Welcome back to The Cap Table Newsletter where we break down what's actually happening in startups and private markets.

Every founder conversation I'm having lately starts the same way. Nobody wants to pitch me a normal software company anymore. Everybody wants to talk about missiles, drones, chip fabs, hypersonic weapons.

The stuff that used to be the boring, capital-intensive corner of venture, the businesses that took a decade of government contracts before anyone made real money, is suddenly the only thing anyone wants in on.

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From Boring to the Hottest Thing in the Market

For most of the last decade, deep tech was the category serious investors respected and mostly avoided. It meant real manufacturing, real regulatory approval, and government customers who take years to sign a contract and even longer to pay it. Software was where the fast money was. You could go from an idea to a hundred million dollars in revenue without ever touching a factory floor.

That's flipped. Look at Etched. It's a chip company building hardware that only does one thing, transformer inference. In December it was worth $5B. By this past July it had raised again at roughly $10B. A month after that it raised $700M more at $21B, led by Jane Street, a trading firm that became an investor because it was already a customer. That's roughly four times the valuation in eight months.... all for a chip company.

Or look at Castelion. Three SpaceX alumni started it in 2022 building hypersonic missiles, after literally getting turned down by more than fifty investors who thought the idea was too capital intensive and too slow to ever return money. They built out of a borrowed warehouse. Now they've closed a billion-dollar round at a $13B valuation, co-led by Andreessen Horowitz alongside JPMorgan's own investment arm and Carlyle, two names that spent no time writing venture checks a few years ago.

Neros, a drone company whose founder flew to Ukraine right after founding it to test the product on an actual battlefield, tripled its valuation to $2.5B in one round.

Terra Industries, run by two founders in their early twenties building defense infrastructure out of Nigeria, just closed a $52M seed.

Then there's Source Foundry... It's a stealth chip equipment startup. No disclosed product, no disclosed customers, basically nothing you could point to yet and say this is worth billions. It just raised another $400M anyway, from Situational Awareness, the hedge fund run by former OpenAI researcher Leopold Aschenbrenner. Aschenbrenner's fund just had a brutal year. It lost so much on AI infrastructure stocks that it sold off most of its public portfolio to Citadel this summer, and its assets under management got cut in half. In the middle of that, it doubled down on a company that hasn't shown anyone anything yet.

None of these are boring anymore. They're the hottest thing in the market right now. That's usually when I start getting nervous, not more confident. I am not saying there aren't opportunities, but it's important to really look at the broader market as well.

Nobody's Waiting Around Anymore

Here's the part that actually worries me. I'm not seeing deals take the time they used to take. Term sheets are turning around in days, not weeks. Rounds that would have taken a quarter to put together a few years ago are done before the data room is even fully organized.

Etched is the clearest example of what that compression actually looks like. $5B in December, roughly $10B by July, then $21B a month after that. That's not just a bigger number each time, that's three separate rounds inside eight months, each one closing faster than the last. Castelion went from fifty rejections to a billion-dollar round co-led by three institutions that don't typically move at startup speed either.

The size of the checks is one thing. The speed at which they're getting written is the part that should give everyone pause. When a company can quadruple its valuation in eight months, the diligence that would normally happen between rounds simply doesn't have time to happen. Nobody wants to be the investor still making reference calls when the round closes without them.

This Isn't Just Six Companies

And it's not isolated to the names I mentioned above. Anduril raised $5B in May at a $61B valuation and is reportedly already back out talking about raising again at close to $100B. Shield AI closed a $2B round at $12.7B. Saronic, which builds autonomous warships, raised $1.75B at $9.25B. Defense and defense-adjacent startups pulled in $35.6B in the first half of this year alone, up 40% from last year, and the median round size has doubled from $11M to $20M in twelve months.

It's not just that a handful of category leaders are raising bigger rounds. The floor is rising under everyone. When the median check doubles in a year, that's not a few hot deals getting bid up.

My Take

So where does this actually go.

I keep thinking about the good companies from the dot com era, the ones that were genuinely overpriced in 2000 and still turned out fine twenty years later because the underlying business eventually grew into the number. Defense spending is real. The physical AI buildout is real. Maybe these valuations just need a few years to catch up to themselves.

Or maybe this is what it always looks like right before it turns. The checks get faster, the diligence gets thinner, and everyone stops asking about price because the story is too good to say no to.

I don't know which one this is yet.

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I read a lot of investor updates, and the best founders are usually the ones who send them consistently. The problem is that actually putting one together is a pain. You’re pulling metrics from different places, writing out wins and challenges, formatting everything, and trying to remember what you sent investors last time.

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