All-In on Defense Tech: How David Sacks Is Positioning for the AI Cold War

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David Sacks isn’t just investing in software anymore.

He’s going all-in on defense tech—and positioning for what he calls the “AI Cold War” between the U.S. and China.

In this post, I’ll walk you through:

Why Sacks is pivoting into defense
The startups Craft Ventures is quietly backing
What this shift means for founders and capital
And how the AI arms race is opening a new wave of venture opportunity

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All-In on Defense Tech: How David Sacks Is Positioning for the AI Cold War

1. Why Defense Tech, and Why Now?

Sacks sees two things colliding:

AI acceleration
Geopolitical instability

His thesis?

“Software is eating the defense sector—and AI is the new battleground.”

He believes the next Palantir, Anduril, and SpaceX-style companies will emerge now—built by startup founders, not government contractors.

2. The “AI Cold War” Explained

Sacks coined this term to describe the emerging tech arms race between:

U.S. + allies (democratic, decentralised, capitalist)
China + authoritarian regimes (centralized AI, surveillance-first)

It’s not about bombs.

It’s about:

Compute dominance
Model access
Cyber capabilities
Information control

In short: control the chips, control the future.

3. From SaaS to Dual-Use Startups

Sacks is now actively seeking startups that can:

✅ Serve both commercial and defense use cases
✅ Work with DoD, DHS, or NATO
✅ Deliver real-time intelligence, automation, or infrastructure
✅ Outperform legacy contractors by 10x on speed and cost

Examples include:

Autonomy software
Tactical AI agents
Energy + resilience tech
Satellite analytics

4. Why Sacks Is the Right VC for This Shift

He’s been here before.

Backed Yammer for internal enterprise comms
Backed Palantir early, for big-data defense
Now backing next-gen defense-first infra

Sacks blends operational DNA, political access, and capital leverage.

And he’s building alliances across military, intelligence, and VC circles.

5. Craft Ventures’ Quiet Bets in Defense

While Craft hasn’t made public all its defense investments, insiders report involvement in:

Cyber threat modeling tools
AI surveillance drones
Low-latency communication infra for battlefields
Simulation tools for war-gaming scenarios

Expect more dual-use deals in stealth mode.

6. What This Means for Founders

If you’re building:

Advanced robotics
AI edge compute
Cybersecurity
Simulation
Infra for resilience…

…you’re no longer a “deep tech” startup. You’re mission critical.

VCs like Sacks are now calling that investable.

7. The Government is the New Enterprise Buyer

David Sacks has said:

“Government contracts are the new Fortune 500 logos.”

Unlike the old days of slow procurement, the DoD is:

✅ Fast-tracking AI adoption
✅ Partnering with startups
✅ Setting up non-dilutive grant + pilot programs

You don’t need to be Lockheed Martin to win.

You just need speed, security, and stakeholder alignment.

8. Why Now Is the Perfect Time to Build in Defense

$900B+ U.S. defense budget
Urgency to counter China’s AI progress
Congressional pressure to back American tech
Distrust of Big Tech = opportunity for lean startups

This is SaaS in 2010—but for defense.

9. What the AI Cold War Actually Looks Like

Here’s how it plays out in practice:

DomainWhat's HappeningComputeU.S. restricts chip exports to China (NVIDIA, Intel)LLMsOpenAI vs. China’s Zhipu & BaiduInfrastructureStarlink powers battlefield comms in UkraineCybersecurityNation-state level threat modeling becomes standardMisinformationAI-generated propaganda fuels digital warfare

This isn’t theory—it’s already happening.

10. Sacks' Media Strategy: Shaping the Narrative

Through the All-In Podcast, Sacks is:

Normalizing pro-defense VC sentiment
Highlighting the risks of appeasement
Mobilizing founder support for national security innovation
Influencing the next generation of operators

Defense tech is no longer taboo. It’s tech’s next big wave.

11. Related Capitaly Blog Posts

12. Capitaly’s Advice for Founders

✅ Reframe your AI startup as defense-aligned
✅ Explore SBIR/STTR grants for early funding
✅ Build privacy, resilience, and auditability into your product
✅ Hire operators with gov/commercial crossover
✅ Pitch investors who understand the new geopolitical landscape

13. FAQs

1. Is David Sacks really backing defense tech now?
Yes. Quietly but increasingly—especially AI-native dual-use infra.

2. What does “AI Cold War” mean?
A non-shooting war fought with models, chips, and autonomy—not missiles.

3. What types of defense startups is Craft interested in?
AI, cyber, satellite, simulation, and resilience-based tech.

4. Do you need security clearance to sell to DoD?
Not always. Many pilot programs don’t require it for MVPs.

5. Is the U.S. defense market open to startups?
More than ever—via DIU, AFWERX, NavalX, and other channels.

6. Are there non-dilutive ways to fund defense tech?
Yes: SBIR grants, DoD pilots, and strategic partnerships.

7. Is defense tech anti-ethical?
Sacks’ view: Tech should strengthen democracy, not avoid responsibility.

8. How fast is defense tech adoption moving?
Faster than ever—driven by Ukraine, China, and AI breakthroughs.

9. Is Craft Ventures building a defense fund?
No official announcement, but many signs point that way.

10. What’s the biggest mistake founders make in defense?
Assuming it’s too slow or bureaucratic to be worth the effort. That’s outdated.

14. Final Take

David Sacks is doing what he’s always done: spotting the wave early.

First it was SaaS. Then crypto. Now?

He’s betting that the next generation of billion-dollar startups will defend not just markets—but nations.

The AI Cold War is here.

Are you building for it?

Subscribe to Capitaly.vc Substack (https://capitaly.substack.com/) to raise capital at the speed of AI.

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