Europe launches €500M fund to reclaim its tech defense

On June 17, 2025, venture capital funds AVP and Earlybird announced the creation of E2D (European Defence & Dual-Use), a €500 million fund dedicated to European defense and dual-use technology startups. The initiative aims to reverse the overwhelming advantage of the United States in defense tech funding within NATO. According to data provided by the funds themselves, since 2019 the US has captured approximately 85% of all NATO defense venture capital funding, while Europe has received only 6.2%. This imbalance reflects a strategic dependency that Europe urgently seeks to correct.

The current geopolitical context is key. Russia's invasion of Ukraine in 2022 prompted European countries to drastically increase defense spending. NATO estimates that in 2024, European members will collectively spend over $380 billion on defense, with that figure expected to exceed $500 billion by 2030. However, most of that money goes to traditional systems (tanks, aircraft, ammunition) rather than disruptive technological innovation. Venture capital, which funds high-growth startups in areas like artificial intelligence, cybersecurity, drones, satellites, and autonomous systems, has barely reached Europe in the defense sector. In contrast, in the US, firms like Anduril, Palantir, and Shield AI have received billions of dollars from private investors, creating a robust ecosystem that Europe lacks.

The E2D fund aims to be a catalyst. AVP (based in France) and Earlybird (Germany) are two of the most active venture capital funds in deep tech and defense in Europe. Their track record includes investments in companies like Isar Aerospace (space launchers) and Helsing (AI for defense). The new fund will invest in early-stage and growth-stage startups developing dual-use technologies (civilian and military) such as AI, robotics, cybersecurity, sensors, and quantum communications. According to the founders, the fund has already made its first investments in startups like Hylight (optical communications) and Robotican (autonomous drones), although financial details have not been disclosed. These companies represent areas where Europe has technological advantages but lacks funding to scale.

The gap with the US is enormous. According to data from PitchBook and Dealroom, between 2019 and 2024, US defense startups raised over $15 billion in venture capital, while European ones barely reached $1.2 billion. Companies like Anduril (valued at $14 billion) and Palantir (publicly traded with a market cap of over $50 billion) have no European equivalents. This asymmetry not only affects economic competitiveness but also security: Europe depends on US suppliers for critical technologies, creating vulnerabilities in case of conflicts or export restrictions. The E2D fund seeks to fill that gap, but €500 million is only a first step. For context, the US government, through the Defense Innovation Unit (DIU) and other programs, has invested over $5 billion in defense startups since 2016. Additionally, US private venture capital in defense has grown 300% in the last five years.

The impact on the labor market and technological sovereignty could be significant. The fund is expected to boost skilled employment in Europe, especially in countries like France, Germany, the UK, and Sweden, where defense tech clusters already exist. However, experts warn that long-term return on investment is uncertain due to the regulated nature of the sector. Defense startups face long sales cycles, certification requirements, and export restrictions that can limit growth. Moreover, regulatory fragmentation in Europe (each country has its own arms export laws) complicates cross-border expansion. The E2D fund will need to navigate these challenges, possibly collaborating with the European Defence Agency (EDA) and the European Commission, which has already launched the European Defence Fund (EDF) with €8 billion for 2021-2027, though that fund focuses more on collaborative R&D than venture capital.

The global comparison is revealing. While the US has giants like Anduril, Palantir, and Shield AI backed by venture capital, Europe lacks similar champions. Israel, another relevant player, has a highly developed defense tech ecosystem with companies like Rafael and Elbit, but its market is small. China, meanwhile, invests heavily in dual-use technologies through its state investment fund. Europe urgently needs to create its own champions to avoid technological dependence on third parties. The E2D fund is a step in that direction, but greater investments and coordinated public policies are needed to close the gap. As the fund's founders note: '85% of NATO defense venture capital money goes to US companies. Europe needs its own ecosystem to avoid technological dependence on third parties.'

In summary, the E2D fund represents a significant move to strengthen Europe's defense technology base. However, its success will depend on its ability to attract more investments, overcome regulatory barriers, and generate startups that can compete globally. The coming years will be crucial to determine whether Europe can close the gap with the US in this strategic sector.