European Tech Companies Have Ramped Up Spending on Military Defence

European tech companies are drawing huge funding in the wake of Russia's invasion of Ukraine

Following Russia's invasion of Ukraine, venture capital firms are investing record amounts in European tech companies that serve the defense sector, which had long been off-limits to them. Governments all over the continent have increased military defense spending in recent years, investing billions of euros to develop and modernize their armed forces.

Private investment in defense-related tech companies has grown in tandem. The amount invested in aerospace and defense last year reached an all-time high of about 780 million euros, according to startup data source Pitchbook. Clearly, something has changed. Uwe Horstmann, a general partner of Project A, which invests in defense technology companies, declared that skipping the conversation was simply not an option. He further said, "Because it's so clear that the situation has completely changed." In peacetime Europe, investing in defense could be controversial. In October, Project A, Sanno Capital, and billionaire Peter Thiel invested $17.5 million in Quantum-Systems GmbH, a drone company that develops docking stations that allow unmanned aerial vehicles to be charged and deployed without human operators.

In the past year, Quantum-Systems supplied 42 drones through the German armed forces to support Ukraine. Partly as a result of the war, European defense startups have dodged the broader slump in tech investment. Governments all over the continent have increased expenditure on military defense over the past year, committing billions of euros to modernize and strengthen their armed forces. For many firms, the source of venture capital funding that flowed during the pandemic dried up as interest rates and inflation increased at the beginning of 2022. The industries of aerospace and defense technology were significant outliers, and they have continued to attract investment throughout the recession.