{"id":464942,"date":"2026-03-08T22:55:04","date_gmt":"2026-03-08T22:55:04","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/464942\/"},"modified":"2026-03-08T22:55:04","modified_gmt":"2026-03-08T22:55:04","slug":"europes-defence-tech-start-ups-hunt-for-more-capital","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/464942\/","title":{"rendered":"Europe\u2019s defence tech start-ups hunt for more capital"},"content":{"rendered":"

Several of Europe\u2019s defence technology start-ups are gearing up for fresh fundraisings this year as companies focus on delivering new weapons at scale for the region\u2019s armed forces.\u00a0<\/p>\n

Companies that have announced financing packages over the past few weeks include Frankenburg Technologies,<\/a> an Estonian start-up building low-cost AI-based anti-drone missile systems, and German groups Tytan Technologies and Quantum Systems.<\/p>\n

With investment at a record of almost $9bn<\/a>, 2025 was a banner year for capital raisings by European start-ups focused on defence and related technologies. The latest conflict in the Middle East has further highlighted the urgency for investment in producing cheaper weapons and defence systems developed at speed, a focus of many of the start-ups.<\/p>\n

However, with many still relying on US investors to write the biggest cheques, industry executives said a key aim this year was securing European capital.<\/p>\n

\u201cThe most important task of this generation in Europe is to rebuild defence readiness and deterrence in Europe\u2009.\u2009.\u2009.\u2009The only capital inherently interested in preserving freedom and prosperity in Europe is European capital,\u201d said Frankenburg chief executive Kusti Salm.<\/p>\n

\"KustiFrankenburg CEO Kusti Salm: \u2018The most important task of this generation in Europe is to rebuild defence readiness and deterrence\u2019 \u00a9 Peter Kollanyi\/Bloomberg<\/p>\n

As the European defence start-ups have attracted larger rounds, an increasing share of funds over the past three years has come from North American investors, accounting for more than a third last year. <\/p>\n

Defence tech investment in Europe also still trails that in the US; venture capital investment going to defence in the past decade is 8.5 times bigger in the US than in Europe, according to recent research by the Boston Consulting Group. <\/p>\n

Industry experts said the trends indicated the need for more growth in European capital going into the sector if the region was to develop scalable defence tech products.\u00a0<\/p>\n

Sten Tamkivi, partner at Plural, one of the backers of Frankenburg, said the \u201clandscape is shifting\u201d, with more funds being raised dedicated to defence tech. Frankenburg is building affordable air defence systems and plans to set up two EU-based \u201cmass production sites\u201d.<\/p>\n

However, while it was relatively easy to raise smaller sums of money, finding European private capital to raise between \u20ac50mn and \u20ac200mn\u2009was \u201chard or impossible\u201d, he said.<\/p>\n

\u201cThat is where the market issue today is, how can Europe fund this ambition and growth beyond tens of millions of euros? Getting to that requires more pension funds and large capital pools,\u201d he added.<\/p>\n

Executives at Quantum and another leading drone start-up Helsing acknowledged the region\u2019s continued reliance on US capital. <\/p>\n

Surveillance drone group Quantum last month agreed \u20ac150mn in long-term debt financing backed by the European Investment Bank (EIB) and major European commercial lenders. It is backed by a number of European funds including Project A, HV Capital as well as Balderton Capital but also counts US investor Peter Thiel among early investors.\u00a0<\/p>\n

Florian Seibel, Quantum co-founder, credited Thiel \u2014 whose role as an investor in strike drone company Stark has come under fire in Germany \u2014 with backing the company in 2019 \u201cagainst all odds\u201d.\u00a0<\/p>\n

\"BavarianSurveillance drone group Quantum has agreed \u20ac150mn in long-term debt financing backed by the European Investment Bank and major European commercial lenders \u00a9 Johannes Simon\/Getty Images<\/p>\n

With the company now \u201clooking into\u2009.\u2009.\u2009.\u2009[the] growth volumes and numbers needed to build a $100bn company we probably also have to look for some US funds now to invest in our next rounds,\u201d said Seibel, adding that \u201cit was not possible to raise these numbers purely from European or even German venture capital facilities\u201d. <\/p>\n

