The dedicated fund for defence techs will fast-track small MOD contracts with the aim of providing a procurement track record to attract private capital and avoid the startup ‘valley of death’.

The UK government has launched a £20 million fund to accelerate small defence contracts for innovative technology companies, in what ministers describe as a search for Britain’s next defence tech unicorn.

The programme will fast-track smaller Ministry of Defence (MOD) procurement contracts for fully or majority UK-owned firms that have had limited or no previous MOD business. Unlike equity or venture financing schemes, the fund is structured around early-stage contract awards tied to specific capability needs.

Officials say the fund will help companies avoid the so-called ‘valley of death‘, allowing them to scale more quickly by giving them an initial revenue base and a procurement track record. A critical bottleneck for defence technology startups seeking to move beyond prototype stage is the lack of direct use-case experience and government contracts.

The government says it wants to support high-growth firms capable of reaching the $1 billion unicorn scale within the defence and national security market, and hope that providing earlier access to MOD contracts can help attract private capital.

At £20 million, the scheme represents a small fraction of Britain’s annual defence budget, which exceeds £50 billion. However, it forms part of a wider effort to expand engagement with small and medium-sized enterprises, with the government previously committing to spend £7.5 billion with SMEs in the coming years. The MOD has also established a dedicated SME support office and introduced streamlined commercial frameworks aimed at widening access to defence procurement.

The fund will focus on areas including artificial intelligence, autonomy, robotics and precision systems.