Venture capital investors have been citing reduced red tape and the Golden Dome as major drivers of their leap into defense tech.

Yes, but: Obstacles remain when the U.S. government collides with Silicon Valley.

Behind the scenes: Most VCs lack the clearances necessary to access classified information — limiting visibility into their investment.

• In board rooms, it's not uncommon for a member to excuse themselves when details relating to a major contract emerge.
• "We hosted a defense tech dinner in D.C., and people asked, 'Do you have clearance? 'And I say no, and they say: 'Well, I can't tell you this, but I'll speak about it in the abstract," says Michael Brown, managing partner of Battery Ventures.

That has implications for the due diligence process.

• Investors still see the overall finances of a business, but might not see the technical specifications of a product tied to a classified project.
• In one case heard by Axios, a company could not reveal when a major payment hit, as it risks signaling a highly watched product has successfully been completed.

Between the lines: As record-high dollars flow into the sector, the big question is if investors without clearances have enough information to make investment decisions.

• Most investors I spoke to believe the information flow is adequate, noting that not all defense tech deals have highly classified information or are wholly dependent on the government for revenue.
• DCVC's Matt Ocko argues clearances will be an edge for investors as the industry dives deeper into critical, and likely sensitive, tech. "You're not getting ground truth," he says. "If there is a new nation-state actor or threat, you can't tell if your company is viable anymore or if you have the golden ball of 'unobtanium'."

Zoom out: "In the defense tech world, there's this overlapping weave of regulatory regimes," says Joshua Gruenspecht, a partner of Wilson Sonsini.

• Companies with foreign investors not only file with CFIUS, but they may also face further scrutiny from the Defense Counterintelligence and Security Agency (DCSA) if they handle classified information. And while a foreign investment may not be an issue with the CFIUS, it could be a problem for DCSA.
• The constant transition from one administration to the next has led to more self-policing by companies, says Holland & Knight partner Robert A Friedman.
• "I've seen people turn down eight-figure amounts," Gruenspecht says, with companies aiming to avoid any conflict with the DCSA. "Scrutiny on FOCI (Foreign Ownership, Control, or Influence) has increased meaningfully. "

Case in point: Allen Control Systems, an autonomous-turret maker, says it's purposely not taken foreign investments of any kind to avoid slowdowns in the contracting process.

The bottom line: Defense tech is not for the faint of heart.

British banking giant HSBC offered to pay $13.6 billion for the 37% stake it does not already own in Hong Kong-based Hang Seng Bank.

Why it's the BFD: Despite geopolitical tensions, HSBC says it's placing a bet on Hong Kong's economy and world trade.

Zoom out: This $37 billion deal comes amid a surge in IPOs in Hong Kong, with the city ranked No. 1 in the world for listings in the first half of the year.

• Hang Seng is known for its lending and personal banking.

What they're saying: "Our offer also represents a significant investment into Hong Kong's economy, underscoring our confidence in this market and commitment to its future as a leading global financial centre, and as a super-connector between international markets and mainland China," HSBC CEO Georges Elhedery said in a statement.

• Base Power, an Austin-based home power backup company, raised $1b in Series C funding led by Addition. Trust Ventures, Valor Equity Partners, Thrive Capital, Lightspeed, Andreessen Horowitz, Altimeter, StepStone, Elad Gil, 137 Ventures, Terrain, Waybury, Ribbit, CapitalG, Spark, BOND, Lowercarbon, Avenir, Glade Brook, Positive Sum, and 1789 joined. axios.link/4gXTOoa

• n8n, a Berlin-based AI orchestration platform, raised €154.9m in Series C funding, valuing it at €2.15b. Accel led, joined by Meritech, Redpoint, Evantic, Visionaries Club, NVentures, T.Capital, Sequoia, HV Capital, Highland Europe, and Felicis Ventures. n8n.io

💊 Expedition Therapeutics, a Delaware-incorporated biotech seeking Chinese drug candidates, raised $165m in a Series A. Sofinnova Investments and Novo Holdings co-led, and BVF Partners participated. axios.link/4gZ9ckg

💊 Arthrosi Therapeutics, a San Diego-based company treating gout and tophaceous gout patients, raised $153m in Series E funding led by Prime Eight Capital with participation from CR Biotech, HighLight Capital, HM Venture Partners, and ReliantTech. axios.link/4ocmPz3

