85% of NATO defence tech funding went to the US. AVP and Earlybird just raised €500M to change that — TFN

• Since 2019, the US has captured round 85% of NATO defence-tech enterprise funding — Europe accounted for simply 6.2% in 2025 regardless of defence budgets surging throughout the continent.
• AVP and Earlybird have began E2D, a €500M development fund that plans to speculate about €25M every in round 20 European defence and dual-use tech firms.
• The fund is prioritising semiconductors, AI, New Area, drones, and directed power, with a primary funding anticipated by summer season 2026.

For years, beginning a defence or dual-use tech firm in Europe often meant listening to the identical factor: the very best development capital got here from America. AVP and Earlybird need to change that.

At the moment, they launched E2D, a €500M development fund targeted on supporting European defence and dual-use tech firms and holding their capital, expertise, and mental property in Europe.

“Public information offers a helpful sense of scale. Roughly half of late-stage financings have been backed by US or Asian capital. Since 2019, the US has captured round 85% of NATO defence-tech enterprise funding. European defence-tech funding has roughly doubled over the previous 12 months, however Europe nonetheless accounted for less than about 6.2% of NATO-wide defence-tech VC funding raised in 2025,” say Benoit Fosseprez, normal accomplice at AVP and Roland Manger, co-founder of Earlybird, to Tech Funding Information.

The fund plans to speculate about €25M every in round 20 firms, with a staff comprising folks from each AVP and Earlybird. The primary shut is about for June 30, with assist from main monetary establishments and firms as restricted companions.

A committee of navy and business leaders from NATO and prime European contractors will assist information funding selections. The primary funding is predicted by summer season 2026.

Why the cash is lastly shifting

France pledged €76B to defence, Germany €152B, and the EU has set out an €800B European defence plan, making this the largest change in European safety spending in a era.

Nonetheless, till not too long ago, most institutional LPs refused to the touch defence in any respect, leaving a severe hole between political ambition and obtainable development capital. European defence-tech funding has roughly doubled over the previous 12 months, however the baseline was so low that the continent nonetheless punches nicely under its weight.

E2D goals to fill that hole. It would spend money on expertise firms working in house, air, land, sea, and underwater, specializing in what it calls “trendy working fashions.” In different phrases, fast-moving startups slightly than conventional defence giants. The aim is to shut functionality gaps in Europe and construct firms that may reach each defence and business markets.

“We’re prioritising what French and German armed forces, in addition to our advisory board of former leaders from armed forces, NATO, and the defence business, have recognized as key functionality targets. That features semiconductors, high-performance computing, AI, New Area, effectors — robots, drones — and directed power,” add Manger and Fosseprez.

The staff that’s been doing this earlier than it was modern

AVP manages over €2.5B in enterprise and development funds and has supported greater than 60 tech firms since 2016. In the meantime, Earlybird, based in 1997, additionally manages €2.5B and has achieved 9 IPOs and 41 commerce gross sales over nearly thirty years of deep tech investing in Europe.

The fund is led by Fosseprez and Manger, joined by two buyers with over a decade of defence expertise funding expertise, giving the staff credibility in a sector the place relationships with procurement officers and prime contractors matter as a lot as capital. Each corporations say their groups had been energetic in defence and dual-use expertise lengthy earlier than most European funds had been permitted to spend money on the sector in any respect.

“European defence is at a historic turning level, requiring a brand new era of expertise champions to safeguard sovereignty. The most effective European defence firms want buyers who deliver actual sector conviction and pan-European attain; that’s precisely what this partnership delivers,” says Fosseprez.

“We stay up for backing the very best European high-growth, deep tech firms that can be instrumental in closing defence functionality gaps whereas additionally addressing business markets, delivering decisive and chronic operational positive factors to European armed forces in addition to primes. This can foster a extra resilient and sovereign European ecosystem and in the end unlock superior worth for buyers,” provides Manger.

A rising however nonetheless underfunded area

E2D is coming into a sector that has gained vital momentum. The NATO Innovation Fund, which raised €1B in 2022, has been one of the vital energetic buyers in European dual-use tech.

Plural and Atlantic Bridge have additionally entered the sphere. Nonetheless, giant growth-stage funds like E2D stay uncommon, and the hole between early-stage investments and the funding required to develop a defence tech firm to prime-level contracts stays a significant problem in Europe.

With 85% of NATO defence-tech funding going to the US since 2019, the bar for what counts as “closing the hole” is excessive. Whether or not €500M strikes that quantity meaningfully, or whether or not it takes ten extra funds like this one, is the query the European defence tech ecosystem can be residing with for the following decade.