There’s been a quiet boom in German defence tech since the war in Ukraine began. Startups are building software, AI, and drone systems for military use. But even as their numbers grow, many founders say they wouldn’t launch in Germany again.
According to a recent Handlesblatt report, only about a third of German defence startup founders would choose to build their company here if they had the chance to start over. That’s the takeaway from a Bitkom survey of 44 startups working in defence. The rest? They’d head elsewhere: 25% to the U.S., 16% to another EU country, and 18% to somewhere else entirely.
Their reasons: a stagnant economy, heavy regulation, and lack of private capital. But what really stands out is how many say they feel ignored. A full third of respondents said they don’t feel appreciated in Germany.
Low Priority
The mood is pessimistic. Most founders don’t believe Germany is equipped to defend itself. One in four rated the country’s readiness as “very low.”
Still, a few German companies have gained serious ground. Helsing, based in Munich, is now one of Europe’s most valuable defence AI startups, worth an estimated €5 billion. Quantum Systems, which makes military drones, may soon join the unicorn club with a $1 billion+ valuation. Other rising players include Arx Robotics and Alpine Eagle, which launched in 2023 and focuses on counter-drone technology.
Bitkom president Ralf Wintergerst said startups like these must play a central role in rebuilding Germany’s military, alongside traditional defence firms.
Funding Gaps
Germany has made some moves. Defence spending is now mostly exempt from the country’s debt cap, and the EU has proposed a €150 billion defence fund. But founders doubt much of that will reach them.
They want faster procurement, less bureaucracy, and better access to military buyers. Many startups don’t survive long enough to get into formal government procurement pipelines. Some suggest changes to national security clearance laws and want a public-facing marketplace where startups can connect with innovation units inside the military—something that already exists in the U.S.
They’re also asking for more live testing and trial sites, so products can be evaluated in real-world scenarios. At least one location—Erding Air Base—is being converted to support that kind of work.
And of course, money matters. Founders want the government to take startup investment seriously. They point to France’s Fonds Innovation Défense and the Netherlands’ SecFund as models. France is even looking into letting retail investors put money into defence startups.
That said, given the high costs of employment and even materials in Germany it’s no wonder startups are heading where they can find savings. The result, however, is a Germany ill-prepared for what’s next.
