European Defence, Security and Resilience Startups Secure Record $8.7 Billion in 2025
European startups working across defence, security, and resilience (DSR) technologies attracted a record $8.7 billion in venture capital in 2025, according to a joint report by Dealroom and the NATO Innovation Fund. The milestone reflects a 55% year-on-year increase and nearly fourfold growth compared with five years ago, signaling rapid expansion of a sector increasingly central to Europe’s strategic priorities.
The report highlights that the surge in investment was driven primarily by late-stage mega rounds, indicating that the ecosystem is moving beyond early experimentation and into a more mature phase focused on scaling operational capabilities. Much of the funding is directed toward technologies designed to meet NATO’s most pressing needs, including mobility, situational awareness, decision-making, and protection of critical technologies.
Investment Outpaces Broader VC Market
While DSR funding jumped by 55% in 2025, the broader European venture capital market grew by just 16% over the same period. The difference underscores growing investor confidence in defence-related technologies, as well as the impact of NATO allies’ commitment to increase defence and security spending to 5% of GDP.
According to Sander Verbrugge, Partner at the NATO Innovation Fund, the growth reflects a strong alignment between investors and innovators across Europe. He noted that many DSR companies are now demonstrating revenue traction and clear growth trajectories, creating opportunities for banks, private equity firms, and other capital providers to support the next stage of scaling.
Late-Stage Deals Signal Maturing Ecosystem
Late-stage investment in the sector tripled to $4.7 billion in 2025, reinforcing the view that the ecosystem is evolving from early-stage innovation toward more mature, deployable technologies. These investments are concentrated in areas addressing critical defence and security challenges.
Artificial intelligence emerged as the dominant technology, underpinning 44% of all DSR funding—its highest share in six years. AI is increasingly central to next-generation capabilities, including autonomous systems, defence-optimized computing, and AI-enabled decision-making tools.
UK and Germany Lead, While New Hubs Emerge
The report also provides a geographic breakdown of Europe’s DSR investment landscape.
- The United Kingdom led Europe in total DSR venture funding, attracting $2.9 billion in 2025 and $9.9 billion since 2020.
- Germany followed with $2.1 billion raised in 2025 and $5.4 billion since 2020, narrowing the gap with the UK.
- Germany and the Netherlands allocated the highest share of their national venture capital to DSR companies in 2025, at over 15% each, highlighting strong policy alignment and industrial focus.
Meanwhile, Central and Eastern Europe recorded the fastest growth in deal activity, with investment rounds increasing 2.7 times since 2020. Countries such as Finland, Spain, Norway, and Bulgaria are emerging as important regional players.
At the city level, Munich retained its position as Europe’s leading DSR hub, with $1.7 billion raised. The city’s strong industrial base, access to defence customers, and deep talent pool have made it a central node for next-generation defence and space companies. Sofia and Oslo also rose in prominence, entering the list of top European cities for DSR venture investment for the first time in five years.
Startups Move Toward Contracts and Operational Impact
Beyond investment figures, the report suggests that many startups are beginning to translate funding into real-world deployments.
- Defence primes are increasingly investing in and partnering with DSR startups, forming strategic development alliances.
- Startups are winning more public tenders, particularly in the drone sector.
- Debt financing and grants are rising, indicating that companies are gaining access to a broader capital stack as the ecosystem matures.
The sector is also seeing a wave of consolidation. Mergers and acquisitions are now four times higher than four years ago, driven by new defence primes acquiring startups to expand their capabilities and geographic reach. However, no public listings occurred in 2025, despite a surge in IPOs during 2021.
From Investment to Capability
Despite the strong funding momentum, industry leaders stress that capital alone will not determine Europe’s defence readiness. John Ridge, Chief Adoption Officer at the NATO Innovation Fund, emphasized that the true measure of success lies in how effectively startups convert funding into operational technologies, contracts, and real-world impact.
He noted that European ministries of defence have a key role to play by making procurement processes more accessible to startups and scaleups, while also reshaping relationships between new entrants and established defence contractors.
A Sector Entering Its Next Phase
Overall, the record funding levels, growth in late-stage rounds, and increasing adoption by defence customers point to a sector transitioning from early-stage experimentation to large-scale deployment. With AI at the core and new regional hubs emerging, Europe’s DSR ecosystem appears poised to play a central role in strengthening technological sovereignty and collective security in the years ahead.