• Duos, a Minnesota-based senior benefits company, raised $130m led by FTV Capital, per Axios Pro. Forerunner Ventures participated. bit.ly/47hsRbS

• Raise Financial Services, parent of Indian trading platform Dhan, raised a $120m Series B led by Hornbill Capital, with MUFG Bank and Beenext participating. axios.link/4q198EL

💊 Nilo Therapeutics, a New York immune disease treatment developer, raised a $101m Series A. The Column Group, DCVC Bio and Lux Capital led, and the Gates Foundation and Alexandria Venture Investments participated. axios.link/4h4Mnf1

• Spellbook, a Toronto-based AI contract reviewer, raised $50m in Series B funding led by Khosla Ventures' Keith Rabois, with participation from Threshold Ventures, Inovia Capital, Bling Capital, Moxxie Ventures, Path Ventures and Jean-Michel Lemieux. It values the company at $350m. axios.link/3KGiWE2

• Simple Life, a London-based AI health coach, raised $35m in Series B funding. Hartbeat Ventures led. bit.ly/42tWOmr

• Snappr, an SF-based photography service, raised $28m in Series B funding. Foundry led and was joined by Basis Set Ventures, Shrug and Yes VC, per Axios. axios.link/46GPfLF

• Coinflow, a Chicago-based stablecoin payments startup, raised $25m in Series A funding led by Pantera Capital, with Coinbase Ventures, Reciprocal Ventures and Jump Capital participating. axios.link/47fOo4G

• Kernel, which makes browser infrastructure for AI Agents at scale, raised $22m. Accel led, joined by Y Combinator, along with Paul Graham (YC), David Cramer (Sentry), Solomon Hykes (Docker), Zach Sims (Codecademy), and Charlie Marsh (Astral), per Axios Pro. axios.link/3J37dPm

• Crosby, a NYC-based AI law firm, raised $20m in Series A funding co-led by Bain Capital Ventures, Index and Elad Gil, with participation from Sequoia, Cooley LLP and Patrick Collison. crosby.ai

• HiOctave, an SF-based SMB customer service agent company, raised $15m led by Vinod Khosla and Khosla Ventures. Celesta Capital, Anthology Fund, and Carya Venture Partners joined. axios.link/4q2SMvs

• Splash Sports, a Denver-based social sports gaming company, raised $14.5m in Series B funding. Dream Ventures led, with participation from Boston Seed, Velvet Sea Ventures, Green Wave Ventures, and Evolution Partners. axios.link/4707jiL

• Authentic8, a Redwood, Calif.-based cybersecurity company, raised $12m from Vistara Growth. authentic8.com

• QuoteWell, an Austin-based wholesale commercial insurance brokerage, raised $12m led by New Enterprise Associates. Brand Foundry Ventures and ClockTower Ventures, Goldcrest Capital and Floating Point joined. axios.link/434BOCV

• Vulcan Technologies, an Austin-based company for streamlining government policy, raised $10.9m in seed funding co-led by General Catalyst and Cubit Capital, per Axios Pro. axios.link/4nSdGMf

• AnyTeam, an AI sales startup, raised $10m in seed funding led by SignalFire, joined by Crosslink Capital. anyteam.com

• Kneu Health, a London-based Parkinson's and dementia monitoring company, raised $5.6m co-led by Oxford Science Enterprises and Cedars-Sinai. Social Impact Enterprises, JIMCO, G.K. Goh Ventures and SXSW London joined. kneu.com

💊 Onos Health, an SF-based behavioral health cost startup, raised $6.3m in seed funding led by Haystack and Pathlight Ventures, per Axios Pro. Bertelsmann Healthcare Investments and Nebular joined. axios.link/3IVXYR4

• 375ai, SF-based DePIN data network, raised $5m co-led by Delphi Ventures, Strobe Capital and HackVC. axios.link/435pQZL

• Asterix Food, a Tel Aviv-based precision fermentation company, raised $4.2m in seed funding led by CPT Capital. ReGen Ventures, SOSV, Grok Ventures and the Israeli Innovation Authority joined. axios.link/3VS7JCN

