Germany’s defence sector is undergoing a seismic shift, driven by geopolitical realities and a newfound commitment to innovation. The war in Ukraine has exposed vulnerabilities in Europe’s military capabilities, prompting a radical rethink of defence strategy and investment. At the heart of this transformation is a wave of German startups, backed by unprecedented government funding and a determination to redefine the future of warfare.
For Gundbert Scherf, co-founder of Helsing, Europe’s most valuable defence startup, the invasion of Ukraine marked a turning point. Once struggling to secure investment, Helsing now boasts a $12 billion valuation, reflecting a broader surge in defence spending. “Europe this year, for the first time in decades, is spending more on defence technology acquisition than the U.S.,” Scherf said. His company, which develops battlefield AI systems and military strike drones, is part of a growing ecosystem of German startups pushing the boundaries of military technology.
Germany’s shift is not just about spending—it’s about mindset. Chancellor Friedrich Merz’s government is slashing bureaucracy to connect startups directly with the military, a stark departure from the country’s historically cautious approach to defence. “Europe is now coming to terms with defence,” Scherf said, likening the moment to the Manhattan Project, the U.S. effort to develop nuclear weapons during World War II.
The change is palpable. Germany plans to nearly triple its defence budget to around €162 billion ($175 billion) per year by 2029, with much of that funding earmarked for cutting-edge technologies. A new draft procurement law aims to reduce hurdles for startups, enabling advance payments and limiting tenders to EU bidders. “Money is no longer an excuse—it’s there now,” said Marc Wietfeld, CEO of ARX Robotics, reflecting the government’s newfound urgency.
This transformation extends beyond funding. Germany is fostering a new generation of defence innovators, from tank-like AI robots to unmanned mini-submarines and even battle-ready spy cockroaches. Swarm Biotactics, for instance, is developing cyborg cockroaches equipped with specialized backpacks that enable real-time data collection via cameras. “Our bio-robots—based on living insects—are equipped with neural stimulation, sensors, and secure communication modules,” said CEO Stefan Wilhelm. These innovations could revolutionize surveillance in hostile environments.
The shift is also reshaping social attitudes. Sven Weizenegger, who heads the Bundeswehr’s Cyber Innovation hub, noted a surge in interest in defence technology. “Germany has developed a whole new openness towards the issue of security since the invasion,” he said, highlighting the growing acceptance of defence work as a patriotic duty.
Yet challenges remain. Europe’s fragmented market and procurement standards lag behind the U.S., where defence giants like Lockheed Martin and RTX dominate. Germany’s defence ministry is taking steps to accelerate procurement and integrate startups, but the path to scaling up remains steep.
Despite these hurdles, the momentum is undeniable. Germany is positioning itself as a leader in European defence innovation, with startups like Helsing, Quantum Systems, and Tekever achieving unicorn status. “There’s a lot of pressure now on Germany being the lead nation of the European defence,” said Sven Kruck, Quantum’s chief strategy officer.
As Germany invests in its defence industrial base, it is also investing in its economic future. Military research has historically driven technological progress, from the internet to GPS and jet engines. With its economy facing headwinds, Germany’s defence push could provide a much-needed boost.
The stakes are high. Europe’s security—and its technological future—hangs in the balance. As Gundbert Scherf put it, “We want to help give Europe its spine back.” The question now is whether Germany and its allies can seize this moment to reshape the battlefield and secure their place in the next era of defence innovation.
