In the wake of the Ukraine conflict, European defense and resilience technologies have emerged as a top investment area within deep tech. Dealroom’s latest report, released alongside the NATO Innovation Fund (NIF), reveals that venture capital funding for this sector reached $5.2 billion in 2023, a record high. This represents a 24% increase from 2022 and a fivefold surge since 2019.
Notably, defense, resilience, and security (DSR) startups now account for 10% of all VC funding in Europe, a significant increase from previous years. This surge reflects a growing recognition of the critical role these technologies play in ensuring strategic autonomy and security for the continent.
DSR encompasses a wide range of areas beyond traditional defense tech, including supply chain management, quantum computing, and energy. Dual-use startups, which have applications in both civilian and military sectors, have played a significant role in attracting generalist VCs to the sector.
Despite the impressive growth, challenges remain. Fragmentation and slow adoption rates can hinder market penetration. However, the rise of dual-use technologies and initiatives like NIF’s recent appointment of a chief adoption officer aim to address these obstacles.
Germany has emerged as a hub for DSR funding, with Munich and Berlin attracting significant investment. Startups in the country, such as AI defense tech company Helsing, have raised substantial funding from leading venture capitalists.
While the DSR sector is seeing rapid growth, it is still a relatively nascent field. However, the increasing interest from investors and the pipeline of early-stage companies demonstrate the potential of these technologies to transform Europe’s security landscape and drive economic growth.
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