Defense Tech Takes Center Stage as EU Reshapes Investment Priorities – 0100 Weekly Brief
Hello there!
Just two years ago, conversations among investors were dominated by impact—ESG metrics, sustainable development, and philanthropic alignment. Fast forward to today, and the narrative has shifted dramatically toward defense tech and security preparedness.
In early 2025, the EU launched an ambitious “ReArm Europe” (now Readiness 2030) initiative, proposing up to €800 billion in joint investments over four years to bolster missile defense, cyber systems, drones, and military mobility.
Meanwhile, at the NATO Summit in The Hague (June 24–25), alliance members agreed to raise defense spending to 5% of GDP by 2035 (3.5% for core defense and 1.5% for infrastructure and resilience)
Spain’s refusal to commit to this target sparked a public backlash, including from former U.S. President Trump, who branded it “terrible” and even hinted at punitive tariffs.
As geopolitical tensions persist, especially following the Russian invasion of Ukraine, Europe’s investment priorities have pivoted away from climate and impact toward resilience, defense R&D, and strategic autonomy.
“Deep tech is the backbone of Europe’s sovereignty – and the key to its global competitiveness.”
As Klaus Hommels, founder of Lakestar and Chairman of the NATO Innovation Fund, shared in a recent Dealroom report:
“Deep tech will power Europe’s next wave of innovation, driving breakthroughs in autonomous systems, space technologies, and beyond. If defense spending grows to 3.5% of GDP, we anticipate around 10% of that – roughly €61bn annually – flowing into European deep tech. With a 4x revenue multiplier, that translates to a €245bn annual market impact.”
This level of investment will improve advancements across Europe’s entire deep tech ecosystem, ensuring technological independence, stronger supply chains, and a competitive edge in global markets.
Some countries, such as Poland, have rapidly increased their defense spending and modernized their forces. However, many other European countries lag in areas such as air defense, cyber capabilities, and the integration of advanced technologies like drones and AI.
Meanwhile, Ukraine has demonstrated how quickly a nation can adapt under pressure, becoming a hub for battlefield innovation and resilience.
As Europe’s defense tech startups grow in number and influence, their role in determining who gains access to cutting-edge battlefield technologies is drawing scrutiny. Traditionally dominated by large defense contractors with established government relationships, the industry is now seeing younger companies navigate complex ethical and regulatory challenges.
As Valentin Menedetter, General Partner at Vektor Partners, mentions in our recent Defense Tech Renaissance round-up, long-term, expertise-driven investing will be key to separating signal from noise in this rapidly evolving sector.
However, some critics argue that such measures are insufficient, highlighting the need for stronger human rights due diligence and greater transparency in the deployment of dual-use technologies. Additionally, Sandra Golbreich, General Partner at BSV Ventures, added in a recent interview that scientific breakthroughs and retaining talent in Europe will determine whether deep tech delivers on its promise.
🎧 Podcast Spotlight | Critical Tech & Europe’s Innovation Edge
In this episode, we talk with Sandra Golbreich, General Partner at BSV Ventures, a firm backed by the NATO Innovation Fund. Sandra shares how BSV is investing in scientific breakthroughs with real-world impact, including quantum computing, life sciences, aerospace, and advanced materials.
BSV Ventures has been bridging the gap between academic research and market-ready innovation since 2021, supporting deep tech startups with a hands-on approach and a strong focus on critical and dual-use technologies.
Key insights from the episode:
What critical tech really means – Beyond defense hardware, it includes innovations vital for healthcare, infrastructure, energy, and Europe’s strategic resilience.
Deep tech vs. SaaS resilience – Sandra explains why fundamental R&D-backed companies may weather market cycles better than traditional SaaS startups.
Retaining talent in Europe – BSV’s mission is to stop the flow of European breakthroughs and founders to the U.S., ensuring technologies are developed, scaled, and commercialized within Europe.
Venture capital’s role – Early-stage investors like BSV are critical in helping academic scientists transition to startup founders, providing both funding and operational expertise.
Why collaboration matters – BSV often co-invests with other funds and partners closely with universities to unlock Europe’s innovation potential.
📝 Expert Round-up | Europe’s Defense Tech Renaissance
In European venture capital, one sector is suddenly impossible to ignore: dual-use and defense technology. In this discussion, we talk with Valentin Menedetter, General Partner at Vektor Partners, to explore how Europe’s defense tech ecosystem is maturing and why long-term, expertise-driven investing will separate signal from noise.
While the world’s geopolitical urgency has only recently put defense tech in the spotlight, Vektor has been backing companies in this space since 2020. With deep roots in both the software and defense industries, Valentin explains how their early conviction in dual-use innovation is now paying off and why Europe’s engineering talent and valuation dynamics create a unique global opportunity.
