Trump’s 2024 bid fuels investment surge in European defense tech

The prospect of Donald Trump returning to the White House has driven a significant increase in investment in European defense technology startups.

Eight prominent industry executives and investors report that Trump’s threats to withdraw the U.S. from NATO and his insistence that allies increase their defense budgets have spurred European nations to ramp up their defense capabilities.

NATO Innovation Fund spurs growth

In response to the shifting geopolitical landscape, the $1.1 billion NATO Innovation Fund (NIF) announced partnerships with venture capital firms and defense startups across Europe in June.

The aim is to bolster security on the continent by accelerating innovation in critical areas such as drones, robotics, and quantum computing. The European Union has also committed over $1 billion towards military innovation through its first-ever defense industrial strategy, unveiled earlier this year.

Industry reactions

Herbert Mangesius, founding partner at Munich-based Vsquared Ventures, notes that Trump’s unpredictability has led European states to invest more in their defense capabilities. Vsquared, a leading deep-tech investor, recently raised a €214 million fund to invest in space, robotics and other technologies.

The firm has partnered with the NATO fund and counts quantum computing company IQM and rocket manufacturer Isar Aerospace among its portfolio.

Structural change in European defense spending

The war in Ukraine and rising tensions in the Middle East, coupled with concerns over Trump’s potential return, have driven global military spending to a record $2.4 trillion in 2023, according to the Stockholm International Peace Research Institute (SIPRI). European defense spending alone has risen 16% to €552 billion since 2022.

Ricardo Mendes, CEO of Lisbon-based drone manufacturer Tekever, emphasizes the implications of a second Trump term for both American and European defense enterprises. He highlighted ongoing discussions about overhauling procurement procedures to introduce more flexibility, benefiting smaller and midsize tech companies.

Investment resilience amid economic challenges

While overall startup investment in Europe fell by 44% in 2023, investment in local defense technology startups remained relatively resilient, dropping just 21% from $2.6 billion to around $2 billion.

German Finance Minister Christian Lindner announced in February that Berlin is easing red tape for investments into defense companies as the country ramps up military spending.