Delian Asparouhov: DoD's continuing resolution freezes new defense tech programs, threatening VC-backed startups

Summary

Delian Asparouhov (Founders Fund) makes a point that almost nobody in defense tech is saying publicly: venture capital is flooding into the sector at the exact moment the U.S. government has stopped writing new checks.

The continuing resolution problem

Roughly ten days before this conversation, Congress passed a year-long continuing resolution that freezes federal spending at fiscal year 2024 levels. For defense tech startups, that means zero new program starts. Incumbents — Lockheed, Raytheon, Northrop — keep their existing programs funded. The wave of VC-backed entrants gets told to expect nothing.

Asparouhov says the math gets worse from there. Multi-year DoD programs were built around escalating budgets: $100M in FY24, $200M in FY25, $300M in FY26. Freezing at FY24 levels means FY25 was underfunded, so FY26 now has to make up the shortfall and hit the original milestone. Programs that were supposed to prove capability in time for a Taiwan contingency in 2027–28 are now slipping, which gives DoD an institutional reason to redirect budget toward incumbent contractors who can actually deliver on that timeline, even if their technology is inferior.

Congress hasn't hit the September 30 budget deadline in over a decade. Asparouhov expects the CR to extend another 30 to 60 days, pushing real new-budget funding into January 2026 at the earliest.

Who's talking and who isn't

The loudest voices on the defense tech boom are founders and investors — neither of whom has an incentive to say their companies aren't going to generate returns anytime soon. Asparouhov is blunt: VCs are writing checks based on zip codes rather than any understanding of how appropriations actually work on the Hill.

He singles out Anduril as a company with the bench, product breadth, and program diversity to navigate this. Most others won't.

The European opportunity

With U.S. government dollars frozen, Founders Fund just led a $36 million first check into a European aerospace and defense company — Asparouhov's largest net-new investment. The company was already performing well before Europe's rearmament push; the geopolitical tailwind made the case stronger. He sees genuine opportunity there precisely because European defense incumbents are even more sclerotic than their American counterparts, and there aren't yet many competent startup alternatives.

Dual-use or bust

On whether defense tech startups should pivot to commercial revenues while government budgets are frozen, Asparouhov is skeptical of the pivot framing. Companies are either built dual-use from day one or they aren't. Palantir took years to build a commercial business from a DoD base, and that happened very late. A company like Saronic, building small autonomous surface vessels, doesn't have obvious commercial buyers. Varda, which he co-founded, chose dual-use architecture from the start — that means some defense program constraints don't fit the product, but it also means commercial work can continue through a CR year.

Corporate espionage and hard-to-copy hardware

On whether the Rippling-Deel corporate espionage case should alarm defense tech companies, Asparouhov says yes on awareness, but argues hardware-intensive defense companies are structurally harder to steal from than software ones. A competitor who got full access to Varda's servers and 30 engineers would still struggle to replicate the product — they'd need the supply chain, the manufacturing process, the testing infrastructure. Chinese rockets look like Falcon 9 clones and still aren't landing. Data theft is a real threat; replication from that data is a much harder problem.