War Leads to Surge of Venture Capital into US and European Defense Technology Sector

Reference News Network, June 24 According to a report from the Financial Times website on June 21, as the conflicts in Ukraine and the Gulf region have turned drones, autonomous vessels, and battlefield artificial intelligence into one of the hottest areas for venture capital this year, investors are pouring billions of dollars into defense technology startups.

According to data compiled by the "Project Proposal" data company, since the beginning of 2026, companies in this sector have raised $12.3 billion from venture capital funds, nearly double the amount raised during the same period last year, and also surpassing the total funding of $9.95 billion for the entire last year.

Meanwhile, the conflict has exposed the demand for next-generation weapon systems that are cheaper and can be rapidly mass-produced. However, as some funds bet that government defense spending will continue to increase, they are willing to pay increasingly higher valuation multiples, which has raised concerns about overheating in certain parts of the market.

Daniel Schlenberger, head of JPMorgan's Security and Resilience Program for Europe, the Middle East, and Asia, said, "We are witnessing what can be described as the most significant change in warfare in history." He noted that as investors realize "this is an industry with long-term demand," valuations have surged dramatically.

The conflicts in the Gulf region have also intensified interest in maritime defense technology. According to insiders, the UK startup Kraken Technology Group's autonomous mine-hunting vessel has been selected by the Royal Navy for deployment in the Strait of Hormuz, and the company is seeking $100 million in funding, corresponding to a valuation of about $1 billion.

Shenel Malani, managing partner at private equity group Anduril Capital, said that while there are "very reasonable" concerns about some high valuations in the market, the core driving factors supporting industry demand will continue to exist even if various conflicts end.

Anduril Capital announced in March this year that it plans to invest $1 billion in next-generation defense technology.

Malani stated, "The reason we need defense technology and various defense capabilities is that the underlying driving logic is real. Adversaries may use more advanced technology against us, and we must rise to the challenge."

Thomas Pruss, chief investment officer of the Defense Technology Fund at Digital Transformation Capital Partners in Germany, said that while the current market is "unprecedentedly hot," only a few areas like drones are experiencing overheating, while there are still plenty of investment opportunities in areas like autonomous maritime combat systems and satellites.

This investment boom is primarily concentrated in the United States. Startups in the country have received $11.4 billion in investment, with Anduril Industries alone accounting for nearly half.

The Silicon Valley-based company is known for producing drones and surveillance towers, and in a recent round of $5 billion financing, its valuation nearly doubled to $61 billion.

Other U.S. startups that have raised funds include Saronic Technologies, which develops autonomous surface vessel technology, and Shield AI, a drone manufacturer.

Data shows that European defense technology startups have completed several rounds of financing worth $460 million this year.

The Financial Times reported in May that the German drone startup Helsing is raising $1.2 billion at a valuation of about $18 billion. Another German company, Stak Defense, is also negotiating to raise at least €300 million; this "kamikaze" drone manufacturer is valued at about €2.5 billion.

Benoit Fossepre, a general partner at investment group AVP, said, "This is a booming market... our investment direction is highly aligned with the long-term budgets of the military in various European countries."

Companies involved in space technology are not included in the data. The Ireland-Poland satellite manufacturer "Ice Eye" raised €1 billion this month at a valuation of €10 billion, which is four times the valuation level after its last financing in December last year.

The surge in valuations has drawn the attention of investors and heightened concerns about the industry entering a "hype cycle." A venture capital executive stated that if the war in Ukraine ends, some companies may struggle to maintain stable revenues. (Translated by Liu Xiaoyan)