Europe is pledging hundreds of billions to defence. Almost none of the venture money funding the technology behind it is European.

Since 2019, the US has captured around 85 per cent of all NATO defence-tech venture funding, according to the founders of a new fund out today. Europe accounted for just 6.2 per cent of NATO-wide defence-tech VC raised in 2025, even as the continent's defence budgets surged.

AVP and Earlybird want to narrow that gap. The two firms have launched E2D, a €500mn growth-stage fund focused on European defence and dual-use technology, with the explicit goal of keeping startups' capital, talent, and intellectual property in Europe.

The plan is to invest about €25mn each into roughly 20 companies. A first close is set for 30 June, with major financial institutions and corporates as backers, and a first investment expected by the summer.

Why the money is moving now

The backdrop is the largest shift in European security spending in a generation. France has committed €76bn to defence, Germany €152bn, and the EU has set out an €800bn plan.

Yet the capital to build the technology has lagged the politics. Most institutional investors refused to touch defence until recently, leaving a gap between ambition and money. European defence-tech funding has roughly doubled in a year, but from so low a base that, as TNW has reported, a single country like Germany can absorb most of it.

E2D is aimed at the growth stage specifically, the point where European startups have most often had to turn to American or Asian investors to keep scaling. It will back what it calls “modern operating models,” meaning fast-moving startups rather than the traditional primes, across space, air, land, sea, and underwater.

The priority list reads like a map of the new defence stack: semiconductors, high-performance computing, AI, New Space, effectors such as robots and drones, and directed energy. An advisory committee of NATO, armed-forces, and industry figures will help steer the bets.

A credible team, a modest cheque

The two firms are not newcomers. AVP manages more than €2.5bn and has backed over 60 companies since 2016; Earlybird, founded in 1997, also manages around €2.5bn and counts nine IPOs over nearly three decades of European deep-tech investing. Both say they were active in defence and dual-use long before most European funds were allowed to be.

The harder question is scale. E2D joins a still-thin field: the NATO Innovation Fund's €1bn, plus a handful of others. Large growth-stage defence funds remain rare, and €500mn is modest set against an €800bn spending plan and the IP drift it is meant to reverse.

So the number to watch is not the €500mn. It is the 85 per cent. Whether one Franco-German fund moves it, or whether it takes ten more like it, is the question Europe's defence-tech ecosystem will be living with for the next decade.