Germany Defense Startups Lead Europe’s High-Tech Military Revolution

From Caution to Acceleration: Germany’s Defence Awakening

For Gundbert Scherf, co-founder of Germany’s Helsing and a leader in European defence innovation, the world changed dramatically after Russia’s invasion of Ukraine. Once forced to battle for investor interest, Scherf now presides over Europe’s most valuable defence start-up, with Helsing’s valuation more than doubling to $12 billion following its latest fundraising round.

The shift in Europe’s security landscape has been seismic. “Europe this year, for the first time in decades, is spending more on defense technology acquisition, than the U.S.,” said Scherf. He sees the continent on the brink of a transformative era in defence innovation, comparing it to America’s historic Manhattan Project.

Germany’s New Vision: Innovation and Investment

Shaped for decades by the scars of Nazi militarism and a culture of risk aversion, Germany has traditionally maintained a modest defence sector protected by U.S. security guarantees. But that model is being overhauled. With the U.S. military’s commitment to Europe now less certain and Germany among Ukraine’s staunchest supporters, Berlin plans to nearly triple its annual defence budget to around €162 billion ($175 billion) by 2029.

This surge in funding is aimed at transforming the nature of warfare. Chancellor Friedrich Merz’s government is linking start-ups directly to senior military leadership, cutting bureaucratic red tape and prioritizing technologies like battlefield AI, drones, and unmanned vehicles. The goal is to “give Europe its spine back,” says Scherf.

Start-ups Take Centre Stage: Cutting-Edge Tech and New Laws

A new generation of German defence start-ups is pioneering technologies once seen as science fiction: AI-powered tanks, autonomous submarines, and even spy cockroaches equipped with miniature cameras and sensors for real-time battlefield intelligence. In an important policy shift, these younger firms are being invited to advise the government alongside established giants such as Rheinmetall and Hensoldt, companies that have traditionally focused on conventional systems.

To help innovative start-ups compete, a new draft procurement law will allow advance payments and restrict certain defence tenders to EU bidders, leveling the playing field for local innovators. This reform is designed to accelerate the integration of new technology into the German military and make the procurement system more agile and responsive.

Germany’s Leadership in European Defence Spending

Germany is committing to meet NATO’s goal of 3.5% of GDP on defence by 2029—faster than most of its European allies. This push comes as the United States, the world’s largest military spender, continues to dominate in key defence sectors and boasts a thriving start-up ecosystem nurtured by Pentagon contracts. In Europe, fragmented procurement markets and differing national standards have historically hindered similar progress.

However, a recent analysis revealed that Europe’s top 19 defence spenders, including Turkey and Ukraine, are projected to collectively outspend the U.S. on military procurement this year—though overall U.S. defence outlays remain larger.

Cultural Shift: Innovation and Social Acceptance

The Ukraine conflict has not only changed budgets and policies—it has shifted public perception. “Germany has developed a whole new openness towards the issue of security since the invasion,” noted Sven Weizenegger, head of the Bundeswehr’s Cyber Innovation hub. Defence innovation is now seen as both necessary and respectable, spurring a wave of new ideas and entrepreneurial activity. Technologies once confined to military labs—such as GPS and the internet—are reminders of how defence research can change everyday life.

Spy Cockroaches and Autonomous Swarms: Science Fiction in Service

Among the most novel projects are bio-robots, like cyborg cockroaches from Swarm Biotactics. Outfitted with neural stimulation systems and secure communication modules, these living insects can be controlled remotely or operate in swarms to gather intelligence in hostile environments. Their development heralds a new era of hybrid biological and digital warfare.

Defence Innovation: Driving Economic Growth

Germany’s renewed focus on defence technology could also provide a much-needed economic boost. With the country’s economy facing challenges from high energy prices, sluggish exports, and competition from China, expanding military research and industry is seen as a way to spur innovation and economic activity. As Markus Federle of Tholus Capital puts it, “A strong defense industrial base means a strong economy and innovation on steroids.”