Key Takeaways
- EU Defence Roadmap and Funding Context: The recently published EU Defence Industry Transformation Roadmap is a European Commission initiative setting out a strategic framework to open the defence sector to innovation-driven companies. It identifies priority technologies, new financing instruments, procurement reforms and skills development measures, creating substantial opportunities for start-ups, scale-ups and tech SMEs – collectively termed “New Defence” actors – to access EU funding, testing environments and procurement structures.
- Priority Technologies and Financing: Focus areas include AI, autonomous systems, quantum technologies, cyber defence and dual-use applications. Key financing instruments are the Defence Equity Facility (over €500 million by 2026) and the up to €1 billion Defence Equity Facility 2.0, both specifically designed for New Defence actors, with the Roadmap explicitly calling on private funds and asset managers to support defence-sector growth.
- Procurement and Market Access Reform: Public procurement is to become more risk-tolerant and accessible to innovative newcomers, with innovation alliances and an increasing share of EU funds directed toward new entrants, counterbalancing the historical market dominance of established defence contractors. Member States are encouraged to allocate at least 10% of defence budgets to highly innovative technologies.
- Time-to-Market and Skills: New EU instruments aim to enable rapid prototyping and operational readiness within months, while specialized Defence Skills Programs launching from 2026 are expected to equip approximately 600,000 European professionals with defence-relevant skills by 2030.
The European Commission recently published its EU Defence Industry Transformation Roadmap, marking a significant shift in European defence policy toward innovation-driven growth. The Roadmap complements the European Defence Industrial Strategy (EDIS) and the European Defence Industry Program (EDIP), established under Regulation (EU) 2025/2643, and should be read in the context of the Commission’s ‚Readiness 2030‘ plan (initially announced as ‚ReArm Europe‘ in February 2025), which envisions up to €800 billion in additional defence spending capacity across the EU. The overarching objective is to accelerate disruptive innovations in the defence sector and position the European defence industry as more resilient and technologically advanced.
The Roadmap creates substantial opportunities for start-ups, scale-ups and technology-oriented SMEs – collectively termed „New Defence“ actors – by providing enhanced access to EU funding instruments, testing environments and procurement structures. For German companies, particularly those in the technology and start-up ecosystem, this opens new avenues for participation in security-relevant EU innovation projects and dual-use technology development.
From an asset management perspective, the Roadmap also serves as a “capital mobilization” document. It explicitly calls on the EU to engage its financial ecosystem – including “investment funds and asset managers” – in support of defence-sector growth. In particular, the Roadmap highlights EU-backed fund-of-funds initiatives (including the Defence Equity Facility, expected to channel more than €500 million in equity into EU defence companies by 2026, and the Defence Equity Facility 2.0 (DEF 2.0) targeting an initial size of up to €1 billion (with the support of private funds). DEF 2.0 is currently in its fundraising phase with EU Member States and is expected to begin investing once commitments reach €250 million at first closing.
Key Strategic Objectives
The Roadmap focuses on opening the defence industry to young, innovation-oriented companies that are expected to play a central role in developing new security-relevant technologies. Priority areas include:
- Artificial intelligence
- Autonomous systems
- Quantum technologies
- Cyber defence
- Dual-use applications (civilian and military)
A core objective is to render public procurement more risk-tolerant, foster disruptive innovations through targeted demand-side measures and facilitate the participation of companies not traditionally associated with the defence sector.
Four Central Action Areas
- Financing
The Roadmap highlights two key financing instruments: (i) the Defence Equity Facility (a Commission/EIF-backed fund-of-funds), expected to channel more than €500 million in equity into EU defence companies by 2026, and (ii) the DEF 2.0, targeting an initial size of up to €1 billion (supported by private funds, including venture capital, private equity, private credit and infrastructure). DEF 2.0 is open for fundraising with Member States and is expected to start investing once commitments reach €250 million at first closing.
The Fund-of-Funds is specifically designed for so-called “New Defence” actors, including start-ups, scale-ups and technology-oriented SMEs working in priority areas such as AI, autonomous systems, quantum technologies, cyber defence and dual-use applications. The initiative strengthens connections between civilian innovation funding and defence by enabling defence-relevant deep tech developments to receive funding through Horizon Europe. Eligible start-ups can therefore access multiple funding streams, including the Fund-of-Funds, Horizon Europe and dedicated EU funds for companies newly entering the defence market. Detailed eligibility criteria – such as company size thresholds, revenue limits or specific application procedures – are expected to be published in upcoming calls for proposals. In light of the Commission’s Readiness 2030 plan, which envisions up to €800 billion in additional defence spending capacity across the EU, the scale of available funding for new entrants may increase substantially beyond the initial Fund-of-Funds allocation.
