Defense tech investments hit record highs in 2026 driven by wars
Defense tech investments are experiencing a moment that few analysts would have dared to predict just a few years ago. Real-world conflicts are reshaping the global venture capital map and turning military startups into some of the most sought-after bets in the market.
Since the beginning of 2026, companies in the sector have raised an impressive $12.3 billion in venture capital rounds, according to data compiled by PitchBook for the Financial Times. That number is nearly double what was recorded during the same period last year and already surpasses the $9.95 billion raised throughout all of 2025.
What explains such a dramatic leap? The answer lies in active conflicts around the world, which are functioning as a kind of real-world laboratory for new military systems. The war in Ukraine and tensions in the Persian Gulf have accelerated the search for solutions that are cheaper, faster to produce, and more technologically advanced.
This is the environment where drones, autonomous vessels, and battlefield artificial intelligence have become the hottest assets in the 2026 tech market. And investors, from Silicon Valley to Berlin, are putting billions on the table to avoid being left out of this race. 🚀
Why conflicts became the engine behind defense investments
For a long time, the defense sector was seen as the almost exclusive territory of large government contractors — century-old companies with billion-dollar contracts and development cycles that could span decades. But recent conflicts have changed that dynamic in a pretty drastic way.
The war in Ukraine, in particular, exposed a reality that no consulting report could describe as effectively as the battlefield itself: expensive, heavy, and hard-to-operate systems were being outperformed by smaller, more agile, and far more affordable technologies. Adapted commercial drones, for example, began filling tactical roles that previously would have required extremely high-value equipment, and that caught everyone’s attention — especially investors.
Daniel Rudnicki Schlumberger, head of JPMorgan’s security and resilience initiative for Europe, the Middle East, and Asia, summed up the situation well by stating that we are witnessing the most important shift in how wars are fought, possibly the biggest of all time. He also pointed out that valuations have climbed sharply as investors realized this is a sector with a long-term need.
This shift in perspective opened a massive window for startups and tech companies that previously would have had no shot at competing with industry giants. Venture capital, which historically avoided defense over ethical concerns, regulatory hurdles, and long return cycles, began seeing a concrete opportunity to enter a market that suddenly started operating with the speed and logic of the tech world.
Companies closing contracts in months, piloting prototypes directly in conflict zones, and iterating rapidly based on real feedback — that is exactly the kind of dynamic the startup ecosystem understands really well.
The investments flowing in right now are not motivated solely by patriotism or geopolitical pressure. There is very solid financial logic behind it all. European governments, pressured by NATO to increase their military spending, are creating predictable, long-term demand for defense technology. That gives venture capital funds a revenue visibility they rarely find in other sectors. It is a powerful combination: geopolitical urgency paired with the predictability of government contracts. 💰
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Drones and autonomy: the hottest bets in the sector
If there is one symbol of this new era in defense technology, it has propellers. Military drones and autonomous systems are attracting a large share of the funding recorded in 2026, and for good reasons. The ability to operate without putting human lives at direct risk, combined with much lower manufacturing and operating costs compared to manned aircraft, has made these systems practically indispensable in any modern military doctrine.
Anduril Industries, headquartered in Silicon Valley and known for its drones and surveillance towers, is the most emblematic example of this boom. The company nearly doubled its valuation to $61 billion in a $5 billion round last month, with investors like Thrive Capital and Andreessen Horowitz among the participants. On its own, Anduril accounted for nearly half of the total capital raised by American defense startups in 2026.
Other American startups also stood out. Saronic Technologies, which specializes in autonomous surface vessels, and Shield AI, a maker of aerial drones, also raised significant capital during this period.
What is fueling investments in this segment goes beyond the immediate demand from conflicts. There is a parallel technology race underway, where mastering autonomy in hostile environments could determine who leads military contracts for the next 20 years. Artificial intelligence applied to defense systems — especially in autonomous navigation, target recognition, and real-time decision-making — sits at the heart of this competition.
Thomas Preuss, chief investment officer of DTCP group’s defense tech fund, noted that while the market is quite active, the overheating is concentrated in niches like aerial drones. According to him, significant opportunities still exist in areas such as autonomous maritime systems and satellites.
Autonomous vessels land on investors’ radar
Beyond aerial drones, autonomous vessels are also gaining increasing traction in venture capital conversations. The conflict in the Gulf has sharpened interest in maritime defense technology in a very tangible way.
British startup Kraken Technology, whose autonomous mine-hunting vessels were selected by the Royal Navy for operations in the Strait of Hormuz, is seeking to raise around $100 million at a valuation near $1 billion, according to people familiar with the matter. The company is working with advisors from PJT Partners on the process. Both Kraken and PJT declined to comment.
