EU investors turn to drones and battlefield AI

Following Russia’s invasion of Ukraine, venture capital firms are investing record amounts in European software companies that serve the defence sector, which had long been off-limits to them.

Governments all over the continent have increased military defence spending in recent years, investing billions of euros to develop and modernise their armed forces.

Defence-related tech companies have seen an upsurge in private investment concurrently. Almost 780 million euros was invested in aerospace and defence last year, according to startup data source Pitchbook, an all-time record.

This is a significant change. “It’s just not an option to not have the discussion,” noted Uwe Horstmann, a general partner of Project A, which is known for its investments in defence technology companies.

“Because it’s so clear that the situation has completely changed.” Defence spending may be contentious in a peaceful Europe. In October, billionaire Peter Thiel, Project A, Sanno Capital, and Quantum-Systems GmbH invested $17.5 million in the drone business. Quantum-Systems GmbH creates docking stations that enable unmanned aerial vehicles to be deployed and charged without the need for human pilots.

Quantum-Systems provided 42 drones to the German military forces in 2022 to assist the Ukraine. European defence businesses have escaped the general decline in tech investment, in part because of the war.