Key insights from the episode:
Why Europe is ready for defense tech leadership – From top-tier engineering talent to urgent regional sovereignty needs, Europe offers fertile ground for dual-use innovation.
Early conviction pays off – Vektor began investing in this sector before the Ukraine war and today’s heightened geopolitical awareness, building unmatched expertise in identifying winners.
Specialization matters – Valentin argues defense tech isn’t a space for generalists: it requires managers with deep technical knowledge and networks to surface under-the-radar opportunities.
Global LP interest is rising – US and APAC investors are increasingly drawn to Europe’s differentiated technological capabilities and comparatively modest valuations.
Avoid hype, stay focused – The best managers avoid chasing trends and instead back companies with the potential to shape critical infrastructure in energy, AI, and edge computing.
🗓️ Beyond the Buzz at 0100 International: How to Invest in Defense?
At the upcoming 0100 International conference in Milan, we’ll put a spotlight on Defence Tech together with Giuseppe Lacerenza, Partner, Defence Tech Fund at Keen Venture Partners, and Daniela Murer, Partner at CMS Italy, a leading M&A expert in the aerospace and defense sectors.
The panel, titled “Beyond the Buzz: How to Invest in Defense?”, will explore how defense technology is transitioning from a traditionally sensitive area to a key area of strategic focus for venture and private market investors. As global geopolitical tensions rise and national security priorities intensify, the discussion will offer practical insights into how investors can approach this emerging sector responsibly and effectively.
Topics will include regulatory considerations, ESG challenges, exit dynamics, and the broader implications of defense investments in today’s security-driven landscape.
More speakers are to be announced soon!
🌍 Across the Ecosystem | News & Useful Resources for You
We’re not the only ones paying close attention to how investors are approaching the growing importance of defense tech in today’s environment. The conversation around national security, dual-use innovation, and the role of private capital in building resilience is taking center stage across the venture and private markets landscape.
Here’s a spotlight on other key insights and resources shaping this rapidly evolving ecosystem:
🗞️ News | Europe’s defense-focused VC funds in 2025
A new article from Sifted examines Europe’s growth in the defense-focused venture capital ecosystem, identifying the firms actively raising capital and backing startups that develop technologies with applications in both national security and commercial markets.
Once a controversial area for venture, defense tech is now a top priority for many European funds as geopolitical tensions rise and governments push for technological sovereignty. Startups in drones, AI, edge computing, and cybersecurity are attracting record-breaking rounds, while a wave of first-time defense funds is raising capital to back the next generation of innovators.
📚 Report | Who is Protecting Europe’s Future?
A new report by The Recursive offers an in-depth examination of how Central and Eastern Europe (CEE) is emerging as a hub for defense technology and cybersecurity innovation.
Covering 19 countries, the analysis examines how the region’s governments and startup ecosystems are responding to rising geopolitical tensions, technological shifts in warfare, and increasing cyber threats.
Key findings from the report include:
Record defense spending: Military expenditure worldwide reached €2.35 trillion in 2024, with countries in the CEE region, such as Ukraine, Poland, and Romania, significantly increasing their budgets to strengthen both traditional and digital defenses.
Cybersecurity as a front line: Cyberattacks are projected to cause €90 billion in annual damage by 2025. Countries like Estonia and the Czech Republic are emerging as leaders in cybersecurity, hosting dozens of startups focused on protecting critical infrastructure.
Rapid innovation in dual-use technologies: Startups across the region are developing solutions in AI, autonomous systems, edge computing, and battlefield digitization, with private and public investment accelerating their growth.
📡 Spotlight | Inside Europe’s Defense Tech Revolution
This dedicated series of interviews from Underline Ventures takes you into the heart of Europe’s defense tech ecosystem, featuring conversations with founders, investors, and innovators shaping the future of dual-use technologies and military innovation.
Covering everything from autonomous systems to deep tech venture funding, the interviews explore how Europe is responding to heightened geopolitical tensions, technological disruption, and the urgent need for strategic sovereignty.
Key topics explored in the series include:
Defense tech on the battlefield: Founders like Marc A. Wietfeld (AKX) and Srdjan Kovacevic (Orqa) share how autonomous systems, robotics, and battlefield digitization are transforming modern military operations.
Scaling dual-use innovation: Insights from Adrian Dan (NATO DIANA) and Eveline Buchatsky (D3 VC) highlight the challenges and opportunities of building innovation accelerators and fast-tracking procurement cycles for dual-use startups.
Investing in critical technologies: Investors such as Eric Slesinger (201 Ventures), Trisha Saxena (NIF), and Samuel Burrell (Expeditions Fund) discuss strategies for early-stage funding, supporting founders in deep tech and ensuring Europe’s technological independence.