""Public funding alone won't suffice. Venture capital has a pivotal role in scaling the next generation of defense tech." say Jimmy Fussing Nielsen, Björn Nilsen, and Bérenger Teboul-Danguin in the analysis. The EU's ReArm Europe Plan, aiming to mobilize € 800 billion for defense readiness by 2030, signals a major shift, but private capital will be essential to bridge the gap."
"With NATO members pledging to allocate 5% of GDP to defense by 2035 and European defense budgets surging by 17% from 2023 to 2024, the continent is in a race to close the innovation gap with the U.S. and China. Denmark alone has committed € 8 billion to European-made air defense systems, including long-range precision weapons. Yet, Europe's AI spending lags far behind, accounting for less than 0.5% of its budget compared to 4% in the U.S. and 3% in China."
Geopolitical tensions and Russia's invasion of Ukraine have accelerated Europe's need for military innovation and rapid technology adoption. NATO and European defense budgets are expanding, with commitments to increase spending and mobilize large-scale funds for readiness through initiatives like the EU's ReArm plan. Private venture capital is positioned as a necessary complement to public funding to scale dual-use and defense-focused startups. Priority investment areas include AI, quantum sensing and computing, robotics, cybersecurity, advanced materials, biodefense, and space applications. Early-stage investments can target both high-strategic research and immediately operational needs such as autonomous systems and electronic warfare.
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