Today, global market intelligence provider Tracxn released the “European Defence Tech Report 2025: Is Europe’s Defence Tech Entering its Most Compelling Phase for Investors?”, which suggests that the European defence tech ecosystem could be entering a golden age.
Defence tech startups- companies that develop advanced hardware, software and technology tailored for military and national security applications- are gaining a considerable amount of VC funding.
The report found that Europe is home to over 380 defence tech startups, raising $3 billion USD across 130 funding rounds. It also found that investment is steadily increasing, with annual funding rising from just $2 million in 2016 to $1.1 billion in 2025.
At the same time, investors appear to have a keen eye for AI-driven defense startups, particularly those deploying unmanned aerial systems (UAS) and autonomous drones. This is, in part, due to the prominence of drone warfare in recent geopolitical conflicts like the Israel-Hamas war and Russia-Ukraine war, which have ushered in a new generation of autonomous warfare.
The state of defense tech in Europe
While the European defense tech ecosystem has a long way to catch up with its U.S. counterpart – which landed $38 billion USD in funding during the first half of 2025 alone- it’s still home to a diverse range of startups, which are supported by policies including the EU Global Strategy for Foreign and Security Policy and the European Defence Action Plan.
Some of the top funded European startups are working on solutions including combat and non-combat systems, cross-border surveillance, counter-drone technology, imaging, C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance) platforms, and advanced simulation and training tools for defence personnel.
Others receiving funding include those firms offering arms and ammunition, tech-based health and wellness solutions designed for military use, defence-grade data management providers, and software systems that support mission planning or enhanced situational awareness.
As of 2025, the biggest players in the market are those leveraging AI as part of autonomous defense solutions. The European ecosystem’s three unicorns- Tekever, Helsin, and Quantum Systems- have all developed autonomous drones and UAS solutions deployed in the Russia-Ukraine war.
Tekever, a startup backed by the Nato Innovation Fund, provides an AI-centric UAS, which has accumulated over 10,000 combat flight hours in the Russia-Ukraine war, and contributed to the destruction of over $3 billion USD of Russian military assets.
It’s also worth noting that more than two-thirds of all equity funding raised is concentrated among three startups: Helsing, Quantum Systems, and All Space UK. Helsing leads the pack with $1.6 billion USD, followed by Quantum Systems with $410 million USD, and All Space UK with $202 million USD.
What’s next for European defence tech
On the whole, the future looks bright for European defence tech. Tracxn’s report details that Europe’s defence ecosystem is in the midst of a revival, with a 40% increase in defense spending across EU member states between 2020 and 2024.
Strategic initiatives and innovation-focused policies such as the European Defence Industrial Strategy (EDIS), the European Defence Industry Programme (EDIP), and the European Defence Fund (EDF), have the potential to support further innovation.
The EDF alone has committed to offering €7.3 billion in funding between 2021-2027 to support defence research and development projects.
Similarly, other third party initiatives, including the NATO Defence Innovation Accelerator, also offer supplementary funding to selected companies working on unmanned systems and other solutions- offering potentially €100,000 in contractual funding, with top performers eligible for as much as €300,000.
While funding does not always guarantee innovation, European defense startups have access to a rich ecosystem of providers, and funding support to develop the next generation of autonomous weapons and defensive solutions.
Featured image: Getty Images via Unsplash+
