Military tech companies, long snubbed in Europe, are having a moment

Today, Ek is one among dozens of European tech entrepreneurs who cut their teeth in peaceful commercial ventures and are now developing or funding military systems. Russia’s invasion of Ukraine, tense U.S.-Europe relations and growing concerns about China have jolted many who until recently couldn’t imagine working on combat or security projects.

“Investing in defense was worse than porn sites," said Karl Rosander, a serial entrepreneur from Sweden who spent 27 years creating e-commerce and podcast startups before last year taking control of a company building inexpensive drone interceptors, Nordic Air Defence.

At first, when Rosander told tech contacts about the venture, “they didn’t want to listen," he recalled. By last year, he said, “people gave me a hug" for helping to protect Europe, and job applications from technical experts have flowed in.

Also flowing into the field is money. Venture-capital investment into European startups that focus on defense, security and resilience will top $8 billion this year, up from $5.4 billion last year and less than $500 million in 2015, according to analysts Dealroom.co and the NATO Investment Fund, a venture-capital fund with links to the North Atlantic Treaty Organization. Resilience investment focuses on withstanding crises such as terrorism, cyberattacks and pandemics.

Some of Europe’s most bullish defense investors are from the U.S., where venture capitalists have long financed security startups—and know many won’t succeed. U.S. venture-capital money has offered European defense, security and resilience startups the second-biggest pool of funding after home-country investors since 2022, edging out funding from other European countries, according to Dealroom.

Helsing co-founder Torsten Reil told a recent defense-tech event in London—entitled the Resilience Conference—that when the company was starting about five years ago, “it wasn’t possible to raise money from European VCs."

Behind the upswing is a confluence of money and fear. NATO governments in June pledged to more than double their spending on defense and security. Investors see opportunity.

Many Europeans worry that even if Russia stops fighting in Ukraine, Moscow’s military will target their countries. Recent drone incursions and cyberattacks deep inside Europe with known or suspected Russian links have heightened concerns.

Europeans also see American protection waning. President Trump’s return to office in January and Vice President JD Vance’s speech soon after in Munich—accusing Europeans of repressing free speech and ignoring voters—“really made a difference" in the minds of many European tech developers, said Michael Wax, a German entrepreneur and investor who has branched out from commercial companies to defense and security. On Thursday he was named a partner in German-U.S. venture fund BlueYard Capital, which invests in defense, among other fields.

The volume of money available to European mil-tech startups remains tiny compared with trillion-dollar funding needed for European security, and isn’t so far sufficient to bankroll fast growth for early-stage companies, say founders and financiers. But deep-pocketed investors are getting interested, they say.

Europe’s lack of one big customer also stymies defense-tech newcomers. U.S. security startups of recent years, including Palantir and Anduril, have benefited from contracts with the Pentagon, which controls a massive budget. In Europe, military and security spending is spread across more than 30 countries, each with its own priorities and timelines.

If Europe can’t concentrate spending, its startups will struggle to grow or shake up the continent’s lumbering military sector as U.S. startups are doing in Washington, say investors and founders.

Impetus for change has come from outsiders including Eric Slesinger, an engineer and former Central Intelligence Agency officer who also worked briefly at the CIA’s associated tech-investment operation, In-Q-Tel. Slesinger moved to Spain in 2021, when he sensed the European startup scene was discovering security.

Shortly after Russia’s large-scale invasion of Ukraine in 2022 he launched the European Defense Investor Network, an informal forum, “to see who is in the room, educate and show founders that there are investors," he said. He has since held two defense-tech conferences and raised a $23 million fund, 201 Ventures, to back startups. He sees a growing number of serial entrepreneurs like Rosander launching security companies.

“The smartest second- or third-time founders right now are choosing to build their next company in defense of European security," he said.

Accelerating the trend are quirks of the military industry and tech world. European engineers and entrepreneurs since the dot-com boom of the 1990s have flocked to the U.S. for its acquisitive consumers, bountiful funding and love of innovation. But American national-security rules restrict foreign ownership or control of military businesses or classified technologies.

So security-minded European techies are increasingly opting to stay put and help defend their homeland.

“There is conviction" among leaders of defense startups, rather than just opportunism, said Sten Tamkivi, an Estonian serial entrepreneur and partner in early-stage fund Plural Platform, which is investing in the sector.

Conviction is also driving investors, particularly wealthy Europeans who see huge stakes in the continent’s parlous security situation.

For years, European regulations and politicians’ reluctance to spend on defense limited funding. When investor Jeannette zu Fürstenberg in 2021 wanted to bankroll Helsing as one of its first outside investors, restrictions on the European fund she managed prohibited backing a military-linked venture. Instead she invested her own money.

Now a managing director of global investment company General Catalyst, which backs European defense startups, zu Fürstenberg said she spends a lot of time with European governments advocating for the sector.

“What we want to do is shape awareness," she said.

Charles Eberly von Szecsey, a wealthy investor and former U.S. Marine, whose European grandparents suffered from the Nazis’ rise to power and bombardments, has funded Ukrainian military startups, including drone producer Swarmer since around 2022. Seeing a rare opportunity to harness European know-how for defense, he is working to build up the continent’s mil-tech sector.

Rather than start a new venture fund, which he felt would face investor pressures unsuitable to building innovative defense firms, Eberly incorporated an operating company, Oedipus, to help nurture its holdings and seek synergies among them. An initial funding round values the closely held business at more than $100 million, he said.

Although Europe lost the global race for commercial-tech dominance to Silicon Valley years ago, the new arms race offers a fresh chance for high-tech success, Eberly and other investors say.

“Defense is offering an opportunity for Europe to capture, incubate, and grow a new economy, because the objectives of defense-tech are inherently nationalistic—as these technologies are tools to preserve sovereignty," Eberly said.

Markus Federle, a German venture capitalist now building a fund, Tholus Capital, focused on defense and resilience technology, said Europeans have been shaken by events this year, but the change in mindset remains limited.

“Defense is still very new when it comes to Europe," he said. He sees growing interest, including in rising attendance at conferences he has organized in Berlin, New York and Sydney under the title Mission 2044, but said deals are slower to materialize.

“There needs to be more money in the system," he said.