A billion dollars of venture capital will be invested in European defense technology in 2024, a first for the continent and a fivefold increase since 2018. The investment comes in the wake of rising geopolitical instability and Russia’s brutal invasion of Ukraine.
According to data included in a new report from Dealroom, since 2018, VC investments in defense-related technology have grown 25% faster than other types of investment across NATO member states and allies, totaling $3 billion.
Since then, most of the investment in the sector has been in startups from Germany, the UK and France, which together account for 87%, or $2.2 billion. German defense technology companies alone have raised more money in the past six years than companies from the Nordics, the Netherlands, Switzerland and the UK combined. Given the German government’s cautious approach to arms shipments to Ukraine, the news may come as a surprise to some observers.
Most of that investment went to companies in Munich, which ranked first in the report’s ranking of European cities, but the bulk of that can be attributed to the $487 million raised by ‘battlefield AI’ startup Helsing in 2024.
Bristol and the UK’s ‘Silicon South West’, known for its defence and space industries, were ranked as the city with the most defence investment, followed by Paris.
In fact, the UK, which has a large defence industry, is home to six of the top 10 European cities for defence technology investment in the report: London (4th), Reading (5th), Oxford (6th), Leeds (8th) and Cambridge (9th).
The report also details how VC investment in defense technology in NATO member countries has quadrupled over the past six years, reaching nearly $5.9 billion, bringing the total amount raised by defense startups in NATO member countries and allies to $18 billion.
The report also counted 370 VC-backed defense tech startups in NATO countries, with a combined valuation of $161 billion. And defense tech now accounts for 1.8% of European VC funding, a figure that will triple by 2022.
Despite Europe’s growth, the US remains the leader in defense technology, with US defense technology companies attracting 83% of VC investment.
More than half of VC funding for European defense tech startups has come from investors on the continent, but there has been a notable increase in funding from US investors, who have provided 66% of the capital for European defense tech companies this year.
The State of Defense Investment 2024: Resilience Builders for NATO and Europe, presented at the Resilience Conference, also outlined a significant increase in investor interest in dual-use technologies that can be applied for both civilian and military purposes.
“By harnessing the power of AI, we can not only strengthen our defense capabilities, but also develop dual-use technologies with broad applications for critical national infrastructure,” Jeannette zu Fürstenberg, General Catalyst’s managing director and head of Europe, said in a statement. “As investors, we are driven by our mission to protect democracies and build resilient infrastructure.”
