geopolitical implications, influencing national security capabilities and international partnerships.
- The Rise of the "Startup Nation" Model in Defense: Israel, already renowned for its vibrant startup ecosystem in various sectors, is now leveraging this expertise to bolster its defense capabilities. This model, where innovation is driven by agile startups and supported by specialized VCs, is likely to be emulated by other nations seeking to modernize their defense sectors.
As global security challenges become more complex and technology continues to evolve at an unprecedented rate, the role of venture capital in shaping the future of defense is set to expand further. Firms like Protego Ventures are at the forefront of this transformation, demonstrating that strategic investment in defense technology can yield both significant financial returns and critical advancements in national security. The record-breaking dealmaking in Q1 2026 is not just a financial metric; it’s a clear indicator of a fundamental and lasting change in how defense capabilities are being conceived, developed, and funded.
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