The announcement marks a dramatic shift in Germany’s defence investment policy since 2022.
Germany will launch a state-backed investment vehicle to take direct equity stakes in defence and security start-ups, the government said Wednesday. Berlin is seeking to close a financing gap that has pushed early stage European defence firms toward private foreign capital.
The fund is part of a broader start-up strategy approved by cabinet this week. It will invest alongside private capital in defence and security companies, according to a government paper seen by Reuters, and forms part of a wider package that also extends Germany’s Future Fund — a state-backed venture capital programme launched in 2021 — beyond 2030.
Start-ups and scale-ups are playing a growing role in Germany’s defence readiness but often struggle to raise capital at later funding stages, the paper said. Venture capital investment in Germany reached €7.2 billion in 2025, well below levels in the United States and Britain.
The move shifts Germany from its traditional role as a customer and grant-giver toward becoming a direct investor in defence technology firms.
Economy Minister Katherina Reiche said the government also wants to use public procurement more deliberately to support young firms, saying that placing major orders helps the state “safeguard production and secure business deals.”
Reiche said at a press conference that the defence sector could generate additional economic growth of 0.5% to 1.0% if the extra funding is invested effectively.
The measures come as Germany and its European allies work to expand defence production following Russia’s invasion of Ukraine and reduce reliance on non-European suppliers for critical technologies.
If the fund proves effective, it could offer a template for other European governments looking to back defence innovation while keeping ownership of strategic technologies within Europe.