The war in the Black Sea had already demonstrated how unmanned naval systems can be extraordinarily effective and far harder to detect and neutralize than conventional vessels. That opened up a whole new segment of interest for investors, with startups focused on surface drones and autonomous submarines receiving attention and resources that until recently would have been unimaginable outside naval research labs. 🤖
The boom is American, but Europe is catching up fast
The data makes it clear that the current boom is heavily concentrated in the United States. American startups accounted for $11.4 billion of the $12.3 billion total raised, though Anduril alone was responsible for nearly half of that figure.
European defense tech startups, meanwhile, completed rounds worth $460 million in 2026, according to PitchBook data. However, that number excludes several large funding rounds still in progress.
For many years, the center of gravity for defense technology investments was clearly in the United States. Silicon Valley set the rules, Pentagon contracts were the big prize, and Europe played a much more secondary role. But conflicts close to its borders have fundamentally changed Europe’s calculus.
Countries like Germany, France, the United Kingdom, and the Baltic nations have begun actively investing in building a local defense tech ecosystem, creating dedicated funds, simplifying regulations for startups in the sector, and establishing partnerships to accelerate military technology development.
Germany emerges as a surprising defense startup hub
Berlin, in particular, has turned into a surprising hub for defense startups. Germany, which historically maintained a very cautious relationship with military spending for well-known historical reasons, has made a significant pivot in its defense policy.
Helsing, a German AI-powered drone startup backed by Spotify founder Daniel Ek, was in May raising $1.2 billion at a valuation of around $18 billion, as reported by the Financial Times. Another German group, Stark, is also in talks to raise at least €300 million, valuing the kamikaze drone maker at approximately €2.5 billion.
Benoit Fosseprez, general partner at the investment group AVP, which recently launched a new €500 million European defense tech fund in partnership with venture capital firm Earlybird, said the market is heating up and that startups are addressing what amounts to the long-term budgets of European militaries.
Advent International, a private equity giant, announced in March plans to allocate up to $1 billion toward next-generation defense technologies. Shonnel Malani, managing partner at Advent, acknowledged that there are valid concerns about some of the higher valuations but argued that the factors driving demand will persist even after current conflicts end.
In Malani’s view, the need for defense technologies and capabilities is real and not a matter of hype. He emphasized that there is a more sophisticated set of technologies that can be used against us and that we need to rise to meet that challenge.
Space tech companies are also riding the wave
Space technology companies, though excluded from the main data compiled by PitchBook, are also benefiting from this cycle. Iceye, a Finnish-Polish satellite manufacturer, raised €1 billion this month at a valuation of €10 billion — four times the value of its previous round, completed in December.
This internationalization of defense tech investments is a new and highly relevant phenomenon. Previously, regulatory and security barriers made it extremely difficult for foreign capital to flow into sensitive military technology companies. But geopolitical urgency is pushing governments to create more flexible mechanisms to attract that capital without giving up strategic control. 🌍
The debate over overheating and sustainability
With valuations climbing at an accelerated pace, concerns are also growing that parts of the sector may be entering a hype cycle. Some venture capital executives have raised questions about the sustainability of certain companies’ revenues if the war in Ukraine were to come to an end.
But not everyone shares that pessimistic view. Florian Heinemann, co-founder of Project A Ventures, stated that valuations do not appear to be inflated, highlighting that there are substantial businesses behind these companies and a significant influx of orders.
Mikolaj Firlej, general partner and co-founder of Expeditions, one of the largest defense tech-focused venture capital funds in Europe, pointed out that the region has serious capability gaps, especially in areas like intelligence and surveillance. He added that the continent also lacks local manufacturers for several critical components.
According to Firlej, the first wave of investments was about rebuilding Europe’s arsenal for the battlefield. Now, it is about securing the supply chain — from the front lines all the way to the chips that make everything work, whether sensors, electronic warfare, or frontier AI models. In his view, Europe needs to stand on its own two feet.
What to expect in the coming months
With $12.3 billion already raised in just a few months of 2026 and global conflicts showing few signs of cooling off in the short term, the trend is for those numbers to keep climbing. The pressure on governments to modernize their arsenals and adopt more sophisticated technologies is not going away, and that creates a virtuous cycle of demand and investment likely to persist for quite some time.
For startups entering this market right now, the moment represents a clear opportunity, but it also comes with enormous technical and regulatory responsibility. Developing defense technology requires navigating a complex compliance environment, dealing with sensitive ethical questions about autonomy in lethal systems, and building trust-based relationships with government partners whose decision-making cycles are very different from those of conventional corporate clients.
The companies that manage to balance rapid innovation with strong governance are the ones most likely to establish themselves in this market and turn today’s venture capital funding into long-term contracts tomorrow.
The drone and autonomous systems market, in particular, is expected to remain the focal point of investments in the coming months. Demand for reconnaissance, surveillance, and rapid-response capabilities is growing across virtually every theater of operations around the world, and AI-powered solutions are proving increasingly capable of meeting those needs with greater efficiency and lower costs than traditional alternatives.
The defense tech sector is, in fact, undergoing a profound transformation — and the billions flowing in right now are just the beginning of this story. 🛸
