Russia’s all-out invasion of Ukraine accelerated increases in defense spending across Europe. While the European defense and dual-use tech ecosystem is still limited by a preference for national champions, fragmented/duplicative spending at the European and national levels, overly restrictive ESG criteria, and adherence to a failed tech investment playbook, a number of startups and new investors are starting to catalyze the sector.
If Europe is to leverage the lessons learned so far in Ukraine on rapid technology development and deployment, along with tactically sound capital deployments, it should look no further than these new stakeholders. Europe has a checkered track record in trying to build critical technology ecosystems from space to energy, where it has tended to defer to government investors and generalists in the private sector. The results have left Europe behind the United States and China in key sectors, and in many areas, they continue to lose ground.
Defense can be different. From 2016-2022, European defense spending rose consistently, despite a common belief to the contrary, and EU defense spending alone now exceeds $200bn annually. Since the full-scale Russian invasion, 11 European nations have announced double-digit defense spending increases.
From a talent perspective, Europe produces more science, technology, engineering, and math (STEM) graduates each year than all of North America combined. Further, while it has been inconsistent across the continent, national venture capital ecosystems such as those of France and the UK have been growing faster than the US, with an attractive valuation delta. Combining these with a clear and tangible threat from Russia and China, and the rise of defense spending has the potential to drive a significant proliferation of defense and dual-use tech startups across the continent.
Here are the startups breaking the mold in Europe.
AERALIS is a UK-based aerospace and defense start-up developing the world’s first modular, light-fast jet platform and utilizing this approach to create a family of common aircraft variants. The company has raised $17m to date and is leveraging it to rapidly accelerate design, development, and testing. The firm’s approach removes the cost of development risk from state defense budgets and drastically reduces time to market. AERALIS has its first flight date scheduled for June 2025.
Anduril is an Orange County, California-based company rapidly becoming a household name. The US startup is only six years old, but already is the highest-valued defense tech scale-up in the world, most recently raising a $1.4bn series E round. It may seem like an odd inclusion on this list, but when an array of other defense and dual-use companies are struggling to generate revenue to back up their valuations, Anduril is growing across the board. The European headquarters office is only three years old and is generating more revenue than the three highest-valued dual-use and defense tech companies in Europe, and they aren’t done yet. Its London office, judging by its careers page, is building out sales and technical teams likely to create more “made in Europe” cutting-edge defense capabilities. With the company’s recent success in building out new capabilities in Australia, it is looking to replicate this across Europe.
Helsing is a Munich-headquartered defense startup and the first European defense centaur (a startup valued over $100m), following its groundbreaking €102m ($110m) series A round fundraising in November 2021. Billed as a “new type of defense and artificial intelligence company bringing software-based capabilities to the armed forces”, the company has hired an array of talent and prior tech solutions to build the company while in flight. The business model of selling into primes (major aerospace companies) versus direct to the government is novel and reduces early friction in building revenue. While Helsing is Germany based, it has opened operations in Paris and London, with a stated plan to invest £100m ($121.5m) in the UK defense sector.
Labrys Technologies is a seed-stage, London-based defense technology startup developing cutting-edge tools for human intelligence (HUMINT). Using its Axiom platform, the company is fundamentally changing how governments and companies can derive insights and impact from their global networks. Unlike many defense and dual-use tech companies, which exist in a world where hype can and often does outpace reality (and revenue), Labrys has managed not only to generate millions in revenue and profit but has done so without taking any external capital.
Re-Lion is a Netherlands-based startup, helping militaries and emergency services to “prelive” their missions. Re-Lion enables operators to immerse themselves into any situation as if they were really there. Unlike other simulation and training companies, Re-Lion does not just offer a virtual environment, but, via its BLACKSUIT product, provides realistic equipment that is aimed at being the closest thing to live fire there is. The company has rapidly scaled over the last four years and is expanding across the Netherlands, Germany, and the United States.
Nicholas Nelson is a Senior Fellow for Emerging Tech and Policy at the Center for European Policy Analysis (CEPA). He is also a Principal and Senior Technology Advisor at the Georgia Tech Research Institute (GTRI), focused on emerging defense and dual-use technologies.
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.
