By Herve Malaussena
"Ne pas subir" - refuse to endure events passively. We should keep in mind Marshal de Lattre de Tassigny's motto. He represented France at the signing of the German surrender in Berlin on May 8, 1945. Realising that there was no French flag in the room, he had one made with the means at hand before raising it - to Marshal Keitel's great dismay - alongside the American, Soviet and British colours.
That anecdote captures Europe's challenge today. Faced with a succession of historic geopolitical and technological ruptures, Europe needs both a wake-up call and an asserted will if it is to ensure its defence and security. Put differently, the war in Ukraine and the crisis in the Euro-Atlantic relationship require Europe to unlock its innovation potential and reduce its critical dependencies as far as possible.
The artificial-intelligence revolution, the sophistication of cyberattacks, and the development of quantum technologies, robotics and drone systems are forcing Europe in particular to rethink the financing of its Defence Technological and Industrial Base (DTIB). Compared with the United States, Europe is worryingly behind.
Europe certainly has major industrial champions: Thales, Dassault, Leonardo, Rheinmetall, Saab. Yet disruptive technological innovation most often comes from small and medium-sized companies: DefTech start-ups.
Financing these innovative companies must therefore become an absolute priority for the European Union and its member states. This analysis focuses on the two crucial phases of their development: Venture Capital for seed and early-stage funding, and Growth Capital for scale-up.
Venture Capital: Europe's awakening
Venture Capital financing - strategic for young DefTech companies - generally refers to fundraising rounds of up to 10 million euros, designed to validate a technology and launch the first products on the market.
Before 2022, this financial support was derisory in Europe: barely 2 billion euros per year across the continent, compared with 25 to 30 billion euros injected every year by US funds.
Since the invasion of Ukraine, European investors have become more aware of the issue. Their commitments to DefTech have accelerated, reaching 8.5 billion euros in 2025 and expected to pass the 10 billion euro mark in 2026.
The effort is real, but the gap remains immense compared with US funds, which have also accelerated, reaching 55 billion euros invested in 2025.
Europe's lag ratio against the United States has moved from 1 to 10 before 2022 to roughly 1 to 5 today, but the room for progress remains considerable given the respective GDP of the two blocs. This initial catch-up rests on three key factors.
1) The shift in the European taxonomy
The EU institutions' perception of DefTech has changed radically in four years, moving from a "pariah" sector to a priority sector. When the taxonomy regulation was adopted in 2020, the European Commission emphasised environmental and social criteria. Ammunition and lethal-weapons sectors were in practice excluded from EU-backed financing, pushing most private funds away.
The pivot came at the end of 2023, when security and strategic-autonomy imperatives were integrated into the Commission's criteria. In 2024, armed with its first defence industrial strategy, the EU embedded that shift, with critical technologies in its sights: cyber, space, quantum and air defence.
The EDIS also sets a clear target: by 2030, 50% of military-equipment purchases by the 27 member states should be made from European companies. At the end of 2025, the taxonomy was also relaxed: only weapons prohibited by international conventions remain excluded, freeing private financing for the rest of the sector.
2) The mobilisation of institutional financial resources
To channel capital towards young DefTech companies, targeted programmes and initiatives have been deployed at scale:
- FID and Definvest, the French momentum: Bpifrance is one of Europe's pioneers with its Definvest and Defence Innovation Fund vehicles. Together, they have around 200 million euros to invest directly in DefTech companies. The public investment bank has also launched Bpifrance Defense, a fund open to retail investors.
- The DEF (Defence Equity Facility) of the European Investment Fund: endowed with 175 million euros, it provides financing to private funds investing in companies developing innovative defence technologies and products.
- The Deutschlandfonds: a German sovereign fund endowed with 30 billion euros, which in 2025 opened a pocket specifically dedicated to supporting DefTech start-ups.
This European institutional momentum is now attracting family offices and major investors such as BNP Paribas, Allianz and Amundi. In France, the "Tibi 3" initiative continues to steer the capital of major institutional investors towards companies developing breakthrough technologies.
3) The massive increase in national defence budgets
The spectacular growth of defence budgets in Europe gives DefTech unprecedented visibility. Supported by long state investment cycles, the sector now offers a stable growth horizon, well aligned with the time horizon of venture-capital funds, which often invest over ten years.
Growth Capital: Europe's real blind spot
Although seed and early-stage financing for European start-ups is finally becoming structured, the ecosystem still hits a glass ceiling when companies need to scale industrially. This is the Growth or Late Stage segment, characterised by individual investment tickets above 20 or 50 million euros.
This phase is vital. It enables innovative companies to finance rapid expansion, cross the billion-euro valuation threshold and establish themselves as unavoidable leaders.
This is where the lack of depth in European capital becomes critical. The flourishing market capitalisation of Europe's top 20 defence giants does allow groups such as Dassault, Saab and Rheinmetall to support start-ups, but the effort cannot rest on their shoulders alone.
The global diagnosis in 2025 was stark: among the world's top 20 funds capable of investing 100 million euros in a single DefTech round, only one was European. The other 19 were American.
American firepower and experience
US funds outperform Europe not only through the volume of their capital, but also through deep sector experience. Across the Atlantic, transactions reach extraordinary levels:
- Anduril raised more than 5 billion dollars in May 2026 in a round led by two US DefTech funds.
- Palantir had accumulated 3 billion dollars in private financing before even going public in 2020.
Faced with this financial asymmetry, US funds naturally play a leading role in the capital of the most promising DefTech start-ups. While a quarter of unicorn founders worldwide are European, half of them cross the Atlantic to finance the hyper-growth of their companies.
The need for mass production
DefTech start-ups' capital needs will continue to grow exponentially. To scale, they must finance not only research in strategic technologies such as AI and quantum, but also the construction of factories and the massification of production tools.
This is the great lesson of the war in Ukraine and recent asymmetric conflicts: military superiority now requires mastery of cutting-edge technology combined with mass-production capacity and a low unit cost. Since 2020, five global DefTech start-ups have raised more than one billion euros to meet this challenge. Only one of them is European: Germany's Helsing.
A strategic-survival imperative
For Europe, the challenge is existential. Without Growth funds capable of matching American firepower, our future technological champions will systematically be financed by foreign capital. The long-term consequences are obvious: loss of governance, transfers of intellectual property and the abandonment of strategic autonomy.
The rebound has begun. International-scale players are redirecting their strategies: the Swedish private-equity fund EQT is emphasising European sovereignty, while Germany's DTCP is deploying its "Project Liberty" through a 500 million dollar vehicle dedicated to defence. In France, funds specialised in DeepTech and some generalist funds are structuring SovTech strategies.
In this race against time, support from institutions such as the European Investment Fund, Bpifrance and KfW will be the indispensable catalyst.
The accumulated delay is immense and the path is difficult, but the will to break the constraints of strategic dependence is real. For Europe, improving access to capital at every stage of development for its innovative companies is no longer an economic option; it is a survival imperative. We must clear the obstacle, stop enduring, or risk disappearing from History.