Defence and AI drive Europe’s venture capital rebound

European venture capital (VC) investment experienced a rebound in 2025, reaching €66bn (£57bn), a post-pandemic high, with a five percent year-on-year increase. This growth was primarily fueled by investments in Artificial Intelligence (AI) and defence technologies, indicating a narrowing of investor focus. Large late-stage rounds in these sectors accounted for a growing share of total deal value, with companies like Synthesia, ElevenLabs, and Legora securing substantial funding at high valuations. Isar Aerospace and other defence tech firms are also exploring new fundraising opportunities.

This shift in investment reflects a broader change in investor attitudes, influenced by events like Russia’s invasion of Ukraine and concerns about Europe’s technological dependence on the US. Defence technology, once considered taboo, is gaining acceptance, with investors increasingly interested in “dual-use” technologies that have both civilian and military applications. Ben Prade of Bullhound Capital noted the sector is now almost taking up the “S” of ESG.

AI-related deals accounted for over 35 percent of all European VC investment in 2025, totaling €23.5bn, a significant increase from the previous year. The surge in funding coincides with the Munich Security Conference, where European rearmament and private-sector investment in defence technology are expected to be key discussion points. Aaron Archer of Cooley anticipates this investment trend will accelerate on both sides of the Atlantic.

(Source：City A.m.)