$1 billion in venture capital is set to be invested in European defense technologies in 2024, a first for the continent and a five-fold increase since 2018. The investment comes in the wake of growing geopolitical instability and Russia's brutal aggression in Ukraine.
Data contained in a new Dealroom report shows that venture capital investment in defense-related technologies across NATO member states and their allies has increased 25% more than any other type of investment, totaling $3 billion since 2018.
Since then, the majority of investment in the sector has been captured by German, British and French startups, which together accounted for 87 percent, or $2.2 billion. German defense technology companies have raised more funding in the past six years than Nordic, Dutch, Swiss and British companies combined. The news may come as a surprise to some observers, given that the German government has been wary of arms exports to Ukraine.
Much of this investment went to companies based in Munich, the top-ranked European city in the report, but most of it could come from the $487 million that “battlefield AI” startup Hellsing raised in 2024.
Bristol and the UK's “Silicon Southwest”, best known for its defence and space industries, attracted the next largest amount of defence investment, followed by Paris.
Indeed, the UK, which has a large defence industry, is home to six of the report's top 10 European cities for investment in defence technology: London (4th), Reading (5th), Oxford (6th), Leeds (8th) and Cambridge (9th).
The report also details that venture capital investment in defense technology across NATO countries has increased fourfold over the past six years, reaching approximately $5.9 billion, bringing the total amount raised by defense startups in NATO countries and their allies to $18 billion.
Additionally, the report states that there are 370 venture-backed defense tech startups in NATO countries with a combined enterprise value of $161 billion, and defense tech accounts for 1.8% of venture capital funding in Europe, a figure that is set to triple since 2022.
Despite Europe's growth, the United States remains the dominant force in defense technology, with U.S. defense technology companies attracting 83% of venture capital investment.
While more than half of venture capital funding for European defense tech startups came from continental European investors, funding from US investors accelerated significantly this year, providing 66% of funding to European defense tech companies.
The report, “The State of Defence Investment 2024: NATO and European Resilience Builders,” released 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.
“Harnessing the power of AI can not only strengthen defense capabilities, but also develop dual-use technologies with broader applications to critical national infrastructure,” Jeannette zu Furstenberg, General Catalyst's managing director and head of Europe, said in a statement. “As investors, we are driven by our mission to protect democracy and build resilient infrastructure.”