The security situation in Europe has changed dramatically. Ever since Donald Trump's return to the US presidency at the beginning of 2025 and his demonstrative renunciation of NATO, it has been clear that Europe must stand on its own two feet in terms of security policy. The Munich Security Conference in February 2025 marked a turning point - not only in terms of public perception, but also in terms of strategic orientation. It is no longer just about general resilience but about real defence capability, and right away. Defence innovations are no longer seen as a "nice to have", but as a geopolitical requirement. As a result, the start-up scene in the defence sector is experiencing an unprecedented boom - supported by venture capital, state funding and a new social awareness.
The need for innovative technologies for defence, cyber security and reconnaissance is increasing. At the same time, start-ups that provide new impetus for Europe's security architecture with artificial intelligence, robotics and drone technologies are playing an increasingly important role However, one thing remains crucial for this trend to be sustainable: Without sufficient funding from venture capitalists on the one hand and the awarding of public contracts to start-ups on the other, many of these ideas will remain stuck in the early development phase.
For a long time, defence start-ups in Europe were considered a niche phenomenon. But this is changing rapidly. According to a report by the NATO Innovation Fund and Dealroom, around USD 5.2 billion was invested in European defence start-ups in 2024 - an increase of 24 per cent compared to the previous year. Germany has surpassed the United Kingdom as the largest target market for investment in this sector. Munich in particular has established itself as the European centre for defence tech, with almost USD 1 billion in investments in 2024 alone.
Since the Munich Security Conference 2025 at the latest, it has been clear that Europe must increasingly stand on its own two feet in terms of security policy. With Donald Trump's return to the White House and the clear strategic reorientation of the USA away from European security guarantees, the era of the American defence umbrella is in fact history. The consequence: Europe must secure its own defence capabilities - technologically, militarily and financially.
This geopolitical upheaval has also changed investment logic.
Just a few years ago, investments in military technologies were often rejected across the board with reference to ESG criteria. The idea that "defence" per se was incompatible with ethical and sustainable investing shaped the investment criteria of many VC funds. Today, this view is considered outdated, as a new understanding now prevails: There is no sustainability without security.
The defence of democratic societies, the protection of critical infrastructure and resilience to hybrid threats have become the central pillars of a new ESG approach - one that does not exclude geopolitical reality but rather integrates it.
This can be seen not least in practice: More and more family offices, sovereign wealth funds and topic-specific VC funds are opening up to investments in security-related start-ups. The NATO Innovation Fund (with a volume of EUR 1 billion), the Estonian DeepTech Defence financing model and new funds such as Helantic are examples of this development.
Helantic - a new defence fund based in Switzerland - plans to invest EUR 100 million specifically in defence and dual-use start-ups. The focus is not only on end products such as drones or robotic systems but also on components such as batteries, sensors or software architectures. What is crucial, according to the founders, is that a specific civil-commercial market is developed and that the founding team has commercial excellence and a sense of responsibility in terms of security policy.
A look at current fund structures in Europe shows a growing diversity of approaches that complement each other: Although Helantic is based in Switzerland, the investment focus is clearly on Germany and Europe. Around half of the planned fund volume of EUR 100 million is to be channelled into German start-ups. The high density of qualified engineers, the excellent research infrastructure and the large number of successful spin-offs from German universities are decisive for this focus. The allocation of funds reflects this strategic focus: 50 per cent of the fund volume is earmarked for Germany, 30 per cent for Central and Eastern Europe and 20 per cent for promising global markets.
Estonia is also increasingly positioning itself as a driving force for defence-related innovations: With a newly created state defence fund totalling EUR 100 million, the Baltic country is investing specifically in military and dual-use technologies. Managed by the investment company SmartCap, the fund supports both start-ups and specialised venture capital funds. The aim is to strengthen the domestic industry, create new jobs and expand Europe's technological sovereignty.
In Germany - especially in Munich, which became a hotspot for defence tech investments in 2024 - almost USD 1 billion has gone into defence-related start-ups. The trend is clear: Investing in security today means investing in stability - and in the future of Europe.
Taking a look at the start-up landscape reveals that success stories do exist. The Munich-based company Helsing develops AI solutions for analysing sensor data for military systems and closed a financing round of EUR 450 million in 2024. For instance, the German robotics start-up ARX Robotics, which develops modular unmanned vehicles, recently received funding from the NATO Innovation Fund.
To realise its full potential, the start-up scene needs:
Only if it succeeds in combining key elements - specialised capital, regulatory clarity and social understanding - will Europe be able to compete for security-relevant technologies in the long term. Venture capital plays a crucial role here. However, it is just as important for politicians to take a positive and pragmatic attitude towards the numerous defence start-ups. They should become an integral part of a new procurement strategy for European armies so that the latter can benefit from the fast innovation cycles of start-ups.
The initial positive trends in this field described above must now be transformed by all stakeholders into a sustainable development stage. To achieve this, it is essential to substantially increase the acceptance of both defence tech and venture capital across society as a whole. Only with the help of start-ups will we be able to at least partially close the innovation gap between Europe and the USA and Asia and at the same time improve the European security situation.
Danielle Golinski, LL.M.
Dr. Mario Weichel
