Trump’s NATO threats boost EU defence technology startups’ investments

The potential return of Donald Trump to the White House has sparked a surge in investments in the EU defence technology startups. Industry leaders and investors attribute this trend to Trump’s threats to withdraw the US from NATO and his insistence that allies increase their defence budgets. These facts and ongoing global tensions have pushed military spending to a record $2.4 trillion in 2023.

In response, Europe has seen significant initiatives to bolster its defence capabilities. In June, the NATO Innovation Fund (NIF) announced partnerships with venture capital firms and defence startups across Europe, backed by $1.1 billion to enhance continental security. Similarly, the EU unveiled its first defence industrial strategy earlier this year, committing over $1 billion towards military innovation.

Prominent investors have noted that Trump’s unpredictable foreign policy has driven the EU states to invest more in their defence, fostering growth in robotics, drones, and quantum computing. Munich-based Vsquared Ventures, a leading deep-tech investor, emphasised that the urgency created by Trump’s rhetoric has accelerated investments in these areas.

Why does this matter?

While Russia’s invasion of Ukraine remains the primary driver of increased defence spending, Trump’s approach has also led to a shift in Europe, where leaders are seeking greater self-sufficiency in defence. These circumstances have resulted in a 16% rise in defence and security spending across Europe in 2023, with further investments expected as concerns over future US support persist.

Despite a broader downturn in venture capital funding, investments in defence technology startups have remained relatively resilient, with only a modest decline compared to other sectors. The EU companies like Quantum Systems and ARX Robotics have directly benefited from this shift as governments prioritise strengthening their military capabilities in light of global uncertainties.