Early in April 2025, I attended the Warsaw Defense Hackathon, an event that convened top talent from across Europe and beyond-including technologists, investors, and defense sector veterans-to tackle pressing defense technology challenges. The hackathon, co-organized with the Polish Development Fund (PFR), aimed to bridge gaps between innovators, public sector leaders, and operators in dual-use and defense technology[1].
European Defense Funding: A Persistent Challenge
A key topic of discussion was the ongoing difficulty startups face in securing direct funding from European militaries. Despite increased attention to defense innovation, EU funding for defense startups has historically been limited, with many early-stage companies struggling to access large-scale contracts due to fragmented and restrictive funding mechanisms[2][4]. Several recent regulatory changes, however, indicate a shift: the European Commission has proposed new rules to redirect EU funds toward defense projects, particularly benefiting emerging firms in Central and Eastern Europe[4].
This funding gap has led to a dynamic where American investors increasingly back European defense tech companies. Helsing.ai is a prime example, recently negotiating nearly $500 million in funding from Silicon Valley investors like Accel and Lightspeed Venture Partners, which would make it one of Europe’s highest-valued AI defense startups[3]. European governments have expressed concern about the dominance of non-EU investors, yet often purchase from these innovative, foreign-backed companies due to their advanced solutions[2][3].
Following the Money in EU Defense
Most EU defense funding continues to flow to established contractors, but there is a trend of larger firms acquiring innovative startups. For example, Porsche SE is reportedly considering investments of up to €2 billion in the defense sector, including stakes in drone manufacturers and other military ventures[5][6]. Porsche’s recent minority investment in Quantum Systems, a Munich-based drone startup, underscores this strategy[5][6].
The Drone Revolution and Its Technical Challenges
The Ukrainian conflict has accelerated the adoption of drones, which have become a central feature of modern warfare, often replacing short- to medium-range artillery[2][3]. At the hackathon, participants discussed how nearly every defense player is developing drone technology, with drones flying lower and faster to evade detection. Technical challenges such as camera blur-caused by high speeds and low-altitude maneuvers-are significant hurdles for both drone operators and counter-drone systems.
The real financial opportunity, many argued, lies in anti-drone and anti-missile systems. As drones proliferate, demand for reliable counter-drone solutions is surging. These systems use radar, RF sensors, and AI to detect and neutralize threats, but issues like false positives remain a technical challenge[8].
The Technical Reality of Defense Innovation
Defense technology requires deep engineering expertise and cannot be solved by simply applying generic AI solutions. The speed and resource constraints of modern drones often necessitate advanced signal processing and specialized hardware, making electronic and RF engineering skills especially valuable[2][8].
Europe’s Industrial Advantage: The Automotive Connection
Europe’s robust automotive sector provides a unique advantage: local production capacity for composites, motors, and electronics supports defense manufacturing needs, reducing reliance on global supply chains-particularly those in China[2]. This industrial base enables European defense firms to respond more flexibly to emerging requirements.
Conclusion
The Warsaw Defense Hackathon offered a revealing look at the state of European defense technology. While funding challenges persist, new regulatory changes and cross-Atlantic investment are reshaping the landscape. As drone warfare transforms conflict, the race is on not only to build better drones but also to develop the systems that can counter them. The interplay between legacy contractors, startups, and international investors will continue to define the sector’s trajectory in the years ahead[2][3][4].
References:
[1] Warsaw Defense Hackathon event details: https://lu.ma/00uv3k4p
[2] McKinsey, “European defense tech start-ups: In it for the long run,” analysis of funding trends and challenges: https://www.mckinsey.com/industries/aerospace-and-defense/our-insights/european-defense-tech-start-ups-in-it-for-the-long-run
[3] “Helsing in talks for $500 million funding, poised to become Europe’s top AI defence startup,” coverage of cross-Atlantic investment: https://dig.watch/updates/helsing-in-talks-for-500-million-funding-poised-to-become-europes-top-ai-defence-startup
[4] “Europe arms up: New EU funding opens doors for emerging defence firms,” analysis of regulatory changes: https://emerging-europe.com/analysis/europe-arms-up-new-eu-funding-opens-doors-for-emerging-defence-firms/
[5] “Porsche SE considers entry into defense industry” and related investment plans: https://eulerpool.com/en/news/business/porsche-se-considers-entry-into-defense-industry–di
[6] “Porsche explores defence industry re-entry following multibillion euro losses”: https://caliber.az/en/post/porsche-explores-defence-industry-re-entry-following-multibillion-euro-losses
[7] “World’s best military drones,” overview of drone technology: https://www.aerotime.aero/articles/25712-worlds-best-military-drones
[8] “Mitigating the risks of false positives through reliable counter-drone solutions,” technical challenges: https://www.siliconindia.com/news/general/mitigating-the-risks-of-false-positives-through-reliable-counterdrone-solutions-nid-224261-cid-1.html