Unlike software, where customer acquisition is the main risk, the primary diligence question for transformative hardware is technical feasibility. If a team can prove they can build the product (e.g., a cheaper missile system), the market demand is often a given, simplifying the investment thesis.

Unlike the asset-light software era dominated by venture equity, the current AI and defense tech cycle is asset-heavy, requiring massive capital for hardware and infrastructure. This fundamental shift makes private credit a necessary financing tool for growth companies, forcing a mental model change away from Silicon Valley's traditional debt aversion.

The future IPO of Anduril, a private defense tech firm, is viewed as a critical test for the entire sector. Its performance will signal Wall Street's appetite for a new class of defense startups that have been heavily funded by venture capital with speculative, low-revenue profiles.

Unlike early defense startups aiming to become the next prime contractor, a new wave of companies is focused on rebuilding the industrial base. They act as critical suppliers of innovation, AI, and components to legacy primes like Lockheed Martin, viewing them as customers and partners rather than just competitors.

Private capital is more efficient for defense R&D than government grants, which involve burdensome oversight. Startups thrive when the government commits to buying finished products rather than funding prototypes, allowing VCs to manage the risk and de-burdening small companies.

Investing in a hypersonic weapons company, once a career-ending move in Silicon Valley, is now seen as a crucial act of deterrence. This rapid cultural reversal, catalyzed by geopolitical events, signifies a profound sea change in the tech industry's values and its relationship with national security.

The defense tech sector is experiencing a perfect storm. This 'golden triangle' consists of: 1) Desperate customers in the Pentagon and Congress seeking innovation, 2) A wave of experienced founders graduating from successful firms like SpaceX and Anduril, and 3) Abundant downstream capital ready to fund growth.

The venture capital mantra that "hardware is hard" is outdated for the American Dynamism category. Startups in this space mitigate risk by integrating off-the-shelf commodity hardware with sophisticated software. This avoids the high capital costs and unpredictable sales cycles of consumer electronics.

Valinor operates as a holding company, acquiring and running defense tech firms that address niche but critical government needs. This model services the vast market of smaller-TAM opportunities often ignored by traditional VCs seeking billion-dollar "moonshot" outcomes.