Investment in defense is experiencing unprecedented growth in Europe. In 2024, the sector has attracted $5.2 billion in venture capital financing, an increase of 30% in two years. These investments now represent almost 10% of all European venture capitala threshold that was still unthinkable five years ago.
Cold by nature, capital becomes strategic
For a long time, private investors shunned defense. Venture capital funds feared its long cycles, its high costs, and the clauses of their statutes (LPAs) often excluded this type of asset for ethical reasons. University intellectual property transfer policies also prohibited the use of certain technologies for military purposes.
But these obstacles are disappearing and European governments have reformed their public procurement procedureslong blocked by large groups (the “primes”), in order to integrate innovative startups and SMEs. The UK led the way in February 2025 with a new defense innovation agency responsible for accelerating the marketing of military technologies.
Pricing models are also evolving: “cost-plus” contracts, which guaranteed a fixed margin for incumbent manufacturers, are giving way to more dynamic systems, adapted to the agility of young technological companies.
Finally, the very nature of the combat has changed: drones, embedded AI, autonomous systems and tactical software redefine military superiority. These technologies, less capital intensive and deployable in volume, make the sector more compatible with venture capital cycles.
European capital rises to the front
This intellectual and financial transformation opens a new chapter. Bpifrance just launched the Bpifrance Défense SLP fund, accessible to individuals from 500 euros. This vehicle aims to finance more than 500 unlisted companies, startups, SMEs and ETIs, Defense Industrial and Technological Base (DIB).
The fund is supported by Axa France, the BPCE Group And Best Investment Ratesand labeled ELTIF for distribution on a European scale.
“With the launch of the Bpifrance Défense fund, we are beginning a second revolution: that of a product at the crossroads of citizen investment and sovereignty issues,” comments Nicolas DufourcqCEO of Bpifrance.
The public establishment, already managing the Definvest fund (in partnership with the DGA) and Defense Innovation Fundthus extends a logic of democratization of unlisted capital.
Individuals can invest in it via a PEA-SMEa life insurance or a retirement savings planwith a 5% annual return target (not guaranteed) on a duration of 20 years.
Pension funds are following suit
In the Netherlands, the SME Pensioenfonds invested 40 million euros in the European Defense and Security Tech Fund of Keen Venture Partnersalongside the European Investment Fund (EIF). This fund, the first of its kind in the Benelux, aims to raise 125 million euros to finance dual technologies (civil and military), defense AI, drones, batteries, sensors, cybersecurity.
“We must build a highly innovative defense industry in Europe,” emphasizes Alexander Ribbinkassociate of Keen.
The innovation war
The war in Ukraine triggered a massive budget rearmament. All NATO members now aim for a minimum 2% of GDP in military spending, several countries approaching a unofficial threshold of 5%.
THE European Defense Fund (EDF) completes this effort with a budget of 7.3 billion euros over 2021/2027intended to finance collaborative military R&D programs.
For startups, this means shorter sales cycles, less dependence on major clientsand a easier access to risk capital.
