NATO Innovation Fund and Dealroom: investments in EU defense tech and related startups rose 24% in 2024 to $5.2B, outpacing AI VC growth over the past two years
Context & Ripple Effects
This report identifies defense and adjacent technologies as a faster-growing European venture category than AI over the preceding two years. It follows evidence that US investors supplied an unusually large share of European defense-startup VC in 2024, including a sharp rise in US VC participation.
The funding acceleration became part of a broader European VC recovery narrative, with Dealroom later identifying AI, fintech and defense as valuation drivers. Subsequent NATO Innovation Fund and Dealroom data showed defense, security and resilience funding reaching a new high in 2025, extending the trajectory reported here.
First-order effects
- EU defense-tech and related startups gain a larger pool of venture capital, improving their ability to finance product development and compete for follow-on funding.
- The reported outperformance versus AI VC shifts investor attention toward defense-linked opportunities within the European startup market.
Second-order effects
- Generalist VCs face greater pressure to build defense-domain expertise or partner with specialist and state-aligned investors as the category takes a larger share of deal activity.
- The sector's growing reliance on cross-border capital, foreshadowed by US investors' increased funding of European defense startups, raises the importance of investor access alongside domestic European capital.
Third-order effects
- If sustained, the pattern would make defense, security and resilience a more permanent pillar of European venture allocation rather than a cyclical niche.
- The overlap between defense investment and AI points toward a more state-mediated model of technology financing, in which strategic-policy priorities increasingly shape startup capital formation.
The trend: European venture capital is increasingly treating defense, security and resilience as strategic growth sectors alongside AI, with public-interest and security priorities influencing private funding flows.