BRUSSELS (Realist English). Once a niche sector shunned by many investors, European defense technology has become one of the continent’s fastest-growing industries — a direct response to mounting geopolitical tension and NATO’s renewed emphasis on deterrence and military readiness.
According to Dealroom’s latest report, State of Defense Tech 2025, startups across NATO member states have already raised $9.1bn this year and are on track to reach $13.7bn by December — more than double the $6.5bn invested in 2024.
From niche to necessity
Russia’s 2022 invasion of Ukraine forced European policymakers and venture capitalists alike to rethink their priorities. Once marginalized, defense and dual-use technologies are now viewed as critical to national sovereignty and industrial resilience.
Before 2020, defense accounted for barely 1% of European venture capital funding; today it represents 4%, and within the EU the figure climbs to 6.2% — making it the fastest-growing investment category on the continent. VC allocations have doubled in just one year, with a record $1.5bn raised in 2024 and an expected $2.3bn by the end of 2025.
Leading the wave is Helsing, the German AI defense company that secured €600mn ($700mn) this year following a €450mn round in 2024. Portuguese drone maker Tekever also raised €70mn ($82mn), underscoring growing investor appetite across Europe’s defense ecosystem.
AI and autonomy at the core
Artificial intelligence dominates the sector, attracting $929mn in 2025 alone. Robotics and autonomous systems — especially unmanned aerial vehicles (UAVs) and drones — have seen the highest deal count, with 30 funding rounds completed so far this year.
Dual-use technologies are also booming. Startups in quantum computing, semiconductors, and space systems have collectively drawn more than $1bn in investment this year. Funding for quantum firms is projected to reach $4.7bn, a 32% jump from 2024, reflecting Europe’s broader shift toward “security through technology.”
A new class of investors
Since 2019, participation in European defense tech has quadrupled. The number of specialist funds has grown from eight to 21, with newcomers such as Dutch VC Keen raising a €125mn ($146mn) defense-focused fund. NATO’s €1bn Innovation Fund is meanwhile channeling capital into strategic technologies across the alliance.
Corporate players are joining the trend: Deutsche Telekom and Porsche SE are reportedly anchoring a €500mn ($583mn) venture fund managed by DTCP, aimed at strengthening Europe’s defense technology base.
U.S. investors now participate in nearly half of all late-stage European defense rounds, reinforcing transatlantic cooperation. With 132% year-on-year growth, defense tech has become Europe’s most dynamic venture segment — and a pillar of its evolving security architecture.
As NATO allies expand defense budgets and Europe recalibrates its strategic posture, investment in AI-driven, autonomous and dual-use systems is transforming from a fringe pursuit into a core industrial priority — one that is redefining the continent’s military and technological future.
