European defense startups raised a record amount of capital this year, turning to US investors more than local funds for the first time.
Venture capital investments in Europe’s defense technology companies reached $7.4 billion for the year to date, nearly three times the 2025 annual total, according to a report published Monday by data provider Dealroom and Resilience Media.
Defense is a booming industry in Europe after governments across the continent increased military budgets in the face of intensifying threats from Russia. The burst of funding has helped fuel a flurry of new companies building drones, spy satellites and other battlefield tech to compete with established contractors.
When Dealroom began tracking investment in the sector in 2020, these startups primarily raised funds from domestic backers. However, US investor activity has soared, with Americans providing 47% of the funding this year to date. European investors accounted for 44%.
The most active US venture investors include Taser-maker Axon Enterprise Inc., Accel, Founders Fund, Y Combinator, General Catalyst and Lightspeed Venture Partners.
Several European officials have raised concerns about foreign ownership in the continent’s defense industry. Some local entrepreneurs counter that weak capital markets and restrictions on investing in weapons force them to look abroad for funds.
As the industry expands, Europe’s investing base is widening. The Dealroom report estimates that there were 455 defense tech investors active in at least one deal this year, double the amount in 2023.
“Europe’s military leaders have been clear with us: if we want to build and retain critical defense capabilities in Europe, we also need sovereign European financing,” Klaus Hommels, founder of European VC firm Lakestar, said in a statement.
About 40% of Europe’s defense startup financing this year came from two deals for German drone makers, according to the report.
Quantum Systems raised $1.2 billion from investors including Blackstone Inc. in July. Later that month, Helsing announced a $1.8 billion round that included California-based Dragoneer Investment Group LLC.
Bergen writes for Bloomberg.
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