Europe's Defence Tech Wave: When Innovation Fails Due to Procurement

Billions for new weapons: Why Europe's arms startups fail due to bureaucracy

The real problem of this turning point: How the German Armed Forces are hindering brilliant defense technology innovations

Europe is experiencing an unprecedented technological arms boom: Startups are developing AI software, drone swarms, and autonomous systems in record time—projects that would have taken traditional defense companies decades to create. With investment growth exceeding 150 percent and billions in venture capital, the DACH region—especially Munich—has become the engine of innovation and the epicenter of the European "defense tech" wave. However, while the geopolitical situation demands technological excellence and investors are fueling the market with record sums, this innovative power is encountering a massive, systemic barrier: a sluggish procurement system stuck in the past. Pilot projects may boast successes, but they rarely make the leap into regular troop operations. The following text examines why the biggest bottleneck in this security policy paradigm shift lies not in technology, but in government bureaucracy—and why startups like GovRadar, which aim to revolutionize these entrenched procurement processes with AI, are now determining the success of Europe's entire defense capability.

Billions are flowing – but the path to the troops remains blocked

Rarely before has a technological sector in Europe developed such explosive momentum as defense tech. Venture capital growth of over 150 percent in 2025, startups building systems in months that would have taken traditional arms manufacturers decades to develop, and a geopolitical environment that has transformed the niche segment of defense technology into a strategic core area of ​​Western security policy. Yet behind the glittering surface of record investments lurks a structural failure that threatens to stifle all the energy of innovation: a procurement system built for a different era and simply not designed for the speed of the 21st century.

Published in May 2026 by The Venturist newsletter, "Europe's Defence 60" documents the sixty companies currently shaping the European defence tech market. It is not merely an industry ranking, but a seismograph of a tectonic shift: away from the cumbersome arms industry of the Cold War era, towards an economy of fast, software-driven defense solutions. Anyone reading this list immediately recognizes that Europe is in the process of reinventing its own kind of defense capability – and that German and Austrian-Swiss innovation plays a prominent role in this. At the same time, the list reveals where the structural bottleneck lies: not in invention, but in implementation.

Where the money went in Europe

The year 2025 marks a historic turning point for European defense tech capital. According to a joint analysis by Dealroom and the NATO Innovation Fund, European defense, security, and resilience startups secured record funding of $8.7 billion in 2025 – a 55 percent increase over the previous year and almost four times the level of five years prior. At the same time, the pure defense sector, excluding dual-use peripheral areas, saw even more significant growth of over 150 percent, making it the fastest-growing venture capital segment in Europe.

The geographical concentration is as clear as it is revealing. The United Kingdom leads in absolute figures with US$2.9 billion in 2025, followed by Germany with US$2.1 billion. Munich has become the undisputed European capital of Defence Tech, with a total of US$7 billion in accumulated capital. The spark originated in Munich – and this has structural reasons: The city combines a strong industrial and defense tradition, a first-class technical university, access to the German Armed Forces as a purchasing power source, and a dense ecosystem of venture capital and entrepreneurial talent.

In this flow of capital, megadeals stand out in particular. Helsing, the Munich-based AI defense company founded in 2021 and now considered the most important European defense firm of its generation, was in advanced talks in May 2026 for a $1.2 billion funding round at a valuation of $18 billion. Quantum Systems, the Munich-based drone specialist, closed a $1.2 billion Series D funding round in July 2026, valuing the company at $8 billion. Stark Defense, the manufacturer of loitering ammunition systems, secured €500 million in a round led by Sequoia Capital and Peter Thiel's Founders Fund. These figures illustrate that the European defense tech market is no longer in the early stages of small seed investments, but rather, with late-stage megadeals, is showing the signs of a mature industrial transformation process.

The DACH region as the most diversified defense tech ecosystem in Europe

Of particular importance is the position of the German-speaking region – Germany, Austria, and Switzerland, or DACH for short – within the European defense tech ecosystem. The Venturist, in its analysis of "Europe's Defence 60," arrives at a clear conclusion: the DACH region is the most diversified defense technology base in Europe. While other ecosystems, such as the British one, show a strong focus on software and command systems, or Ukrainian companies are almost exclusively active in the field of autonomous air systems, Germany boasts companies in six of the seven defined domains.

These seven domains encompass autonomous air systems, AI and defense software, air defense and counter-UAS, ground-based robotics and land systems, maritime and naval systems, space and ISR systems, and the industrial base including manufacturing, procurement, and communications. Germany is only missing the maritime domain, which is geographically quite understandable: unlike coastal states such as the United Kingdom, Norway, or Portugal, Germany is not primarily located on the open sea. All other six domains are covered by an impressive array of startups.

