Venture capital investments in defence tech start-ups within NATO countries and Europe saw a significant increase in 2024, reaching $3.9 billion – quadrupling since 2019 – with the United States leading the way.
The US accounted for 83 per cent of the total investment, while the European Union and the United Kingdom collectively represented 15 per cent. The figures emerged from “The State of Defence Investment 2024 – Resilience Builders in NATO & Europe” report by Dealroom.
According to the report, there is a growing interest in dual-use technologies –innovations applicable of use in both military and civilian contexts. This trend is particularly evident in sectors such as artificial intelligence (AI) and cybersecurity, where advancements can enhance defence capabilities and offer commercial applications.
The report discusses the impact of environmental, social, and governance (ESG) considerations on investment decisions, noting that while some investors remain cautious due to ethical concerns, there is a shifting perspective recognising the role of defence tech in safeguarding democratic societies.
It also addresses the challenges faced by defence tech start-ups, including navigating complex regulatory environments and lengthy procurement processes, while emphasising the importance of public-private partnerships and streamlined regulations to foster innovation and support the growth of these companies.
The establishment of NATO’s €1 billion innovation fund to support defence tech start-ups is highlighted as a significant initiative in this context. While incentives have been hard to resist, pressure from beyond the pond may have played an even more compelling role in boosting investments.
Trump anxiety
Several industry executives have linked this investment spur to Donald Trump’s return to the White House and his long-standing threats of withdrawing the US from NATO unless allies cough up.
Though not the sole driver behind the increase in financing defence tech start-ups, the Republican’s re-election in November has significantly influenced investments in drones, robotics, and quantum computing.
According to the Dealroom report, Germany, the UK and France dominated the investments, capturing 87 per cent of the total funding. These three counties have raised $2.2 billion between them since 2018.
Munich emerged as the major investment hub among all European cities, attracting most of the capital, followed by Bristol and Paris.
Helsing, a German AI start-up, which raised a whopping €450 million at a reported valuation of $5 billion, played an important role in nudging market confidence.
Despite Munich taking the crown, the UK is home to six of the top 10 European cities for defence tech investment in the Dealroom report – with London ranking fourth, Reading fifth, Oxford sixth, Leeds eighth, and Cambridge ninth.
The report counted 370 VC-backed defence tech start-ups in NATO countries, all of which have a combined enterprise value totalling $161 billion. Defence tech makes up for 1.8 per cent of European venture capital funding, tripling since 2022.
Ultimate weapon
Klaus Hommels, Chair of the NATO Innovation Fund (NIF), and Prof. Dame Fiona Murray, Vice Chair, emphasise the importance of transatlantic venture capital in fostering cooperation among NATO member nations.
The summit, marking the Alliance’s 75th anniversary in Washington, D.C. last year, highlighted the critical role of technology in securing the future of one billion NATO citizens, stressing the growing integration of civilian and military technologies.
Europe has positioned itself as a key player in the global tech landscape, despite a decline in US deep tech funding. European investment grew by 22.4 per cent from 2018 to 2022, with strong support from government initiatives.
Hommels and Murray argue space has become an essential strategic domain, with both civilian and military applications. The war in Ukraine has demonstrated the importance of space-based communications and sensors, reaffirming the strategic role of space in modern warfare.
The commercial space market is expected to reach $1.8 trillion by 2035, with lower launch costs and growing demand driving rapid growth.
To counter China’s rising space power, NATO must strengthen its transatlantic cooperation, leveraging dual-use technologies for both defence and diplomacy.
The officials argue that by bolstering investments in Europe’s advanced technologies, NATO can limit adversarial influence and ensure competitive advantages in strategic tech sectors. The collaboration will enhance military interoperability and defence strategies, enabling a more efficient approach to collective security.
[Edited By Brian Maguire | Euractiv’s Advocacy Lab ]
This post was originally published on here
