Europe has a lot to shout about when it comes to defence tech, with a growing cohort of startups looking to disrupt the large, incumbent primes. Defence tech investment in Europe hit €2.5bn in 2025, more than double the €1.2bn raised in 2024. Activity is being driven by multiple factors: Russia’s war in Ukraine has dragged into its fourth year, while fresh conflicts have flared in the Middle East; geopolitical instability is the new norm, and warfare is evolving fast. Early-stage dealmaking is gathering pace; according to Sifted data, pre-Series B defence startups have raised €556m this year already, compared to the €635m startups at the same stage raised in the whole of 2025. However, experts think a number of things are stalling many of those companies from scaling, including government money going to the wrong places and a slower flow of growth and late-stage capital into the sector. To generate a successful innovation ecosystem, Paolo Surico, professor of economics at London Business School, thinks Europe needs more of three things: “the government to fund areas of public interest; research institutes to push the frontier of knowledge; and the private sector to turn that knowledge into new products.”If it gets that, “Europe will have the opportunity to catalyse this defence spending, not just to fight war and for national security, but also to build the ecosystem," he adds.Fixing procurementAccording to Surico, the most effective way to use government defence budgets is to spend on domestic R&D rather than acquiring equipment from foreign companies.