Dealroom and NATO Innovation Fund: European defense, security, and resilience startup funding rose 55% YoY to a record $8.7B in 2025, with AI accounting for 44%
Context & Ripple Effects
This report extends a documented acceleration: the prior Dealroom/NATO Innovation Fund survey put 2024 investment at $5.2 billion after 24% annual growth, providing a clear baseline for the latest step-up in capital deployment the prior $5.2 billion funding benchmark.
The funding mix also matters because European defense startups had already become more dependent on overseas investors, with US VCs supplying 65% of their 2024 VC funding US investors' growing share of European defense capital. The new data indicates that AI is now central to the sector's investment case, not a peripheral category.
First-order effects
- European defense, security, and resilience startups—especially those positioned around AI—gain a stronger fundraising benchmark and a clearer signal of investor appetite.
- Dealroom and the NATO Innovation Fund establish AI's 44% share as a reference point for how investors and policymakers assess the composition of the sector.
Second-order effects
- Investors allocating to European technology face greater pressure to evaluate defense and resilience companies alongside mainstream AI opportunities, reinforcing the valuation support already cited for AI, fintech, and defense deals defense alongside AI as a driver of European VC valuations.
- The concentration of funding in AI-linked companies could make it harder for non-AI security and resilience startups to compete for attention unless they can show a distinct deployment or procurement advantage.
Third-order effects
- If sustained, the pattern would make European defense innovation a more established AI investment vertical, tying startup financing more closely to strategic-security priorities rather than only commercial software markets.
- Continued reliance on foreign capital remains a structural tension: sector growth may broaden the European defense-tech base while leaving ownership and financing influence internationally distributed.
The trend: European venture capital is increasingly treating AI-enabled defense, security, and resilience as a strategic growth category shaped by both commercial returns and state-aligned priorities.