• Edelman Financial Engines, a Boston-based wealth management firm backed by Warburg Pincus and Hellman & Friedman, halted its sale process, per Citywire RIA. axios.link/3KJiOne

• Niobrara Capital invested in Noventiq Holdings, a London-based cybersecurity provider. axios.link/4nKfIy3

• Shofner Capital Partners invested in PtEverywhere, a Cary, N.C.-based practice management platform for cash-pay physical therapy clinics. axios.link/46RX6Gt

• T. Rowe Price Associates is expected to vote against Thoma Bravo's $12.3b buyout of Dayforce (NYSE: DAY), saying the bid is underpriced. It's the company's largest shareholder. axios.link/3J1Z11I

• Wall Street Prep, backed by the Riverside Company, combined with Financial Edge Training and Euromoney Learning, financial education and content platforms. axios.link/48gkMFr

• Apollo is among the private equity firms in conversations with Paramount Skydance about potentially joining its bid to acquire Warner Bros. Discovery, per the NYPost. axios.link/48n2672

• PestCo Holdings, backed by Thompson Street Capital Partners, acquired the assets of Arizona's Best Choice Pest & Termite Services, a Phoenix-based residential and commercial pest control service. https://axios.link/4hd0JtV

• Alliance Laundry Systems, a Ripon, Wis.-based laundry equipment manufacturer owned by BDT & MSD Partners, raised $826.3m (35% secondary) in its IPO. It priced 37.6m shares at $22m, an upsized IPO at the high-end of its range. axios.link/3W0gdHY

💊 Soren Acquisition, a heath care-focused SPAC, filed to raise $220m. Former Theoria Medical CLO Arghavan Di Rezze leads the firm. axios.link/4mV9IBi

• Phoenix Education Partners, the University of Phoenix operator backed by Apollo and Vistria, raised $136m in a sale of 4.3m secondary shares at $32, the midpoint of its range. axios.link/4ogm73T

• KNDS, an Amsterdam-based tank maker, has selected Lazard as adviser for a potential IPO. It may seek a valuation of about around €20b. bit.ly/3VWRgx6

💊 Iqvia (NYSE: IQV) agreed to acquire Cedar Gate Technologies, a GTCR-backed health data business, for $750m, per Axios Pro. axios.link/4n1OvFV

• Kadant Inc. (NYSE: KAI) acquired Clyde Industries Holdings, an Atlanta-based boiler efficiency and cleaning system company, for $175m in cash from Wynnchurch Capital. axios.link/4pXfjKd

💊 Novo Nordisk (NYSE: NVO) agreed to buy Akero Therapeutics (Nasdaq: AKRO), a South San Francisco-based company with a drug treating liver diseases, for as much as $5.2b. axios.link/46IRRbT

• Race Rock acquired Spitzer Industries, a Houston, Texas-based engineered products maker, from Stephens Group. axios.link/4nNETjk

• Novata, backed by S&P Global, Hamilton Lane, Microsoft, Ford Foundation, Motive Partners, acquired Atlas Metrics, a Berlin-based company backed by Cherry Ventures and b2venture. axios.link/4706vuf

• Grantd, backed by Edward Jones Ventures, acquired StockOpter, an equity compensation management company. stockopter.com

• Crux, a New York City-based clean energy financing software provider backed by a16z, is acquiring Augur Energy AI-backed Daedaline. axios.link/46GLi9O

• Lowes (NYSE: LOW) completed its buyout of Foundation Materials

• Jonathan Cantwell was named head of technology investment banking at Cascadia Capital. He was previously partner and head of the software practice at GP Bullhound. cascadiacapital.com

Jamie Cavanaugh was promoted to managing director at Halifax Group. He was previously a principal. thehalifaxgroup.com

• William "Bill" Dunigan was named head of wealth solutions and a managing director at New Mountain Capital. axios.link/4h2lLez

Laura Lande-Diner joined Jefferson Life Sciences, a new fund from Tony James' family office, as managing partner. axios.link/3VWS98U

• Tony Pulice rejoined Rockbridge Growth Equity Management as partner. He was previously partner at Huron Capital Partners. axios.link/3J4L0jX

PepsiCo reported earnings today while under pressure from activist investor Elliott Management.