Germany to Take Direct Stakes in Defence Startups Under New Fund
Updated
Updated · Reuters · Jul 22
Germany to Take Direct Stakes in Defence Startups Under New Fund
3 articles · Updated · Reuters · Jul 22
Summary
Germany said it will set up an investment vehicle allowing direct federal stakes in defence startups and scale-ups developing products with clear military applications.
Russia's war in Ukraine and doubts about U.S. security guarantees have pushed Berlin to rebuild defence capacity, with startups such as Helsing and ARX Robotics already supplying systems for battlefield use in Ukraine.
Katherina Reiche said the defence sector could add 0.5% to 1.0% to economic growth if new funding is deployed well, though she gave no size for the fund and said state orders can also provide startups economic security.
The fund sits inside a broader startup strategy to improve financing, attract skilled workers and cut bureaucracy as Germany tries to keep firms from seeking larger funding rounds in the United States.
Germany recorded 3,053 new startups in the first half of 2026, while 2025 venture capital investment reached €7.2 billion—still well below U.S. and British levels.
With its new defence fund, can Germany finally fix its slow military procurement and build a European tech champion?
Will direct state investment create global tech leaders or simply distort markets and stifle private innovation?
As the state becomes a defence-tech investor, what ethical guardrails will it set for AI-powered autonomous warfare?
Germany’s New Defense Investment Fund: How the Deutschlandfonds Is Transforming Military Innovation and Startup Growth
Overview
In July 2026, Germany announced a major policy shift by launching the Deutschlandfonds, a new investment fund managed by the state-owned KfW bank. Unlike previous approaches that relied on grants or procurement contracts, this fund will take direct equity stakes in startups focused on security, defense, and deep-tech. The move is a response to changing geopolitical realities and aims to boost innovation by providing capital directly to promising companies. By structuring the Deutschlandfonds as a fund of funds, Germany seeks to strengthen its defense sector, support economic growth, and secure technological leadership in critical areas.