American venture capital firms invested a record $3.1 billion in European defense technology startups in 2024, more than triple the $900 million they deployed in 2021, according to data compiled by the venture tracking firm Dealroom. The surge reflects a widening gap between skyrocketing demand for military technology and the slower pace of US defense procurement.
European governments have committed to raising defense budgets sharply in response to Russia's war in Ukraine, with NATO members pledging to spend at least 2 percent of GDP on defense. Germany alone approved a €100 billion ($108 billion) special defense fund in 2022, and Poland now spends 4 percent of its GDP on its military — the highest ratio in the alliance.
That spending has created a pipeline of contracts that European startups can capture faster than their American counterparts. Companies like Helsing, a Munich-based AI defense firm valued at €5 billion, and Tekever, a Portuguese drone maker, have secured major contracts with European ministries of defense, giving investors earlier visibility into revenue.
"The procurement cycle in Europe is shorter, and the political will is there," said Mark Boggett, CEO of the London-based venture firm Seraphim Space, which has backed several European defense startups. "US investors are recognizing that some of the most innovative defense technology is being built in Europe right now."
The trend marks a reversal from the post-Cold War era, when American defense giants like Lockheed Martin and Raytheon dominated global arms exports. Today, smaller European firms are competing for the same NATO contracts, often with faster development timelines and lower overhead costs.
US venture firms including Andreessen Horowitz, General Catalyst, and Lightspeed Venture Partners have opened European offices or expanded existing ones in the past 18 months, specifically targeting defense and dual-use technology. Andreessen Horowitz launched a dedicated American Dynamism fund in 2023 and has since backed European companies including Helsing.
The shift also reflects changing attitudes toward defense investing in Silicon Valley, where environmental, social, and governance (ESG) concerns once discouraged military-related investments. Since Russia's full-scale invasion of Ukraine in February 2022, those barriers have eroded rapidly, with major pension funds and endowments now allocating capital to defense technology.
European startups raised $5.2 billion across 180 defense-related deals in 2024, up from $1.8 billion in 2021, according to Dealroom. American investors accounted for roughly 60 percent of that total, up from about 35 percent three years earlier.
The trend faces risks. European defense procurement remains fragmented across 27 EU member states, each with its own requirements and timelines. And some startups have struggled to scale production fast enough to meet contract deadlines, particularly in artillery and ammunition manufacturing.
Still, the direction appears set. The European Commission proposed a €1.5 billion ($1.6 billion) defense industry program in 2024 to co-fund joint procurement among member states, a move that could further accelerate contract awards to private companies.
