From F-16s to Venture Capital: Raj Shah's Mission to Innovate Defence

When Raj Shah, Managing Partner at Shield Capital, talks about the intersection of technology and defence, it’s clear he’s not just investing in companies; he’s investing in the future of democracy. Leslie Hitchcock caught up with Raj over coffee one morning to discuss his journey from flying F-16s in Iraq, running the DIU, to leading one of the most forward-leaning venture firms in the defence sector.

The Personal Catalyst

Raj’s path to defence innovation began in 2006, during his first deployment in Iraq. As he piloted an F-16 at 500 knots, he realised his plane lacked a moving map—a glaring gap in technology that could have easily led to an international incident. “At over 500mph, it doesn’t take long to cross a border,” he recalled. This firsthand experience with outdated software planted the seed for what would later become his mission: closing the technology gap in defence.

Fast forward to his tenure at the Defense Innovation Unit (DIU), where Raj worked to bridge Silicon Valley’s tech capabilities with the Pentagon’s operational needs. Now, as a venture capitalist, he applies those lessons to scale groundbreaking solutions for both defence and commercial markets. “We started Shield Capital before Ukraine, before the recent geopolitical urgency,” Raj explained, “but the need was already there.”

Investing in Transformation

Shield Capital’s focus is artificial intelligence, cybersecurity, space, and robotics. These domains, Raj believes, hold the greatest potential to revolutionise the defence ecosystem. “AI is transformational,” he said. “It’s about making sense of incredible amounts of information and enabling machines to perform tasks humans used to do.” He sees autonomy as a subset of AI, with applications ranging from unmanned vehicles to advanced decision-making systems.

Space, too, has captured Shield Capital’s attention. “The intersection of space and AI is particularly exciting,” Raj noted, pointing to innovations in satellite technology and navigation. While all four focus areas are pivotal, most of Shield’s investments cluster around AI and space, reflecting their transformative potential.

Navigating the Dual Markets

One of the firm’s unique strengths is its ability to guide companies through the complexities of serving both defence and commercial markets. “We help our founders understand how to work with the government, and just as importantly, who not to work with,” Raj said. Shield’s team includes experts like a former head of procurement at DIU, providing invaluable insights into navigating government bureaucracy.

Commercial markets, however, are equally critical. Shield assists its portfolio companies with customer introductions and strategic guidance, ensuring they thrive on both fronts. “We’re not just investors; we’re advisors and partners,” Raj said. “Our goal is to be the consigliere founders can rely on.”

A Pioneering Exit

Shield Capital recently celebrated its first exit when Tetra, an AI company specialising in optimising silicon for drones, was acquired by Qualcomm. “It was a great outcome for everyone,” Raj shared, describing the acquisition as a validation of their dual-market approach. Yet, he acknowledged the challenges defence-focused startups face when exiting. While some may achieve public scale, others must rely on acquisition—an area where defence primes have historically been less active.

Beyond the Horizon

Looking ahead, Raj highlighted emerging trends that could redefine defence innovation. Synthetic biology, for instance, offers transformative potential in healthcare and national security. Meanwhile, advancements in energy, such as small nuclear reactors, could underpin future technological breakthroughs.

But the biggest challenge, Raj believes, is not innovation itself, but its adoption. “The Department of Defense doesn’t have an innovation problem; it has an innovation adoption problem,” he said, quoting former Deputy Secretary of Defense Bob Work. Bureaucratic inertia remains a barrier, but Raj remains optimistic, especially as Europe ramps up its efforts in defence and Ukraine becomes a proving ground for new technologies.

Balancing Business and Patriotism

When asked whether defence innovation is a patriotic endeavour or a business opportunity, Raj was unequivocal: “You can do well and do good at the same time.” Shield Capital’s mission is to harness capitalism’s strengths to build technologies that not only solve critical problems but also strengthen democratic societies.

In a world increasingly shaped by emerging threats, Raj Shah’s vision is both pragmatic and aspirational. Shield Capital is not just investing in startups; it’s investing in the defence of democracy itself.