Defense and security went from a fifth to nearly half of all European deep tech venture funding in three years. That single shift explains where 2026’s capital is actually flowing better than any other number in the data.
A sector proving genuinely resilient while the rest of tech corrects
The broader context makes the defense shift even more notable. European deep tech funding reached $20.3 billion in 2025, an all-time high representing 32% of all European venture capital — more than double the 15% share it held in 2015. While the broader tech market remains roughly 53% below its 2021 peak, deep tech funding sits just 4% below its own all-time high — a genuine divergence, and evidence that sophisticated investors have made a durable, structural bet on deep tech specifically, not a temporary rotation likely to reverse with the next funding cycle.
Why defense specifically, and what’s actually driving it
The reallocation toward defense and dual-use technology reflects a fairly direct chain of geopolitical cause and effect. Macroeconomic shocks — the pandemic, the Russian invasion of Ukraine, US tariff policy, and China’s accelerating industrial capability — have made the cost of strategic dependency on foreign technology and supply chains impossible for European governments to ignore, and the response has been enormous public commitment: the EU Chips Act directing €43 billion toward semiconductor production by 2030, Germany’s €35 billion space investment commitment, France’s €109 billion five-year AI and data center program, and an expected €20 billion or more annually in deep tech funding driven specifically by expanded defense spending. Defense and dual-use technology is now the fastest-growing single segment in the entire deep tech landscape, up 125%.
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LEARN MOREThe clearest headline example of this sovereignty thesis in action came in September 2025, when ASML — the Dutch company that makes the lithography machines the entire global chip industry depends on — became French AI company Mistral’s largest shareholder through a €1.3 billion investment, taking roughly an 11% stake. It’s difficult to find a cleaner single transaction illustrating how seriously European industrial giants now treat technological sovereignty as a genuine strategic priority rather than a policy talking point. At the earlier stage, companies like Orqa — a vertically integrated first-person-view drone manufacturer building its own flight controllers, radios, and motors specifically to avoid Chinese-made components — closed a €12.7 million Series A in March 2026 with customers spanning the US Department of Defense, the Croatian Army, and Ukraine’s armed forces, a genuine illustration of supply-chain sovereignty as a company’s core value proposition rather than a side benefit.
Quantum: the rare case of Europe genuinely leading, not catching up
Most conversations about European tech competitiveness default to a catch-up framing relative to the US. Quantum computing is a genuine exception. Europe holds 89% of global venture funding in quantum cryptography and 47.5% of overall global quantum investment — not a competitive position, a dominant one. Quantonation closed a €220 million early-stage quantum fund in February 2026, more than double its predecessor’s size, and companies like IQM are already delivering superconducting quantum processors to national programs across Finland, Germany, and Spain — evidence the sector is genuinely crossing from laboratory research into industrial deployment rather than remaining a purely speculative research bet. Within the broader “Future of Compute” category quantum anchors, funding more than doubled to $2.5 billion in 2025 alone, the fastest-growing segment of Europe’s entire deep tech landscape outside defense itself.
Where the money actually concentrates geographically
Country-level funding data shows a consistent three-way leadership pattern: the UK attracts the largest overall share, followed by France and Germany, with all three countries pulling meaningfully ahead of the rest of the continent in absolute deep tech investment. City-level specialization tells a more useful story for founders choosing where to actually locate. London remains the top hub across most of the newer, fastest-growing deep tech segments. Munich has become the clear European leader specifically in both defense and space technology — a genuine cluster effect worth knowing about for any founder in either category deciding where to base a European headquarters. Zurich leads specifically in novel robotics, a more specialized but genuinely dominant position within its category.
Beyond defense and quantum, the broader 2025 sector data shows real breadth: Novel AI grew 27% to $3.4 billion, Space Tech grew 22% to $1.3 billion, Computational Biology and Chemistry surged 88% to $1.1 billion, and Novel Robotics grew 64% to $468 million. Novel Energy stood out as the sole declining category, down 41% to $700 million — a genuine counter-trend reflecting capital concentration into defense and sovereignty-adjacent categories rather than any real collapse in the long-term climate tech thesis itself.
The honest structural weakness underneath the growth story
None of this momentum resolves Europe’s most persistent deep tech problem. Beyond Series A, there genuinely isn’t enough growth-stage capital in Europe to fund companies through to scale domestically — the practical consequence is that companies raise smaller rounds than their American counterparts, sell earlier than they might otherwise choose to, or take capital from overseas investors in a way that can quietly shift a company’s actual center of gravity outside Europe even when its origins and technology remain firmly European. The exit environment reinforces the same pattern: more than 80% of European deep tech exits are driven by M&A rather than public listings, and a meaningful share of the value created ends up captured by US acquirers rather than recirculating back into the European ecosystem that originally funded the research.
This is the real tension underneath the headline growth numbers, and it’s worth understanding before assuming Europe has fully solved its historical capital gap. The public and early-stage capital genuinely is there now, at a scale that didn’t exist even five years ago. What’s still catching up is the growth-stage private capital needed to keep a European deep tech success story funded, and owned, by European capital all the way through to a major exit.
What this means for founders and investors positioning now
The practical read for anyone building or backing a European deep tech company in 2026: defense, dual-use, and sovereignty-adjacent technology carries genuine tailwinds that look structural rather than cyclical, backed by public commitments in the tens of billions of euros that aren’t likely to reverse on a short political timeline. Quantum represents a genuine area of European global leadership worth building toward specifically rather than treating as a distant research bet. And the growth-stage funding gap, while real, is also arguably the clearest current opportunity for growth-stage investors specifically — the exact bottleneck constraining otherwise strong European deep tech companies from scaling on domestic terms. I’ve written separately about the practical funding mechanisms available to European founders navigating this landscape, including the specific EIC Accelerator and Horizon Europe programs behind much of the earlier-stage capital driving this growth, in my guide to raising capital without Silicon Valley.
The broader signal worth taking away: European deep tech in 2026 isn’t a story about catching up to the US across the board. In defense, quantum, and semiconductor sovereignty specifically, it’s increasingly a story about Europe setting its own terms entirely.
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If you’re seeking professional translation and localization services to enhance your global ventures, visit The Spanish Group — your trusted partner in bridging cultures worldwide.
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If you’re seeking professional translation and localization services to enhance your global ventures, visit The Spanish Group — your trusted partner in bridging cultures worldwide.
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