Defence investment in Europe reaches new high as threats loom

Investment funding for European defence, security, and resilience companies has reached a new high, according to a report by the Heligan Group that was released on August 18. The analysis highlights a significant boom in defence investment in 2024, with venture capital funding for start-ups reaching approximately $5.2 billion, a near fivefold increase over the past six years.

This rise has been primarily driven by geopolitical tensions, notably the Russian war in Ukraine, which has led to increased demand for defence technology. The United Kingdom and Germany have emerged as the leading destinations for this capital. The UK has attracted the most venture capital funding in the sector since 2019, though Germany took the lead in 2024, with France following closely behind, the report states. 

Although these figures undoubtedly reflect the growth of defence investment, they are skewed by a few large funding rounds. In an email to Calibre Defence, Will Ashford Brown, a Director at the Heligan Group, explained, “Helsing has certainly raised significant funding in the past few years, with this year’s Series D attracting €600 million of investment. Elsewhere European defence unicorns Quantum Systems (Germany) and Tekever (Portugal) raised EUR230 million combined earlier this year.” 

“Whilst deals of this size are obviously going to skew the market when they occur, there are encouraging signs at home in the UK, with recent Heligan analysis identifying 191 direct PE investments between 2018 – 2024 and 202 companies receiving VC investment between 2022 – 2024,” he added. This is an important caveat because some analysis indicates that the growth in defence is not as pronounced as many would hope, in part because the huge funding rounds secured by these companies skew the overall image. 

However, as Ashford Brown explained, “the attractiveness of investments in defence and national security is supported by ‘Heligan’s NSCPPS index’ which has demonstrated consistent growth, outperforming the FTSE 100.” This is evident in the plethora of investments covered just by Calibre Defence. To name but a few, there has been Tencore and Teletactica from Ukraine, Quadsat from Denmark, Kraken from the UK, and LendurAI from Estonia, all since June this year.

The report also details several public initiatives that are fueling this growth. The European Union has launched its European Defence Fund, a program with an €8 billion budget for co-financing collaborative research and development projects from 2021 to 2027. In parallel, the NATO Innovation Fund, a €1 billion multi-nation venture fund backed by 24 member states, has been established to invest in “dual-use” deep-tech start-ups. Following Brexit, the U.K. has also pursued its own innovation programs through initiatives like the National Security Strategic Investment Fund.

Key Defence Investment Trends

Beyond venture capital, the report identifies a significant role for private equity and corporate investors. Major defence contractors are reinvesting profits into research and development, while private equity firms have made notable acquisitions of British defence companies. Examples include the 2020 acquisition of British aerospace firm Cobham by US-based Advent International and its subsequent purchase of Ultra Electronics.

Investment from abroad is not always welcome, however, with some analysis suggesting that companies are not really sovereign if they rely on funding from US venture capital or private equity, for example. “You’re right to point out the importance of sovereignty, but US investment in UK and European defence businesses doesn’t necessarily mean the loss of sovereignty over specific capabilities. In fact, it goes to show the strength of innovation coming out of the region. This flow of funding also signals confidence in the European industrial base and will allow these businesses to scale to hopefully rival the defence primes,” Ashford Brown went on to explain. 

The report notes a shift among investors, with a greater focus on dual-use technology that has both commercial and defence applications. This includes fields such as artificial intelligence, cybersecurity, autonomous systems, and quantum technologies. The Heligan Group’s assessment is that the long-term stability of these investments is improved by a combination of geopolitical necessity and significant governmental backing. 

Dual-use products are seen as an inviting prospect for investors because they help secure revenue outside of the unpredictable and challenging procurement cycles of MoDs, which means healthier returns and a more straightforward path to an exit and profit. 

Additionally, public investment is on the rise. The UK government has committed to increasing defence spending to 2.5 per cent of its gross domestic product (GDP) by 2027 and plans to dedicate at least 7 per cent of the Ministry of Defence budget to research and development by 2030, nearly doubling annual spending in this area. These factors, alongside record-high mergers and acquisitions activity in the sector, point to robust confidence in the future of defence investment.

Calibre comment

Venture capital funding is inherently a higher risk investment than many other prospects. Because the technology that is developed with venture funding is nascent, there is no guarantee that the technology or company will succeed. This raises the prospect of what might happen to intellectual property developed for defence purposes if a company fails. “Whilst an element of risk for defence VC investments remains, the general indicators of sector strength and growth significantly derisk opportunities. Naturally not all investments will succeed, and for those companies the IP will remain a business asset, likely sold to competitors to pay off creditors or transferred to an acquirer of the business,” Ashford Brown explained. “We’re excited to be supporting one of the UK’s critical industries at a time of great importance,” he added. 

By Sam Cranny-Evans, published on August 19, 2025. The lead image is AI-generated and represents the growth in capital investment in defence in Europe.