The Roadmap’s financing pillar is designed to attract private capital alongside EU-backed financing: (i) it explicitly lists private funds and asset managers among the intended financing sources; and (ii) it points to equity (fund-of-funds) and debt (EIB support, including a dedicated envelope to support access to debt for SMEs in defence supply chains). Together, these mechanisms are expected to create fundraising/anchor-capital opportunities for eligible GPs and expanded defence/dual-use deal flow for VC / growth / private credit strategies.
- Accelerating Time-to-Market
New EU instruments are designed to enable technologies to be tested and brought to operational readiness within months. These instruments are intended to address the traditionally lengthy development and testing cycles that have posed significant barriers for new companies seeking to enter the defence market, enabling rapid prototyping and validation of disruptive technologies.
- Access to Contracts
Innovation alliances between technology companies and military stakeholders will facilitate market entry. Traditional procurement structures have historically been risk-averse and difficult for non-traditional defence companies to navigate. The Roadmap seeks to address this by making public procurement more accessible to innovative newcomers and by directing an increasing share of EU funds toward companies newly entering the defence market. These reforms are designed to counterbalance the market dominance of established defence contractors, which has historically made it challenging for new entrants to compete for contracts.
- Skills Development
In 2026, the Commission will launch specialized Defence Skills Programs, with dedicated training structures to be established in 2028 to meet demand for high-tech specialists. According to the Roadmap, approximately 600,000 European professionals in defence-relevant sectors are expected to acquire skills by 2030. These programs are intended to address the significant talent gap that technology companies face when entering the defence space, where specialized sector knowledge has traditionally been a barrier to entry.
Industrial Modernization and Investment Targets
The Roadmap envisions modernization of industrial production capacities through flexible, digitally supported manufacturing models. Member States are encouraged to allocate at least 10% of their defence budgets to highly innovative technologies. In the context of NATO’s June 2025 Hague Summit commitment for members to spend 5% of GDP annually on defence and security by 2035 (at least 3.5% on core defence requirements and up to 1.5% on broader defence- and security-related spending) – superseding the prior 2% benchmark – and the Readiness 2030 plan’s substantial additional spending capacity, this 10% allocation is expected to translate into significantly larger absolute funding volumes than previously anticipated. This allocation target creates substantial demand-side funding opportunities for innovative start-ups and technology companies, particularly those developing disruptive solutions in the priority technology areas identified by the Roadmap.
Implications for German Companies
For German companies, especially within the technology and start-up ecosystem, the Roadmap creates new opportunities for participation in security-relevant EU innovation projects. These opportunities are further amplified by the broader EU defence spending initiatives, including the Readiness 2030 plan and the complementary EDIS and EDIP frameworks, which collectively expand the scale and scope of available funding and procurement channels. However, new entrants should be aware of the systemic challenges that the Roadmap seeks to address, including limited access to venture capital, lengthy time-to-market cycles, risk-averse procurement structures, market dominance by traditional contractors, skills and expertise gaps, and the complexity of navigating the civilian-military technology interface. The enhanced European focus on dual-use technologies opens new avenues for cooperation potential between established industrial players and young technology companies.
Recommended Strategies and Key Opportunities for New Entrants
To overcome the traditional barriers to defence market entry, new entrants should consider the following strategies:
- Leveraging the various EU funding mechanisms now available, including the Fund-of-Funds, Horizon Europe and dedicated new-entrant funding streams;
- Participating in accelerated testing and rapid development initiatives to shorten time-to-market;
- Forming innovation alliances and strategic partnerships with military stakeholders and established defence industry players to build credibility and navigate procurement complexities;
- Aligning development efforts with the five priority technology areas where funding is concentrated;
- Emphasizing the dual-use potential of existing technologies to access both civilian and defence funding streams;
- Investing in specialized workforce development through the Defence Skills Programs; and
- Positioning as a „New Defence“ actor by highlighting disruptive innovation capabilities and non-traditional defence credentials.
Companies interested in leveraging these opportunities should take the following concrete steps:
- Monitor upcoming calls for proposals under the Fund-of-Funds and Horizon Europe defence-relevant programs and track evolving eligibility requirements and application procedures as detailed criteria are published in upcoming program announcements.
- Explore innovation alliance opportunities with military stakeholders and evaluate strategic partnerships with established defence industry players.
- Assess dual-use potential of existing technologies to identify opportunities for accessing both civilian and defence funding streams.
- Consider early participation in Defence Skills Programs from 2026 onward to build sector-specific expertise and address workforce capability gaps.
- Track Member State defence budget allocations, particularly the recommended 10% allocation to highly innovative technologies, in order to identify national-level demand-side opportunities aligned with the Roadmap’s priority areas.
By implementing these strategies, new entrants can systematically address the traditional barriers of funding access, procurement difficulties, time-to-market challenges and skills gaps that have historically made defence market entry challenging.
