Surge in Defence Technology Investment
Investment in defence technology startups has catapulted to unprecedented levels this year, driven by the world’s leading arms manufacturers elevating their expenditures in military innovations.
Recent statistics from Dealroom reveal that prominent defence contractors, such as BAE Systems, Lockheed Martin, and Airbus, have collectively engaged in $4.1 billion (£3 billion) of venture capital funding rounds in 2023, marking it as a historic peak.
In a separate analysis by White & Case, it was reported that 42 mergers and acquisitions within the global defence sector were successfully concluded in the first half of 2026, reflecting a remarkable 56 percent increase compared to the same timeframe last year.
Daniel Turgel, co-head of White & Case’s Global Technology Industry Group, indicated that the demand for advancements in artificial intelligence, cybersecurity, and autonomous systems has significantly intensified.
Turgel stated, “With AI, autonomous systems, space-based sensing, and cybersecurity reshaping the dynamics of conflict, the urgency to invest in and acquire defence technologies is accelerating. The largest defence corporations are keenly focused on fortifying their technological portfolios via acquisitions and substantial funding initiatives.”
In light of escalating defence budgets coupled with record levels of private investment, Turgel forecasts that the momentum of investment and deal-making is poised to remain robust well into 2026.
This trend follows recent substantial investments from defence manufacturers. Notably, Lockheed Martin announced a commitment of at least $100 million towards UK and European defence tech startups, while increasing its venture investment fund from $400 million to a striking $1 billion.
Moreover, BAE Systems has allocated €50 million to two European venture funds concentrated on defence, and Airbus has emerged as a principal investor in a new €500 million fund dedicated to dual-use technologies.
In an impressive feat, German drone manufacturer Quantum Systems garnered $1.2 billion in funding this month, achieving a valuation of approximately $8 billion. Meanwhile, UK maritime defence firm Kraken Technology secured $175 million at a valuation of $1 billion, thanks to the backing of Rheinmetall.
UK Defence Expenditure Increases
In a decisive move, the British government last week approved £708 million for BAE Systems and its Team Tempest partners to advance the Future Combat Air System.
This initiative encompasses developments in AI, robotics, digital engineering, and advanced manufacturing, supporting a vast supply chain of roughly 600 companies and academic institutions throughout the UK.
The government is also championing the emergence of new defence enterprises. The Technology and Growth Alliance, comprising members such as BAE Systems, Thales, Leonardo, and Helsing, aims to facilitate the creation of 20 defence technology spinouts annually, transforming military research into viable commercial ventures.
Andy Burnham has conveyed that defence will remain a focal point, particularly following the appointment of former defence secretary John Healey as Chancellor.
The Prime Minister remarked on Sunday that he is “keenly aware” of Healey’s advocacy for increased defence funding, indicating that the full financing of the Defence Investment Plan will be among the new Chancellor’s primary objectives.
Axel Belorde, head of business development for EMEA and Asia at TMX VettaFi, noted a growing inclination among investors to explore opportunities beyond traditional defence manufacturers.
He articulated that software, cybersecurity, and autonomous systems have ascended in importance, rivaling military hardware.
“Greater access to data will dictate the outcomes of future conflicts,” Belorde asserted. “Compromised data is more detrimental than a complete lack thereof.”
Belorde further emphasized that numerous defence technologies possess dual applications, extending their relevance from logistics to predictive maintenance, thus broadening the spectrum for investment opportunities.
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