Gundbert Scherf, co-founder and co-chief executive of Helsing, highlighted the persistent difficulties of securing financing in Europe for companies solely focused on military technologies given ethical concerns among investors. \u201cOn the capital side, if we had easier access to just European capital, I think it\u2019d be great to build more scaled companies, sovereign entities.\u201d\u00a0<\/p>\n

Many European financial institutions \u201cstill have restrictions\u201d, Scherf said, with requirements that the technology was dual-use rather than solely for military purposes. \u201cThat\u2019s something that still needs more work even though you think we should have come a bit further,\u201d he said.<\/p>\n

Adam\u00a0Niewi\u0144ski, co-founder of OTB Ventures, a Polish venture capital\u00a0firm whose defence investments\u00a0include satellite image provider Iceye and Tytan, said there were still reputational risks associated with certain areas of defence such as explosives. <\/p>\n

\u201cIn terms of reputation it is easier to not have anything to do with aggressive warfare and to explain why we are investing in something that is truly defensive, like a producer of kinetic drone interceptors, rather than something that is actually made to kill people,\u201d he said. <\/p>\n

\"AA Tytan drone. The German company has recently announced a financing package \u00a9 dpa picture alliance\/Alamy<\/p>\n

Despite the challenges, experts point to more institutional funding becoming available. <\/p>\n

Nadia Calvi\u00f1o, president of the EIB, said the bank\u2019s \u20ac70mn loan as part of the \u20ac150mn debt financing package for Quantum had helped to act as a \u201ccatalyser\u201d, underlining its ability to \u201ccrowd in private capital and that is key going forward\u201d.\u00a0<\/p>\n

Separately, the EIB\u2019s European Investment Fund said this week it would commit \u20ac50mn towards a third fund being raised by venture capital group Join Capital. The investment is the EIF\u2019s largest to date in defence. Join Capital hopes to raise \u20ac235mn to invest in 25 early-stage cutting-edge disruptive start-ups.<\/p>\n

Fiona Murray, chair of the Nato Innovation Fund, which led the recent \u20ac30mn fundraising for Tytan, said Europe was \u201cbeginning to see\u201d larger funds being raised to back defence tech and that it was important for Europe to co-ordinate its efforts.\u00a0<\/p>\n

\u201cIf every country was trying to build its own 30 companies, they\u2019d all be a bit sub-scale because no one of them could be big enough. And so we\u2019ve got to lean into our competitive advantage and have a little more willingness to co-ordinate. And that\u2019s very, very difficult.\u201d<\/p>\n

Money alone, however, will not be enough, with several executives raising concerns that governments were continuing to spend more on conventional weapons produced by the region\u2019s large established players rather than on innovative capabilities.\u00a0<\/p>\n

At last month\u2019s Munich Security Conference, senior officials pledged funding for defence tech start-ups after a mounting backlash over spending on conventional weapons. Quantum\u2019s Seibel told the FT that Berlin was failing to spend enough on autonomous systems and AI.<\/p>\n

A report <\/a>by think-tank Bruegel, published on Thursday, calls on European governments to show greater willingness to enter into contractual arrangements with new players. Its authors found that defence procurement in selected European countries is primarily directed at the 10 biggest companies, with less than 30 per cent of total order volume typically going to other firms. <\/p>\n

Guntram Wolff, one of the report\u2019s authors and a senior fellow at Bruegel, said start-ups \u201cneed a signal that they will be considered in the order book\u201d. <\/p>\n

Companies, he added, \u201ctell me, as soon as they have their first contract with the defence department, even if just \u20ac10mn, with [that] \u20ac10mn they can go to the market and get \u20ac100mn. That is the signal they need\u201d.<\/p>\n","protected":false},"excerpt":{"rendered":"Several of Europe\u2019s defence technology start-ups are gearing up for fresh fundraisings this year as companies focus on…\n","protected":false},"author":2,"featured_media":464943,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[84,4203,56,54,55],"class_list":{"0":"post-464942","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-entrepreneurship","8":"tag-business","9":"tag-entrepreneurship","10":"tag-uk","11":"tag-united-kingdom","12":"tag-unitedkingdom"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/464942","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=464942"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/464942\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/464943"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=464942"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=464942"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=464942"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}