Germany’s defence sector is undergoing a seismic shift, driven by a new era of government support for startups and a strategic pivot to reduce reliance on US military guarantees. The transformation, fueled by Russia’s war in Ukraine, is positioning Germany as Europe’s lead innovator in military technology.
At the forefront of this revolution is Helsing, Europe’s most valuable defence startup. Founded by former McKinsey partner Gundbert Scherf, the Munich-based company has more than doubled its valuation to $12 billion in under a year. Scherf attributes this surge to a fundamental shift in European attitudes towards defence: “Europe is now coming to terms with defence,” he said.
This sentiment is shared across the industry. Two dozen executives, investors, and policymakers interviewed by Reuters confirm that Germany’s government is actively fostering innovation by slashing bureaucracy and fast-tracking procurement for startups. A draft law, recently approved by Chancellor Friedrich Merz’s cabinet, allows for advance payments to cash-strapped startups and enables EU-only tenders—a significant move to boost domestic capabilities.
The shift is not just ideological. With U.S. support increasingly uncertain under former President Donald Trump’s renewed questioning of NATO, Germany has committed to tripling its defence budget by 2029, hitting the alliance’s 3.5% GDP target faster than most allies. Much of this funding will go towards reinventing warfare, with startups like Helsing leading the charge in AI-driven battlefield systems, autonomous drones, and even biotech applications like spy cockroaches.
“Money is no longer an excuse—it’s there now,” said Marc Wietfeld, CEO of ARX Robotics, echoing the sentiments of Germany’s Defence Minister Boris Pistorius. This newfound financial commitment is already reshaping the industry. Smaller firms are now advising the government alongside established players like Rheinmetall and Hensoldt, which have historically dominated procurement contracts.
The change in attitude is as much cultural as financial. Sven Weizenegger, head of the Bundeswehr’s innovation accelerator, notes a surge in interest from professionals eager to contribute to defence technology. “Germany has developed a whole new openness towards the issue of security since the invasion,” he said, citing a 10-fold increase in LinkedIn requests for Defence-related collaborations.
Yet challenges remain. Europe’s fragmented procurement standards and the dominance of U.S. defence giants like Lockheed Martin and RTX present hurdles. Unlike in the U.S., where startups like Anduril and Palantir have been integrated into military contracts since 2015, European startups have historically struggled to secure funding. However, this is changing. An Aviation Week analysis shows that Europe’s top defence spenders will invest $180.1 billion this year, surpassing U.S. procurement spending for the first time.
The implications for the defence sector are profound. If Germany and its European partners can maintain this momentum, they may finally bridge the gap with the U.S. in terms of innovation and self-sufficiency. For now, the focus is on scalability—turning startups into industry leaders while maintaining the agility that defines them. As Scherf puts it: “We want to help give Europe its spine back.”
