U.S. investors fuel record haul for European defense startups - Los Angeles Times

European defense startups achieved a historic funding milestone in 2025, raising $1.5 billion in venture capital as U.S. investors led a capital surge into the continent's emerging defense-tech ecosystem. This represents a fundamental shift in European venture priorities, with defense now established as the region's fastest-growing VC sector, projected to expand over 130% year-on-year and outpace all other investment verticals. The broader defense, security, and resilience sector—encompassing dual-use technologies, AI, robotics, and critical infrastructure protection—has emerged as Europe's most dynamic investment category over the past two years.

The influx of American capital underscores Europe's continued reliance on U.S. funding sources despite record domestic growth. Approximately 65% of European defense-tech funding now originates from U.S. investors, with nearly 50% of late-stage deals also led by American firms. This dependency reflects both the maturity of U.S. defense venture markets and the persistent capital gap in European ecosystems. Within the broader NATO alliance, the disparity is even starker: the U.S. has captured 85% of all defense-tech VC funding among NATO members since 2019, though European performance is accelerating rapidly. NATO allies collectively raised $9.1 billion in defense-tech VC funding in 2025—1.4x the total for all of 2024—demonstrating institutional conviction in the sector's strategic importance.

The investment surge reflects geopolitical realities. Russia's full-scale invasion of Ukraine and mounting concerns over transatlantic security have prompted governments and institutional investors to elevate defense and resilience spending to both moral and economic priorities. European venture capitalists, historically cautious about military and dual-use technologies, have fundamentally reconsidered sector participation. European defense-tech VC funding has grown from $159 million in 2014 to cumulative investments exceeding $2 billion since 2018, with investment skyrocketing over 500% between 2021-2024 compared to 2018-2020. This acceleration reflects not only policy shifts but also recognition among institutional allocators that European strategic autonomy requires domestic innovation capacity in critical defense domains.

Despite record European capital deployment, the continent remains substantially behind U.S. markets in both absolute funding volume and ecosystem maturity. European defense tech accounts for 6.2% of NATO defense-tech VC funding, whereas the U.S. dominates with 85% of total investment across the alliance. Venture leaders emphasize that preparedness and long-term commitment remain essential; as noted by Balnord General Partner Marcin P. Kowalik at the 2025 Vestbee CEE VC Summit, institutional discipline and readiness planning must extend across fund management, portfolio companies, and partner networks as defense innovation becomes a sustained priority.