Quantum Systems and Stark are addressing autonomous aviation with electrically powered drone systems and loitering munitions. Helsing and SE3Labs are taking AI and defense software to new levels, Alpine Eagle and TYTAN Technologies cover air defense and counter-UAS, ARX Robotics has positioned itself as Europe's leading provider of unmanned ground vehicles, Munich Quantum Instruments is opening the door to quantum sensing for defense applications, and companies like 3YOURMIND and GovRadar are securing the industrial and procurement base. Finally, Swarm Biotactics, founded in Kassel in 2024, is developing one of the most unlikely and yet fascinating innovations on the entire list: programmable cyborg cockroaches for reconnaissance in inaccessible terrain. The company has moved beyond the concept stage in under two years and already counts the German Armed Forces among its paying customers.

This breadth is no accident. It is the result of an early industrial culture in Bavaria that spawned its first startups long before the post-2022 wave. Quantum Systems was founded as early as 2015, and ARX Robotics emerged in 2022 as a spin-off from the Bundeswehr University Munich. The academic-industrial network around Munich has fostered a startup culture that combines technical depth with entrepreneurial maturity – a combination rarely found in other European regions.

The innovation project as a blueprint – and as a warning

On this list of sixty of Europe's most influential companies, alongside the more well-known names, is GovRadar – and its presence is not due to spectacular drone technology or AI-controlled combat systems, but to something more fundamental: the modernization of the procurement process itself. Founded and led by Sascha Soyk, an entrepreneur and reserve officer, GovRadar positions itself as a SaaS solution that optimizes public procurement processes through the use of AI. The company functions, in a way, like an Amazon or Check24 for public institutions: employees enter their requirements, the platform searches for suitable offers, and uses AI to generate the necessary specifications.

The specific product of this positioning is called KI-PROcure, an innovation project in cooperation with the Bundeswehr Cyber ​​Innovation Hub. The background is quite straightforward: For Bundeswehr procurements exceeding €5,000, detailed specifications must be created. These are still prepared manually, a process that is labor-intensive, time-consuming, and costly. KI-PROcure addresses this issue: The software is designed to simplify, standardize, and accelerate the creation of these specifications using AI. Initial tests with the Federal Office for Infrastructure, Environmental Protection and Services of the Bundeswehr (BAIUDBw) have demonstrated that tendering processes can indeed be standardized. In a subsequent phase, KI-PROcure was expanded to include the Bundeswehr Medical Service, enhanced with pharmaceutical-specific databases, and implemented in Bundeswehr hospitals from Hamburg to Ulm.

GovRadar promises time savings of up to 90 percent in the preparation of tenders – specifications should be created in days instead of weeks. This is not a marginal improvement, but a shift in the order of magnitude. If this figure is even approximately accurate, the widespread use of such systems would have a transformative effect on the procurement speed of the entire public sector – not just the armed forces. And therein lies the unresolved problem.

The valley between pilot project and operational use

Anyone who follows GovRadar's journey through the German Armed Forces' innovation ecosystem will recognize in it the fundamental dilemma of the entire German defense tech sector. The AI-PROcure innovation project was successfully piloted, rolled out to several areas of the Bundeswehr, positively evaluated by users, and demonstrably scalable. And yet, the leap to "planned operational use"—to binding, structurally embedded, and permanently funded deployment—has not yet been completed.

This pattern is not an isolated phenomenon. It illustrates the fundamental systemic problem of German defense procurement: The capacity to pilot innovations exists. However, the institutional structures needed to translate successful pilot projects into regular procurement programs are largely lacking. Rafaela Kraus, a professor at the Bundeswehr University Munich, describes the problem as silo thinking: Departments operate in isolation, are sometimes engaged in internal competition, and the absence of cross-departmental innovation ecosystems prevents precisely the necessary scaling. The CDU/CSU parliamentary group has systematically substantiated this finding in a 71-point plan for procurement reform, noting that many of the simplifications provided for in the 2022 Bundeswehr Procurement Acceleration Act are simply not being applied in practice.

The result of this structural failure is that Germany will invest billions in defense technology in 2026 – while simultaneously risking these investments going to waste because the final step is missing: the institutionalized path from innovation to capability. The Federal Office of Bundeswehr Equipment, Information Technology and In-Service Support (BAAINBw) itself complains about a lack of capacity in the defense industry, while the industry, in turn, points to bureaucratic hurdles. Both have a point – but the real weakness lies deeper: in the absence of a coordinated, binding procedure for transitioning innovation projects into regular operations.

