Defence Technology Investment in Europe | Why Smart Money, Not Fast Money, Will Win.

Defence technology investment in Europe is being reshaped by informed, disciplined capital and policy-aligned investors

Europe is in the middle of a defence technology awakening, but most investors are still treating it like just another trend to chase. Yes, over €5.2 billion flowed into European defence and dual-use ventures in 2025 alone. Capital is moving. But here's the thing: speed isn't the same as strategy. The real winners won't be the first through the door; instead, they'll be the ones who actually understand the door they're walking through.

The future of European defence belongs to "skilled" capital, which is investors who blend financial know-how with a genuine grasp of policy, regulation, and how things actually work on the ground in the defence and national security world.

1. Welcome to the Era of Strategic Capital

2025 is a turning point. Defence and dual-use ventures now make up more than 10% of all European venture activity, and that's something that would have seemed crazy just a few years ago. But clearly this isn't your typical tech boom or bubble. A playbook of spray-and-pray investing or wiring money and hoping for the best isn't relevant. Success here means you need to understand export controls, security clearances, and procurement law, and these are things most VCs have never had to consider. And when they do finally look at defence tech, they'll quickly realise how few people actually know how to operate in it.

The playing field is changing fast. The NATO Innovation Fund (€1 billion) and the EU Defence Fund (€7.3 billion through 2027) are setting new rules of engagement. Investors who can work within these frameworks and who understand the compliance requirements, eligibility criteria, and national security considerations will be the ones who actually get deals done.

2. Regulation Isn't Red Tape. It's Your Competitive Edge.

Europe's regulatory landscape is growing faster than most people realise. The European Commission's 2025 decision to include defence and dual-use R&D in Horizon Europe ended decades of civilian-only policy. Meanwhile, the EU Control List and the ReArm Europe Plan, mobilising over €800 billion in dual-use capabilities, definitely signal that this shift is here to stay.

For smart investors, regulation isn't a headache; it's an incredible advantage. If you can interpret these evolving rules, structure deals around export classifications, and anticipate state aid eligibility, you'll outperform those just chasing the next hot deal. What was once seen as friction is now a moat for the startups, scale-ups and investors backing them.

3. It's Not Just About Capital. It's About Capability.

Here's what most people miss altogether! The hard part of European defence tech isn't the technology itself. It's the translation. Taking cutting-edge AI, autonomy, or advanced sensors and turning them into something governments can actually deploy requires understanding procurement cycles, certification pathways, and interoperability standards.

As law firm, Baker McKenzie, recently pointed out, compliance and export control literacy are now make-or-break factors for European dual-use innovation. Investors who can navigate that complexity, structure deals intelligently, and guide founders through NATO or EU contracting aren't just writing cheques—they're unlocking value that others can't access.

4. How Fulcrum Does It Differently

At Fulcrum, we invest where policy meets performance. We back early and growth-stage European defence tech companies with both the capital and the expertise they need to scale within sovereign and allied frameworks.

Our playbook covers:

• Regulatory fluency — from export control classifications to NATO interoperability requirements

• Capital discipline — structuring deals that pass muster with both defence ministries and markets

• Deep diligence — analysing cap tables and shareholder structures before investing to ensure no investor or jurisdictional exposure could restrict future growth or trigger regulatory complications

As NATO countries move toward spending 5% of GDP on defence by 2035, Fulcrum and other informed investors will help build the next generation of trusted industrial champions —companies that are compliant from day one and built to compete.

5. A Line in the Sand

The next few years will separate fast money from smart money. One will chase headlines. The other will build lasting companies. The difference won't be who invests in defence, but who understands it and who can translate between founders, regulators, and policymakers in a space where national security and market opportunity now overlap.

As the hype around defence tech gets louder, Europe's real leaders won't be the flashiest; instead, they'll be the most disciplined. In this new era of geopolitically informed investing, strategic autonomy starts with informed capital.