Over the last three years the geopolitical landscape has changed dramatically, it keeps intensifying as warfare evolves and awareness continues to rise. Russia’s 2022 invasion of Ukraine triggered an unprecedented surge in defence spending, with NATO members committing to earmark 5% of GDP by 2035. European defence budgets grew by 17% from 2023 to 2024, reaching $693B. A growing uncertainty to the US’ commitment to NATO’s Article 5 makes the case for innovation and investment in European defence bigger and more urgent than it’s been since the continent was last at war. In our native Denmark, it was recently made public that investments of $9.2B would be made into European made air defence systems, including long range precision weapons. At Heartcore, we are committed to fuelling innovation that strengthens European resilience in the decades ahead.
Enabling technologies will be a driving force for military innovation, with quantum, AI and robotics all paramount to advance European freedom and autonomy. AI spending in particular is severely underfunded in the EU relative to the US and China. Per the European Parliament the spend is <0.5% in the EU compared to ~4% in the US and ~3% in China in 2024. These are not like-for-like comparisons as the EU efforts are spread across fragmented sovereign efforts, creating an even more dire outlook for AI capabilities in European defence. Similarly, China is the undisputed leader in quantum satellites since 2016 and quantum secured communication spectrums since May 2025. Alongside the European Commission’s ReArm Europe Plan aims to mobilise up to €800B for defence readiness by 2030, with AI and quantum capabilities being prioritised. Alongside EC’s funding, private capital will be a necessity to address the innovation gaps.
We believe the future of active warfare builds on finding asymmetric advantages with inexpensive solutions. As an example, aerial warfare economics have dramatically changed with the advent of cheap attack drones. Moving away from expensive missiles or manned fighter jets have made defence rather than attack uneconomical as countermeasures are trailing. Attack:defence ratios have been reported in the range 10-40:1 favouring the attacker. Attack drones are a good example of how enabling technologies are at play in electronic warfare. These robotic systems rely on edge AI and secure quantum satellite connectivity, making them resistant to spoofing. Similar applications can be considered in the maritime and ground domain as well as in ISR, field logistics and advanced manufacturing. It is a wide open field that creates a broad opportunity set for entrepreneurs to build in.
This tension mirrors the contrast between the “mighty war machine” (6-10 year timelines, monolithic programs and hardware first innovation) and the “scrappy innovator” (scrappy actors across domains that develop autonomous systems, electronic warfare, cybersecurity, advanced manufacturing and more). In Europe, we think the latter perspective is more relevant as our competitive edge will not come from matching US or Chinese scale. Ukraine has shown that fast, pragmatic procurement in active warfare works. Anecdotal evidence suggests European Ministries of Defence are accelerating their processes and reassessing their needs to match today’s reality.
We think the time is ripe to invest in the future of European defence across domains and expect an emergence of new primes, civil-military dual-use technology and AI-enabled software systems in the coming decade. Interesting investment opportunities fall in one of two buckets:
Short-term urgency: solutions that directly address pressing operational needs with a path to quick government contracts and potential to either become or be acquired by new-primes.
Long-term resilience: single and dual-use technologies with lasting strategic value in defence and civil applications alike
The intersection of what Europe needs and that which we think can be supported with VC investment has yielded a simple heuristic which we have boiled down to a handful of categories of interest.
Urgency,
Clarity of need,
Strategic value and
Scalability potential
are the vectors along which we’d evaluate startups. We believe that Heartcore investments may equally well be early onset research projects of high strategic value (e.g., quantum sensing solutions, advanced materials, biodefence and space applications) as well as high-urgency and immediately clear operational needs (e.g., novel defence systems, maritime ISR, integrated HW/SW systems, communication systems and more).
The use of advanced AI systems in these emerging technologies already feel like a given. We also believe quantum will play a particularly important role across categories. Whether in secure communications, GPS-denied navigation or advanced sensing for ISR, quantum capabilities will play a critical role. Enablers for quantum supremacy we consider to be among the biggest long-term opportunities to invest in. European startups such as Alice & Bob and IQM (fault-tolerant quantum computing) or Isentroniq (infrastructure enabling scalable quantum processors and a recent addition to the Heartcore portfolio) are all companies we believe have the potential to have systemic impact, also in defence.
Some example categories we find particularly interesting to invest in include:
Autonomous Systems & ISR: We see enormous opportunity in autonomous systems that extend intelligence and situational awareness across domains. Companies like HarmattanAI (autonomous drones), Nordic Air Defence (drone defence systems), Polar Mist (surface-level maritime autonomy), and Bubble Robotics (subsea drones) illustrate how European founders are building cost-effective ISR and defence layers that make operations more resilient.
Secure Communications & Spectrum Dominance: Resilient, sovereign communications are critical for both civil and defence applications. Lysk is working on secure comms, while Orasio develops sovereign video AI systems for situational awareness. Skynopy, a Heartcore portfolio company, in turn delivers secure, real-time satellite links for defence. These tools reduce dependency on foreign infrastructure and make European systems more robust.
AI-Enabled Command & Decision Systems: The future battlefield will be defined by AI-driven decision support. Arondite is building a data platform that connects critical systems, while UXV Technologies develops ground control systems for electronic warfare. Comand AI is building an AI-native & interoperable command software platform.
Precision Logistics & Sustainment: Innovation in logistics and sustainment directly translates to lives saved and resources conserved. TwentyFour Industries is building drones to accelerate procurement and operations in contested environments. In parallel, Portchain is redefining global port and shipping logistics with AI-powered planning and optimisation that strengthens both civilian supply chains and military sustainment operations.
Cybersecurity & Critical Infrastructure Protection: The lines between cyber and physical warfare are blurring, and securing critical infrastructure is paramount. UK-based Periphery is building a cybersecurity platform for critical infrastructure, a dual-use technology with relevance far beyond defence. Similarly, Trout Software is building plug-and-play cybersecurity for industrial networks.
Dual-Use Software & Procurement Tools: Navigating procurement remains a major bottleneck for startups in this sector. We see opportunities in software that helps innovators interface with defence buyers more efficiently, creating leverage for smaller, more agile entrants.
Just as Palantir, Shield AI and Anduril created a new generation of defence primes in the US, we believe Europe will follow a similar trajectory. Companies like Helsing, Quantum Systems and more recently Harmattan and Stark Defence showcase the funding available and premium valuations that can be commanded for the most ambitious startups. We are equally confident that significant exits are already within reach. As procurement modernises and new-primes emerge, we expect venture-backed defence tech to become a major category for European venture.
Authors
~ Björn Nilsen, Principal, Heartcore Capital
~ Bérenger Teboul-Danguin, Associate, Heartcore Capital
~ Jimmy Fussing Nielsen, Founding Partner and CEO, Heartcore Capital