Dual-Use Tech: A Fast-Growing Bet

The numbers most people are still missing

Global venture capital invested in defence and dual-use technology reached $49.9 billion across 966 deals in 2025, nearly double the $27.2 billion invested in 2024, according to PitchBook data cited by ValueAdd VC. The momentum has carried into this year: preliminary figures put Q1 2026 defence tech investment at roughly $17.8 billion, just shy of the $17.9 billion peak recorded in Q2 2025, according to FNEX's analysis of the sector.

Europe's slice of that story has its own shape. European defence, security and resilience startups raised $8.7 billion in 2025, up 55% year on year and roughly four times the level of five years ago, per Dealroom and NATO Innovation Fund data. Defence now accounts for about 13% of all European VC funding and 43% of deeptech investment, according to Moonshot Capital's Female Foundry newsletter. Startup Genome's 2026 ecosystem report tracked defence as a standalone category for the first time this year and found Series A value up around 60% and deal count up around 15%, making it the fastest-growing sector outside AI, per Startup Genome's GSER 2026.

A separate deal-level count from FCF Fox Corporate Finance puts the European DefenceTech VC market at 154 deals worth €2.8 billion in 2025, up 148% in deal count and 718% in volume versus 2021, a compound annual growth rate of 69% over that period, according to the FCF DefenseTech Venture Capital Report 2026. Germany leads the region, accounting for 42% of invested capital (about €2.2 billion) though only 14% of transactions, the same report notes, a gap that points to a smaller number of very large German rounds.

Where the concentration sits

If July's letter was about the gap between record capital and falling deal count across all of venture, dual-use tech shows the same pattern in miniature. The FCF report finds that five companies, Helsing, TEKEVER, Quantum Systems, Iceye and Destinus, account for almost 60% of all capital raised in European DefenceTech since 2021, via FCF's DeepTech Series. And the transatlantic gap remains wide: US-based Anduril alone generated more revenue in 2025 ($2.1 billion) than the entire European defence VC ecosystem raised that year in pure defence-tech rounds ($1.5 billion), and the US has captured 85% of all NATO-related defence VC funding since 2019, against Europe's 6.2% share, though that European share is growing quickly, according to New Fund Capital's analysis of Dealroom and NATO Innovation Fund data.

Chatham House frames the broader picture this way: VC-backed defence startups in the US and Europe raised a combined $7.7 billion between January and October 2025 alone, more than double the prior comparable period, with a growing share of EU-based AI and dual-use startups explicitly citing European strategic autonomy as their motivation, per Chatham House's research on the securitisation of the AI race.

Who is writing the cheques, and how that is changing

The composition of the capital is shifting from angel-heavy syndicates toward institutional-sized tickets. Dedicated defence-fund fundraising hit $7.1 billion in 2023, reset to $3.3 billion across nine funds in 2025, and is now reconcentrating into fewer, larger vehicles backed by institutional LPs, according to S&P Global Market Intelligence data reported by Nexi. The same piece reports that APG, the Dutch pension fund managing €601 billion, said in June 2026 that defence-adjacent technology is now “front of mind” for its allocation strategy, and that AVP and Earlybird have launched a joint €500 million dual-use fund.

Public capital is moving in the same direction. The European Innovation Council opened its instruments to defence and dual-use technologies from 17 June 2026, offering up to €30 million in direct equity and co-investment in rounds typically sized €50 million to €150 million or more, per the European Innovation Council's own announcement. In March 2026 the European Investment Fund committed €50 million to Join Capital's Fund III (targeting €235 million), its largest defence commitment to date, backing 25 early-stage deeptech companies across defence, dual-use, security and space, according to the European Commission's Defence Industry and Space service.

For fund managers and founders, the practical read is this: the capital is real and growing, but it is not evenly distributed, and it increasingly rewards teams that can show both defence and commercial traction rather than a single government customer, a pattern several investor guides describe as the difference between a fundable dual-use company and an unfundable pure defence contractor, per Round Funded's overview of active defence tech VCs.

By the numbers

$49.9B

Global VC into defence and dual-use tech, 2025 (PitchBook / ValueAdd VC).

$8.7B

European defence, security and resilience funding, 2025, +55% YoY (Dealroom / NATO Innovation Fund).

13%

Share of all European VC funding that is now defence-related (Moonshot Capital).

60%

Share of European DefenceTech capital since 2021 held by five companies (FCF).

€2.8B

European DefenceTech deal volume, 2025, across 154 deals (FCF DeepTech Series).

6.2%

Europe's share of NATO-related defence VC since 2019, vs. the US's 85% (New Fund Capital).

People who inspired us this month

Nicola Sinclair spent 18 years in the British Royal Air Force, including leading its venture capital arm, the Air Innovation Fund, a roughly £30 million-a-year programme working exclusively with pre-Series A dual-use startups in energy, future compute and hypersonic flight. In December 2025 she closed the first tranche, about £5 million toward a £10 million target, for her own fund, Twin Track Ventures, a solo-GP vehicle backing pre-seed and seed dual-use deep tech across NATO countries, in compute, communications, sensors, supply chain, manufacturing, materials and energy. The first close was backed by the NATO Innovation Fund and Allocator One, according to Sifted's reporting and the NATO Innovation Fund's own announcement. Sinclair is a member of European Women in VC, the UK Business Angels Association and the Defence Investor Network, and is described in the trade press as one of very few women currently leading a fund in the defence and dual-use space, per Tech Funding News. “Defence procurement is hard, early traction with customers in deeptech is hard,” she told Sifted. “When you put the two sectors together, the problems are appearing in different parts of the company's life cycle, and so there's an opportunity to offset.”

Fund News

Expeditions, the Warsaw-headquartered defence-tech firm backed by BAE Systems and the NATO Innovation Fund, closed a €197 million ($225 million) fund to back up to 40 early-stage European startups building sovereign military technology, general partner Mikolaj Firlej told Bloomberg.
DTCP has raised €300 million toward a €500 million final close for a new defence-focused fund that will back around 30 companies across software, AI, cyber and autonomous systems, per Vestbee's Q1 2026 roundup.
Join Capital's Fund III, targeting €235 million, will back 25 early-stage European deeptech companies across defence, dual-use, security and space, anchored by a €50 million commitment from the European Investment Fund, its largest defence commitment to date, according to the European Commission.
Kembara, based in Barcelona, reported a €750 million first close toward a €1 billion DeepTech fund targeting growth-stage European companies across AI, robotics, compute, dual-use and defencetech among other areas, per EU-Startups.
AVP and Earlybird have launched a joint €500 million dual-use fund, part of a broader move of institutional capital, including pension giant APG, into the sector, as reported by Nexi.