Growing global tensions and the need for strategic autonomy are driving innovation in defense, transforming the sector from a government stronghold to fertile ground for high-tech startups with dual-use solutions.
Defense in Europe
In 2024, member states’ defense spending reached €343 billion and is expected to reach an estimated €381 billion in 2025. This represents an increase of 62.8% between 2020 and 2025. In 2024, investment in the defense sector grew at an exceptional rate, reaching a record €106 billion, while the 2025 closing estimate stands at €130 billion, a 150% increase in Member States’ defense investment between 2020 and 2025. (Council of the European Union, Jan. 2026).
Focusing on the world of startups, funding for European defense startups has reached €2.4 billion since 2022, with €1.4 billion in the first seven months of 2025 alone (PitchBook, Sept. 2025). This surge is fueled by the demand for dual-use technologies, applicable in both civilian and military contexts, and by the push towards artificial intelligence, cybersecurity, robotics, and space technologies (Economy Magazine, Sept. 2025).
Italian excellence
Although Italy is not a historical giant in defense venture capital, it is showing significant growth, supported by a growing innovation ecosystem. Here are five Italian startups to watch, with strong dual-use potential:
Exein: this embedded cybersecurity scaleup raised €100 million in a round in December 2025, bringing its 2025 total to €170 million (Reuters, Dec. 2025). Its specialization in on-device artificial intelligence security makes it crucial for protecting sensitive infrastructure and systems.
Deepgeo ai: the only Italian startup selected for the NATO Diana 2024 program, develops solutions based on AI and sensor fusion for mine clearance operations, with projects in Ukraine, Israel, and the United States.
Kurs Orbital: specializing in space technology, it offers standardized modules for docking maneuvers and space debris management, in partnership with the ESA. Space applications are inherently dual-use.
Aiko: develops artificial intelligence-based software solutions for the automation of space applications, in particular satellite propulsion systems.
WSense: specializes in underwater wireless communications and monitoring systems. It raised €9 million in a round in 2024, with clear applications for maritime surveillance and naval operations.
International startups to watch
Internationally, the excitement is even more palpable, with several companies already achieving significant valuations:
Helsing (Germany): Founded in 2021, it focuses on the application of advanced algorithms to defense systems, with a software-first approach. It has already raised around €1.36 billion and exceeded €1 billion in valuation.
Quantum Systems (Germany): specializing in reconnaissance and combat drones, it too has surpassed the billion-euro valuation threshold.
Anduril (US): a leader in AI-based defense systems, raised $2.5 billion in a Series G round in June 2025, reaching a valuation of $30.5 billion.
Tekever (Portugal): develops solutions for maritime and land surveillance using drones and has exceeded €1 billion in valuation.
Arx robotics (Germany): manufactures autonomous vehicles for defense, used for transporting loads, surveillance, and training, already employed by European armies and in Ukraine.
Opportunities for private markets
Private equity is gradually overcoming its traditional caution towards the defense sector. Factors such as growing global instability and NATO’s goal of allocating at least 2% of GDP to defense, with an ambitious target of 5% by 2035 (source: Bain & Company, July 2025), are making the sector more attractive. Bain & Company Italia’s analysis estimates that the European defense market is set to grow from €375 billion to €635 billion, offering significant opportunities for SMEs through M&A and LBO transactions. The rationalization of spending and the push for innovation on a supranational scale could favor consolidation and the entry of new players, supported by private capital, especially in a context of seeking efficiency and industrial autonomy.
