Through a combination of quantitative budget analysis and qualitative interviews, this thesis examines the current state of innovation in the defense industry. The majority of the Department of Defense budget is tied up in major weapons acquisitions, but in recent years, there has been an increased number of initiatives trying to bridge the gap between government and industry (especially venture capital). In addition, technology development has shifted towards private industry research in Silicon Valley. Using the DoD’s budget spending trends between 1999-2016, this thesis analyzes R&D investment trends to gain a better understanding for areas of government interest. Additionally, samples were also gathered from early-stage venture databases to analyze private investment trends. This study suggests that there has been increased collaboration between R&D organizations within the DoD in recent years. However, the government’s focus & needs are still not quite aligned with the investment preferences of the private sector.