Deep in the Florida Panhandle, there’s a munitions factory without a roof.
It was originally planned as a private factory for a well-known gun dealer in the area, but construction was never completed due to a lack of funding. It could be brought online for about $2 million, said one startup CEO I talked to at AUSA, but there wasn’t enough interest from American investors.
How do we know? That startup CEO, who is developing anti-drone munitions that can be fired from standard rifles, tried to raise the money himself. He also sought a similar amount in the Nordic country where his company is based, hoping to speed up deliveries to Ukraine by licensing his technology. That effort, which led, ironically, to another unfinished factory, was held up by a stalled government grant that would have allowed him to establish manufacturing in the EU.
The difference is that Europe, despite its bureaucracy and slow-moving institutions, is increasingly willing to back companies developing weapons for the wars being fought today. The United States, meanwhile, remains heavily invested in its established defence contractors, leaving smaller companies struggling to attract the relatively modest sums needed to bring their products into production. This founder has a product that soldiers in the field want, yet American investors appear more comfortable putting their money into established primes than taking a chance on a new technology with immediate military applications.
Europe’s approach is far from perfect, as the second unfinished factory makes clear. But at least European governments and investors are beginning to recognise that defence innovation requires more than billion-dollar contracts for established manufacturers. For this founder, the prospect of building his business in Europe remains more attractive than trying to break into the American defence market.
“It would be funny if it weren’t tragic,” said the founder, who asked to remain anonymous.
Primes not prime
As I wrote earlier this week, I came away from the AUSA show concerned for the state of defence innovation. At Resilience in London I met dozens of excited founders who were ready and willing to share everything from post-exposure radiation therapies to space-based systems designed to deploy repair and reconnaissance drones. These startups, many of them operating on relatively modest funding, face what every startup faces: a surfeit of ideas and a dearth of funding.
But there is one thing that differs between the U.S. and Europe: European investors are building momentum when it comes to defence startup investment, enough so that investors on the Resilience stage raised concerns about a possible bubble. Unlike much of the traditional American defence industry, Europe’s emerging defence technology sector is responding directly to an immediate threat on its eastern borders. That urgency is helping direct investment towards drones, autonomous systems and other technologies shaped by the realities of the war in Ukraine. Whether that investment can consistently translate into production and battlefield deployment remains another question.
The funding announcements are substantial. Recent European rounds include Exein’s $270 million raise at a $1.7 billion valuation, while British aircraft developer Skyfly raised $10 million. Occam Industries also reportedly raised €3.8 million. American defence startups are attracting significant capital too, with Mach Industries announcing an additional $600 million in September. The difference is not that American investors are unwilling to finance defence technology, but that Europe’s governments and financial institutions are increasingly making support for smaller defence companies an explicit priority.
Public financing is also expanding across Europe in 2026, with the European Investment Bank expecting to exceed €5 billion in security and defence investment this year. The EIB also announced a guarantee agreement with Santander in October intended to mobilise approximately €300 million in financing for smaller defence companies, while the EU adopted a €115 million programme on 12 October to help defence SMEs move from prototypes to operational systems. These initiatives reflect a growing focus on strengthening Europe’s domestic defence industry and helping smaller companies scale production. However, increased access to capital will need to be matched by faster procurement and more consistent demand from European governments.
All of this is to say that Europe is beginning to address a problem that the United States, despite its enormous defence budget and private capital markets, has yet to solve consistently: getting money into the hands of smaller companies developing technologies that soldiers need now. And, as evidenced by our opening anecdote, even the best-laid plans of European investors and institutions gang aft agley.
Panhandle blues
I found AUSA and its denizens disappointing but not because of the technology I saw. Everything was directionally correct, from autonomous missile launchers the size of freight trucks to AI-powered turrets straight out of a video game. The ideas were modern, focused on autonomy and human-in-the-loop systems that allowed soldiers to multiply their effectiveness while staying out of direct fire. But much of this technology seemed designed for a military with virtually unlimited resources, established supply chains and the money to sustain expensive systems over decades. European defence startups, by contrast, are increasingly building for a different reality: limited budgets, urgent operational needs and the requirement to produce sovereign systems quickly. Where the American primes displayed expensive, complex platforms, many of the European companies I encountered were focused on smaller, cheaper and more adaptable technologies.
The problem, ultimately, isn’t a lack of money or ideas. It’s where the money goes and how much risk investors and procurement officials are willing to accept. Europe is beginning to understand that the next generation of defence technology cannot depend entirely on established contractors, driven in no small part by the reality of a war on its doorstep. Even there, however, money moves slowly and bureaucracy moves slower. The United States, meanwhile, continues to direct enormous resources towards its established defence industry while smaller companies struggle to secure the funding and contracts needed to scale. Neither system is perfect, but Europe appears increasingly willing to challenge the old model, while the American defence industry remains heavily invested in preserving it.
The result? Somewhere in the Florida Panhandle, a factory without a roof sits waiting for $2 million. In an industry where contracts routinely run into the billions, that should be a relatively easy problem to solve. The fact that it isn’t says more about the priorities of defence investment than any funding announcement ever could.
