𝗗𝗲𝗳𝗲𝗻𝗰𝗲: 𝗳𝘂𝗹𝗹 𝘀𝘁𝗲𝗮𝗺 𝗮𝗵𝗲𝗮𝗱

𝗔 𝘀𝗲𝗰𝗼𝗻𝗱 𝗴𝗲𝗻𝗲𝗿𝗮𝘁𝗶𝗼𝗻-𝗱𝗲𝗳𝗶𝗻𝗶𝗻𝗴 𝘁𝗲𝗰𝗵𝗻𝗼𝗹𝗼𝗴𝘆 𝗮𝗿𝗲𝗮 𝗶𝘀 𝗱𝗲𝗳𝗲𝗻𝗰𝗲 (or defense for our US friends). In fact, we could say the hype around defence is only second to the hype surrounding AI. Geopolitics has upended the European scene, including the war in Ukraine (which has now lasted longer than World War 1 or 2), and the re-armament imperative driven by the unreliability of US support.

As a result, defence spending is increasing in Europe (+14% in 2025 vs 2024, with a commitment to 5% of GDP by 2035 for NATO countries vs. 1.3% in 2023). For investors, this means 𝗮𝗻 𝗵𝘆𝗽𝗲𝗿𝗴𝗿𝗼𝘄𝘁𝗵 𝗺𝗮𝗿𝗸𝗲𝘁 𝗼𝗳 𝗮 𝗱𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝘁 𝗸𝗶𝗻𝗱 (𝟭𝟱% 𝗖𝗔𝗚𝗥), especially as most weapon systems rely heavily on AI (be it command and control systems or autonomous vehicles of all kinds - in the air, on the ground and in the sea).

Underlying all this, 𝗮 𝗻𝗲𝘄 𝗰𝗼𝗻𝘀𝗶𝗱𝗲𝗿𝗮𝘁𝗶𝗼𝗻 𝗶𝘀 𝗱𝗿𝗶𝘃𝗶𝗻𝗴 𝗺𝘂𝗰𝗵 𝗼𝗳 𝘁𝗵𝗲 𝗮𝗰𝘁𝗶𝗼𝗻 𝗼𝘂𝘁 𝗼𝗳 𝗘𝘂𝗿𝗼𝗽𝗲: 𝘀𝗼𝘃𝗲𝗿𝗲𝗶𝗴𝗻𝘁𝘆. As a result, the ecosystem reorganising: EU and EIB have now approved dual use and defence investments (even if weapons and ammunitions are subject to different financing mechanisms); debt is being issued both at European (€150 billion EU Security Action for Europe (SAFE) debt facility); and national levels (Bpifrance’s €1bn defence bond); and of course equity funds are being deployed.

We see 𝘁𝘄𝗼 𝘁𝘆𝗽𝗲𝘀 𝗼𝗳 𝗳𝘂𝗻𝗱𝘀 alongside public investors (e.g. NATO Innovation Fund (NIF), SPRIND - Bundesagentur für Sprunginnovationen):
➡️ Emerging defence specialists, e.g. KEEN VENTURES, LLC, MD One, Seven Capital Management, etc.
➡️ (deeptech) funds which are creating a pocket for defence investing:
🔹 Either formally, e.g. Earlybird Venture Capital/AVP, Industrya, Lakestar; or (far more often)
🔹 Making defence investments out of their main fund, e.g. Nazca Capital, Omnes, Project A, Plural, Verve Financial etc.

The 𝗶𝘀𝘀𝘂𝗲 𝗼𝗳 𝗲𝘅𝗶𝘁𝘀 is pushed aside, as investors rely on: continuing investment market enthusiasm (Helsing is now worth €18bn only 5 years after inception); sheer financial performance (which makes an IPO possible); and prime contractors having to buy their way into change through M&A (please note SAP’s $1bn acquisition of 18-month old Prior Labs – something which we have never seen in Europe before).

Sources:
> https://pitchbook.com/news/reports/q1-2026-defense-tech-vc-trends‍
> https://dealroom.co/reports/the-state-of-defence-tech-2025‍

> https://www.eib.org/files/publications/20250132-eib-group-excluded-activities-en.pdf