Dealroom and NATO Innovation Fund: European Defence, Security & Resilience Startups Smash Record with $8.7B Raised in 2025

• The 55% year on year surge was fuelled by late-stage mega rounds, indicating a maturing ecosystem to address NATO’s capability needs.
• Munich retained its position as Europe’s #1 DSR hub, with the UK attracting the most VC funding and Central and Eastern Europe showing the largest growth.
• AI dominated the sector, underpinning 44% of all DSR funding.

AMSTERDAM & LONDON–(BUSINESS WIRE)–An exclusive new report by Dealroom and the NATO Innovation Fund shows that European DSR (Defence, Security and Resilience) startups secured a record $8.7 billion in venture capital in 2025. The surge was fuelled by late-stage mega-rounds to support breakthrough technologies that help address critical capabilities for NATO nations – from freedom of operations & mobility, to awareness and decision making, and the security of critical technologies.

Record funding surge powers DSR Startups to meet NATO nations’ most urgent security needs

Funding for DSR startups increased by 55% year on year and is nearly four times higher than five years ago. It outpaces the broader European VC market, which grew just 16% over the past year. The increase indicates that both innovators and investors across Europe are rallying to develop, back and scale technologies that address the capability needs of European NATO nations, while also capitalising on the opportunities generated by Allies’ pledge to invest 5% of their Gross Domestic Product in defence and security.

“Across Europe, DSR continues to scale rapidly, with business growth evident across markets and substantial venture capital deployed through large rounds,” said Sander Verbrugge, Partner, NATO Innovation Fund. “With proven revenue streams and clear trajectories for continued growth, the opportunity is now for the remainder of capital providers – from banks to private equity – to step in and support the next phase of funding for late-stage DSR companies.”

Late-stage investment tripled to $4.7B, signalling a maturing ecosystem, and was driven by investments in technologies addressing key defence and security challenges. AI dominated the sector, underpinning 44% of all DSR funding – the highest share in six years – as autonomous systems, defence optimised computing and AI-enabled decision making became critical to next-generation capabilities.

Germany and the UK lead in DSR investing, with Finland, Spain, Norway and Bulgaria on the rise

The report reveals where Europe’s DSR capital is concentrated, with the UK and Germany continuing to lead the charge and new countries emerging as regional hubs. Highlights include:

• The UK leads Europe in total VC funding for DSR startups attracting $2.9 billion in 2025 and $9.9 billion since 2020, though Germany is closing the gap with $2.1 billion raised in 2025 and $5.4 billion since 2020.
• Germany and the Netherlands recorded the highest share of national VC funding allocated to DSR companies in 2025 at over 15% each, underlining strong national commitment to the sector and alignment with industrial policy priorities.
• Central and Eastern Europe showed the fastest growth in deal velocity, with rounds increasing 2.7x since 2020.
• Munich retained its position as Europe’s leading DSR hub with $1.7 billion raised, reflecting its strong industrial base, access to defence customers and deep talent pool. Sofia and Oslo both rose in prominence, making it into the top European cities for VC investment for the first time in five years.

“Munich’s leadership is shaped by its strong industrial base, diverse international talent, and a vibrant deep tech ecosystem—all of which are driving future growth,” said Daniel Metzler, Co-Founder & CEO, Isar Aerospace. “This ecosystem is enabling next-generation space and defence companies to scale faster and move from innovation to deployment.”

Startups are growing, fostering partnerships and generating revenue at pace

Translating increased investments into real defence, security and resilience capabilities for Europe requires adoption of those technologies by governments at scale. The report shows early signs that many startups are already generating revenue, and gaining access to the full capital stack required for further growth, cementing their role in Europe’s technological sovereignty and security. Highlights include:

• Contracts and Partnerships: Though data on contracts is limited, the report reveals that defence primes are increasingly investing and establishing strategic development partnerships with DSR startups. In addition, DSR startups are increasingly winning public tenders, particularly in the drone industry.
• Access to the Full Capital Stack: Although VC financing remains the key source of income for DSR startups, debt and grants are increasing, indicating the maturing of the DSR ecosystem.
• Consolidation: M&A activity is at an all time high – 4x more than four years ago – driven by neo-primes acquiring startups to grow their offerings and expand geographically. On the other hand, no public listings took place this year, despite a flurry of listings in 2021.

“While capital continues to flow into a sector that has never been more strategically important, investment alone doesn’t automatically translate into stronger European defence capabilities. What matters is how effectively DSR startups and scaleups are turning funding into real technologies, real contracts, and real operational impact,” said John Ridge, Chief Adoption Officer, NATO Innovation Fund. “European ministries of defence have a critical role to play by making it easier for startups and scaleups to compete for acquisition contracts and by reshaping the relationships between new entrants and established defence primes.”

Click here to read the full report.

Contacts

Amalia Kontesi
amalia@nif.fund