Hub for Security and Defense - Image: Xpert.Digital

The Security and Defence Hub offers expert advice and up-to-date information to effectively support companies and organizations in strengthening their role in European security and defence policy. Working closely with the SME Connect Defence Working Group, it particularly promotes small and medium-sized enterprises (SMEs) that wish to further develop their innovative capacity and competitiveness in the defence sector. As a central point of contact, the Hub thus creates a crucial bridge between SMEs and European defence strategy.

Related to this:

• The SME Connect Defence Working Group – Strengthening SMEs in European Defence

Procurement as a strategic bottleneck of the turning point

A new era in defense spending has begun. Germany has decided to gradually increase its defense budget from approximately €62 billion in 2025 to around €152 billion in 2029, thus meeting the NATO target of 3.5 percent of GDP six years ahead of schedule. For 2026, the Bundestag has approved defense spending of over €108 billion, comprised of the regular budget of €82.7 billion and €25.5 billion from the special fund. At the NATO summit in The Hague in the summer of 2025, the alliance partners also agreed on a long-term target of a total of 5 percent of GDP by 2035, divided into 3.5 percent for defense and 1.5 percent for defense-related infrastructure.

These figures are staggering. They describe a tripling of German defense spending within just a few years. But money alone doesn't solve structural problems—on the contrary, it can exacerbate them. When billions are channeled into a procurement system designed for significantly lower throughput rates, bottlenecks, inefficiencies, and misallocations arise. Rafaela Kraus has clearly identified this connection: money is important, but it doesn't solve structural problems. Those who pour money into an inefficient system can create even more inefficiencies. The Federal Court of Auditors and external economists like the German Economic Institute are already warning that without procurement reform, a substantial portion of the planned investments could be wasted.

This sounds like an internal German administrative problem, but in reality, it's a pan-European challenge. Defence tech in Europe, whether in Germany, Great Britain, or France, faces the same systemic question: How do startups operating in innovation project mode become reliable and long-term suppliers of national defense capabilities? How do new solutions transition from pilot projects to regular operations? According to several companies on the "Europe's Defence 60" list, the British Ministry of Defence has so far answered this question even less effectively than Germany: Helsing, Stark, and Quantum Systems are considering reducing their activities in Great Britain in favor of continental European markets until there are firm procurement signals.

Young ecosystem, strategic responsibility

The data from the "Europe's Defence 60" list reveals yet another dimension, one that is equally significant economically and strategically: the extreme youth of the ecosystem. Thirty-one of the 60 listed companies were founded after the start of Russia's war of aggression against Ukraine in 2022. In the Baltic and Ukrainian groups, the proportions are even higher, at 71 and 75 percent respectively. With few exceptions, defense tech in Europe is a product of the geopolitical shock of 2022.

This has far-reaching consequences for the economic assessment of the sector. An ecosystem consisting primarily of post-2022 startups has little institutional memory, weak balance sheet strength, and is exposed to a significant risk of setbacks should geopolitical urgency subside. Historical parallels serve as a warning: After the end of the Cold War, defense budgets collapsed, and with them, entire industries. A structurally similar risk exists today if political priorities shift again or the Ukraine crisis is defused diplomatically.

At the same time, the investor structure shows that the sector is no longer relying on naive growth expectations, but is increasingly attracting mission-aligned capital. The NATO Innovation Fund, a multilateral capital structure comprised of 24 NATO member states, is the most active investor in the "Europe's Defence 60" list, holding stakes in seven of the sixty companies – including ARX Robotics, Stark, and Aquark Technologies. Around 40 percent of the companies on the list have received strategic capital from government-oriented vehicles such as EUDIS, Bpifrance, Definvest, or national defense ministries. US investors now dominate the later stages: Between 40 and 50 percent of European defense tech capital in later rounds comes from the US. This provides European startups with scaling capital, but also raises questions about technological sovereignty.

At the same time, consolidation is on the rise. M&A activity has quadrupled compared to four years ago; so-called neo-primes are building broad capability portfolios through acquisitions. Quantum Systems acquired Fernride and simultaneously secured a major contract with the German Armed Forces. Helsing took over Grob Aircraft, thus entering the field of unmanned aerial combat systems. The market is undergoing a maturation process typical of technological waves in the transition from experiment to industry: from many small, agile players to a few, well-capitalized platforms.

