Defense and Venture Capital Finally Stopped Ignoring Each Other
For much of the 2000s and 2010s, defense was an awkward fit for venture capital. Government procurement can be slow, customers operate under demanding security constraints, and the commercial path for military technology is not always obvious. Those features once discouraged investors accustomed to software’s rapid scaling. That divide is narrowing: defense technology dealmaking reached a record in the first quarter of 2026, and new firms have formed around the world to invest specifically in defense startups.
Protego Ventures has positioned itself at the center of that shift in Israel. The two-year-old firm describes itself as the country’s first and largest dedicated defense technology venture fund. Led by Lital Leshem and Lee Moser, it has completed the final close of its debut fund with $125 million in capital commitments, according to TechCrunch’s reporting.
The closing is a financing milestone, but it is also evidence of a broader change in how investors assess defense innovation. Protego’s stated mission is to back companies addressing critical defense and security needs in Israel and internationally. The fund’s approach makes the investment case explicit: specialist capital, founders with relevant networks, and technologies developed for problems that are difficult to address with conventional commercial products.
What a $125 Million Defense Fund Can—and Cannot—Do
Protego expects to invest between $5 million and $15 million per company. That range gives it room to take meaningful stakes and support companies through capital-intensive development, while limiting the number of investments a $125 million fund can make. Defense startups may need substantial resources for hardware, testing, certification, integration and long sales cycles; the check size alone does not remove those obstacles, but it can make a specialist investor more useful than a generalist writing a smaller, less engaged check.
The firm had initially targeted $150 million and chose to close at a lower figure. Leshem told TechCrunch that the decision was connected to the strength of the fund’s early portfolio, particularly drone maker XTEND. The company, described as Protego’s first portfolio investment, went public on the New York Stock Exchange earlier in September 2026. Leshem characterized XTEND as a potential “fund maker”—an investment capable of returning the entire fund. In that context, raising more money could dilute the relative impact of a major outcome across a larger pool of capital. “Nobody wants to share the pie,” she said.
That is an investor’s rationale, not a guarantee of performance. A public listing does not by itself establish what a venture fund will ultimately return: results depend on the value and liquidity of the fund’s position, timing, future company performance and the terms of the investment. The important point is that Protego is making a deliberate trade-off between fund size and the potential weight of an exceptional portfolio company. A concentrated strategy can amplify success, but it also makes individual company outcomes matter more.
Why Israel—and Why These Founders
The fund emerged in the aftermath of the October 7, 2023 Hamas attack. Leshem said executives from Ares Management encouraged her and Moser to join forces, believing new technologies would be important to strengthening Israel’s defense capabilities in response to new threats. The reporting clarifies that the backers were Ares executives, rather than Ares Management itself as an institution. Those executives contributed $30 million as limited partners, giving Protego support to begin investing.
The founders bring complementary experience. Moser is a veteran venture capitalist and continues as a managing partner at generalist firm AnD Ventures. Leshem co-founded a startup acquired for $625 million in 2025 and has 11 years of experience in military and intelligence work. She also described being deployed as a reservist on October 7 while pregnant, and witnessing a battlefield that differed from what she had known over the preceding decade. Her account helps explain the firm’s founding context, while also pointing to the importance of translating operational experience into investable products and companies.
Protego’s local relationships are a practical asset in a market where access and trust matter. Leshem said military contacts have approached the firm to learn, train and explore its technology. The value of those connections is not simply deal flow: specialist investors may be able to understand procurement realities and customer needs earlier. But networks cannot substitute for product reliability, responsible deployment, or a route from a pilot to sustained purchasing.
The Portfolio: From Drones to Situational Awareness
XTEND illustrates the fund’s exposure to autonomous and remotely operated systems. Its NYSE listing has brought visibility to the portfolio, but it should not be treated as proof that every defense startup can follow the same path. The commercial and regulatory conditions for each company differ, and public-market attention is only one measure of a business’s progress.
Another portfolio company, ASIO, develops situational-awareness systems and has partnered with Anduril. That focus reflects a wider defense technology challenge: decision-makers need timely, usable information from complex operating environments. Systems that help organize or communicate information may be as consequential as the platforms that move through those environments, though their effectiveness depends on integration, data quality and human oversight.
The portfolio examples also show why “defense tech” is a broad category rather than a single product market. Drones, awareness tools and other dual-use or military technologies have different buyers, risks and development paths. Investors must assess not only whether a technology works, but who will use it, under what conditions, how it will be tested, and what safeguards govern its use.
A Growing Field, With Public Capital in the Mix
Protego is not alone. Israeli authorities have responded to the same shift, awarding Adir Capital and Sling Capital approximately $33 million in state guarantees to invest in military and dual-use technologies. Other funds are also raising capital for similar strategies. Leshem said Protego was already too far along in its own fundraising to participate in the government tender.
The appearance of public guarantees alongside private funds signals that policymakers and investors see a financing gap worth addressing. Guarantees can reduce some of the risk of investing in companies, but they do not eliminate technical, commercial or ethical uncertainty. Public support also raises questions about accountability: what capabilities are being funded, how success is measured, and how oversight keeps pace with increasingly capable systems. A healthy ecosystem needs more than capital; it needs credible evaluation, clear responsibility and an understanding of downstream consequences.
Competition may also make disciplined selection more important. As specialized funds proliferate, the strongest investors will need to distinguish durable customer demand from short-lived urgency and companies with deployable products from those still far from operational use. For founders, a dedicated fund can offer sector knowledge and patient capital, but they still face demanding procurement processes and the need to demonstrate performance in real conditions.
What Comes Next for Protego
Protego is planning a second fund in the first quarter of 2027. Leshem told TechCrunch that the next vehicle is expected to include Israeli institutional investors and one large U.S. commitment she has already secured. It is also intended to broaden the firm’s scope to include early-growth American defense technology companies.
That planned expansion would take Protego beyond a solely Israel-focused investment story while retaining its defense specialization. It may connect companies and capital across two markets, but it will also require the firm to navigate different customer environments and investment needs. The second fund remains a plan, not a completed raise, and its ultimate scale and portfolio will depend on fundraising and investment decisions still ahead.
The debut fund’s final close therefore marks a beginning rather than a verdict. Protego has $125 million in commitments, a defined investment range, an early portfolio that includes XTEND and ASIO, and founders whose backgrounds span venture capital, entrepreneurship and military experience. The next test is whether that combination can help companies build useful, reliable businesses while meeting the unusually high standards that defense applications demand.
For Israel’s startup ecosystem, the fund is a sign that defense technology has become a more established category for venture investors. For the wider market, it offers a case study in the trade-offs of specialized capital: strong domain knowledge and larger checks can help companies tackle hard problems, while concentration, long procurement cycles and the consequences of deployment demand careful judgment. The opportunity is real, but so is the responsibility that comes with financing technologies designed for security and conflict.
Source: TechCrunch, “Protego Ventures closes debut $125M fund for Israeli defense tech” (September 29, 2026).
