UK veterans drive defence tech boom
Defence tech startups are booming across Europe, powered by an influx of UK military veterans and record levels of VC investment. Yet, a new report found critical gaps in space tech and AI chips could leave the country exposed.
The State of Defence Tech 2025 report has revealed that defence startups have secured $1.5bn (£1.12bn) in funding so far this year, the highest annual total on record, with mega rounds, such as Helsing’s €600m raise, propelling the sector into the mainstream of European VC.
Defence tech now accounts for 6.2 per cent of all European VC funding, up from less than one per cent before 2020, reflecting investor appetite for AI-enabled military systems, robotics and autonomous platforms in the wake of geopolitical tensions.
Veterans at the helm
A striking feature of the boom is the role of UK armed forces veterans in leading startups.
The report found that one in seven European defence founders has a background in the military or Ministry of Defence (MoD), with Britain producing more than twice as many C-level executives with military experience as France, its nearest rival.
That expertise is increasingly steering investment into areas like cybersecurity, battlefield autonomy, and post-quantum cryptography, where military know-how and startup agility are combining to outpace traditional defence primes.
Record-breaking investment
Europe has emerged as a global leader in quantum cryptography and resilience tech, accounting for 88 per cent of global VC funding in the sector.
But it lags far behind the US in space technology, AI chips and drones.
Only six per cent of global VC funding in AI semiconductors between 2022 and 2025 came from Europe, compared to the overwhelming US dominance.
Similarly, just 12 per cent of global VC into space launch vehicles came from Europe, showing what the report dubbed as “critical vulnerabilities” in sovereign defence capacity.
Germany currently leads Europe in absolute funding terms, thanks largely to Helsing, while London, along with Paris, remains a key hub.
A sector shedding its taboo
The surge in investment comes amid a profound cultural shift.
Once considered off-limits for VCs, defence is now at the heart of European technology conversations.
“Two years ago, defence tech was like pornography or gambling”, Bullhound Capital’s Ben Prade recently told City PM. “Now it’s almost taking up the ‘S’ of ESG”.
This shift has opened the door for new players. Expeditions, a Warsaw-based defence VC, recently announced it had raised over €100m for its second fund, which is nearly ten times larger than its debut vehicle in 2021.
Meanwhile, US heavyweights such as Palantir are anchoring in London, where defence secretary John Healey this month signed a £1.5bn partnership with the AI firm to create hundreds of new jobs and boost battlefield innovation.