Defense tech startups raise $12.3 billion as investors bet on next-generation warfare

Venture capital funds are pouring into the defense technology market, driven in part by the wars in Ukraine and Iran, with drones, autonomous vessels and battlefield artificial intelligence emerging as some of this year’s most sought-after investment areas.

According to PitchBook data provided to the Financial Times, startups have raised $12.3 billion since the beginning of the year.

The figure is nearly double that recorded during the same period last year and has already surpassed the full-year total for 2025, which stood at $9.95 billion.

The surge comes as recent conflicts highlight growing demand for a new generation of weapons systems that are cheaper and faster to produce.

However, concerns are also emerging that parts of the market may be overheating, as some investors become willing to pay increasingly high valuations on expectations that governments will continue expanding defense spending.

“We are probably witnessing the most significant change yet in the way wars are fought,” said Daniel Rudnicki Schlumberger, head of security and resilience initiatives for Europe, the Middle East and Asia at JPMorgan. He added that valuations had risen sharply as investors recognized that the sector represented “a long-term need.”

Shonnel Malani, managing partner at private equity group Advent International, argued that although concerns about some elevated valuations were “very valid,” the factors underpinning demand would remain in place even after current conflicts come to an end.

In March, Advent announced plans to invest up to $1 billion in next-generation defense technologies.

Malani said:

“The underlying driver of why we need defense technology and these defense capabilities… is very real. This is not hype. There is a broader range of sophisticated technologies that can be used against us, and we have to meet that challenge.”

The Financial Times reported in May that German drone startup Helsing, backed by Daniel Ek, had raised $1.2 billion at a valuation of roughly $18 billion.

Another German company, Stark, is also in talks to raise at least €300 million, a transaction that would value the “kamikaze” drone manufacturer at approximately €2.5 billion.

“This is a very active market… We are working on solutions that align with the long-term budgets of European militaries,” said Benoit Fosseprez, general partner at investment group AVP.

AVP recently launched a new €500 million European defense technology fund together with venture capital firm Earlybird.