The logic of alliances as an economic model

A particularly noteworthy development is the emergence of formalized alliances between defense tech companies. ARX Robotics and Quantum Systems, together with other partners, have founded the UXS Alliance, a consortium of companies in the unmanned systems segment that aims to pool German and European expertise and make a significant contribution to NATO security. In parallel, Helsing and ARX Robotics have entered into a strategic partnership to jointly develop an AI-based reconnaissance and combat network, with the goal of digitizing and connecting the fragmented and analog land-based defense sector.

These alliances follow an economic logic that goes beyond mere cooperative interests. Individual startups can hardly provide the full operational depth required by armed forces on their own. True defense capability arises from the interplay of sensors, AI, autonomous systems, and situational awareness centers—a system of systems that can only be created through close technical integration of various providers. The resulting alliances are therefore not merely marketing constructs, but rather responses to a technical and institutional necessity.

This has immediate implications for procurement. Traditional tendering procedures are designed for individual product categories, not for integrated system solutions involving multiple suppliers. Those wishing to procure these new alliance products therefore need new procurement logics – framework and option contracts, performance-based service agreements, and the ability to conduct multi-stage tendering processes that give small and medium-sized enterprises (SMEs) and startups a real chance. The fact that this is not yet happening to a sufficient extent is one of the key obstacles to the transformation of European defense capabilities.

Procurement as a defense capability – not as an administrative function

Through its work with the Bundeswehr Cyber ​​Innovation Hub and the results of the AI-PROcure innovation project, GovRadar has empirically substantiated a thesis that has not yet received sufficient attention in the political debate: Modern procurement is not an administrative task, but a core component of defense capability. A military force is only as good as the systems it receives – and these systems only reach the troops if the procurement process is fast, precise, and scalable. As long as creating a specification for office supplies takes weeks and transferring a proven software solution into regular operation takes years, even the most technologically sophisticated innovation will ultimately be ineffective.

The structural requirements are clearly defined: specifications need binding deadlines, procurement procedures must be fully digitized, direct award thresholds must be raised, and startups need easier access to public tenders. This reform agenda is not new; it's already on the table. The CDU/CSU parliamentary group has described it in detail in its 71-point plan, Bitkom and other industry associations have formulated similar demands, and the procurement office itself has repeatedly pointed out the structural bottlenecks. However, political will and institutional capacity for implementation are two different things.

The comparison with countries that are faster in defense tech procurement is sobering. The European Commission has launched a €115 million pilot program, AGILE, which promises funding commitments in under four months. In comparison, the average duration of a German tendering process for complex procurements – often several years – seems like something from another era. It is no coincidence that Helsing, Stark, and Quantum Systems are seriously considering relocating parts of their operations from the UK to the continent, where the prospects for faster contract awards are better. Contract awards are becoming a key factor in the defense industry's location decisions.

Where the wave breaks – and how to hold it back

It would be dishonest to portray the dynamics of the European defense tech ecosystem solely as a success story. The wave is real, it is large, and it has genuine economic power. But waves that hit structurally ill-prepared shores simply dissipate – that is precisely the warning that must be conveyed at the end of this analysis.

The necessary steps can be divided into three levels. At the institutional level, binding structures are needed that no longer leave the transfer of innovation projects into operational use to chance or the commitment of individuals, but rather design it as a defined process with clear responsibilities, deadlines, and budgets. At the legal level, procurement law must be reformed so that software-driven, scalable solutions like AI-PROcure are structurally favored or at least not discriminated against – with multi-stage procedures that actually give startups a fair chance. Finally, at the cultural level, a shift from siloed thinking to cross-departmental cooperation between politics, the armed forces, procurement agencies, and industry is required.

GovRadar is on the list of sixty European defense tech companies currently making history. It's not there as a drone manufacturer, nor as an AI war machine, but as a representative of the least sexy, yet perhaps most crucial, part of the entire defense tech chain: the smooth, rapid, AI-supported deployment of capabilities to troops. If innovative projects like AI-PROcure are not put into active service after successful testing, it's not just a single company that loses an opportunity. Germany loses the chance to be better equipped quickly and efficiently with its own taxpayers' money. And Europe loses the proof that the defense tech wave can become a lasting strategic capability – and not just an investment cycle that, like so many before it, eventually peaks and then subsides.

The real question, therefore, is not whether Europe is capable of defense technology. It is, and the list of companies including Helsing, Quantum Systems, ARX Robotics, Swarm Biotactics, Stark, GovRadar, and dozens more impressively demonstrates this. The real question is whether Europe develops the institutional reflexes to actually deploy what it invents. The difference between a defense capability and a defense pledge lies precisely there—in the procurement process.

Markus Becker

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Chairman SME Connect Defense Working Group

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Konrad Wolfenstein

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You can contact me at wolfenstein∂xpert.digital or

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