Germany Launches Direct Investment Fund for Defence Startups to Boost Innovation
Germany’s New Defence Startup Investment Fund: Details and Strategic Context
By Maria Martinez and Miranda Murray
Government Initiative and Motivation
BERLIN, July 22 (Reuters) – Germany’s government on Wednesday said it will create an investment fund that allows the state to take direct stakes in defence startups, as part of a broader strategy to support new businesses.
Spurred by Russia’s war in Ukraine and doubts about the reliability of U.S. security guarantees under Donald Trump, Germany and other European governments are moving to rebuild defence capacity after decades of underinvestment.
Role of Startups and Scale-ups in Defence
Startups and scale-ups in the security and defence sector are playing an increasingly important role in bolstering Germany’s security and defence readiness, according to a government paper seen by Reuters.
German AI defence firm Helsing and autonomous ground-systems startup ARX Robotics have supplied systems for battlefield use in Ukraine, where the war has become a proving ground for fast-deployable technology and helped show young European companies can deliver capabilities faster than traditional procurement channels.
Improving Access to Capital
To improve access to capital, the government will establish “a new vehicle for direct federal investments in startups and scale-ups” that develop products and services with clear military applications, it said.
The value of the fund has not been announced.
Broader Startup Strategy and Economic Impact
Making Germany More Appealing for Startups
STRATEGY AIMS TO MAKE GERMANY MORE APPEALING
The vehicle is part of a broader startup strategy, led by the economy ministry, aimed at improving access to finance, attracting skilled workers and cutting bureaucracy for newly founded companies.
Startup Growth Statistics
A record 3,053 startups were founded in Germany in the first half of 2026, up 52% from the second half of 2025. They employed 26% more people in 2024 than in 2020.
Challenges in Scaling Startups
“When we look at the United States, we see that far too little private capital flows into startups [in Germany],” Economy Minister Katherina Reiche told broadcaster ntv on Wednesday.
Germany still struggles to turn successful startups into growth companies. According to the paper, venture capital investment reached €7.2 billion ($8.21 billion) in 2025, far below levels in the United States and Britain.
Private Capital and Future Fund Initiatives
Germany’s BVK private equity and venture capital association said the strategy marked an important step in strengthening Germany’s standing as a startup location and “focused on the right levers, particularly regarding financing.”
The strategy also aims to mobilise more private capital for sectors including technology and biotechnology.
The Future Fund — a German government-backed venture capital programme launched in 2021 — will be extended beyond 2030.
(Reporting by Maria Martinez, Christian Kraemer and Miranda Murray, Editing by Alexandra Hudson)