85% of all NATO defence-tech venture funding since 2019 went to the United States. European defence budgets are at their highest since the Cold War. France at €76 billion, Germany at €152 billion, the EU mobilising €800 billion through ReArm Europe. The gap between what governments spend and what private capital deploys has become the defining structural anomaly of the European security economy.
The fund targets approximately 20 companies at an average ticket of €25 million across space, air, land, maritime, and subsurface domains.
A strategic advisory committee of NATO military leaders and major European defence executives will guide investment decisions. That is a structural access edge that generalist growth funds cannot replicate.
The numbers behind the launch tell the story. Since 2019, the US has captured roughly 85% of NATO defence-tech venture funding. Europe accounted for just 6.2% in 2025, despite doubling its total defence-tech investment year-on-year. The gap is not about technological capability. European startups build some of the most advanced autonomy, AI, and space technologies in the world. The gap is about growth capital at scale. When a European defence-tech company needs a €25 million Series B to scale, it has historically had one option: raise from American investors and move key operations and eventually IP across the Atlantic.
That pattern has a cost beyond the individual company. Since 2019, an estimated 85% of NATO defence-tech value creation has accrued to US-domiciled firms and their investors. European pension funds, sovereign wealth funds, and institutional LPs that cannot or will not invest in US venture vehicles have had no way to access the defence-tech return stream, despite being the taxpayers funding the demand side of the same market.
As we wrote in July, institutional capital has already begun to recognise this misalignment. The question was always which vehicle would be the first to close the gap at scale.
The Franco-German Answer
E2D's structure reflects the specific gap it means to fill. This is not a seed fund and not a late-stage private equity vehicle. It is a growth-stage fund writing €25 million cheques, precisely the ticket size where European defence-tech companies have most often run out of domestic options.
The two parent firms bring complementary weight. AVP was founded in 2016 as a spin-out of AXA's venture platform and now manages over €2.5 billion from New York, London, and Paris, with more than 60 technology investments and a transatlantic vantage point. Earlybird was founded in 1997, one of Europe's oldest venture firms. It also manages roughly €2.5 billion and counts nine IPOs and 41 trade sales across nearly three decades of European deep-tech investing.
What makes E2D structurally different from a generalist growth fund is the advisory committee. The fund has assembled active and former NATO military leaders, procurement veterans, and executives from major European defence primes. This is not window-dressing. In defence-tech, the path to revenue runs through eligibility: security clearances, framework access, product qualification, integration into prime contractor systems. A fund whose partners sit in the rooms where procurement priorities are set has a sourcing and diligence advantage that a generalist growth fund cannot replicate in a decade.
European defence is at a historic turning point, requiring a new generation of technology champions to safeguard sovereignty. By partnering with Earlybird in this Franco-German alliance, we will be able to move fast and invest in the companies that will have the greatest potential impact. The best European defence companies need investors who bring real sector conviction and pan-European reach.— Benoit Fosseprez, General Partner, AVP
The Market Logic
The macro context is the largest European defence spending surge in a generation. France has committed €68.5 billion to defence in 2026 at 2.25% of GDP. Germany is on a trajectory toward €162 billion by 2029 across budget and special fund allocations. The EU's ReArm Europe initiative mobilises €800 billion over four years, including €150 billion in direct SAFE instrument loans.
At the NATO level, the old 2% GDP guideline is already obsolete. The new target is 5% of GDP by 2035, split across 3.5% for core defence and 1.5% for flanking activities. Every EU NATO member now spends above 2% for the first time in the alliance's history.
Venture capital has followed, but unevenly. European defence-tech VC reached approximately €1.28 billion in 2025, representing around 4% of total European venture funding, up from less than 1% before 2020. But the distribution is concentrated. A handful of mega-rounds, Helsing's €512 million Series D alone, accounted for more than three-quarters of the total. The mid-tier growth stage, where companies with proven unit economics need between €15 million and €30 million to scale, remains the most under-served segment. That is precisely the bracket E2D is built to fill.
Roughly half of late-stage financings have been backed by US or Asian capital. European defence-tech funding has roughly doubled over the past year, but Europe still accounted for only about 6.2% of NATO-wide defence-tech VC funding raised in 2025. This fund exists to change that ratio.— Roland Manger, Co-founder, Earlybird, in Tech Funding News
The European Innovation Council has also recognised the gap. On June 17, 2026, the EIC updated its mandate to explicitly include defence and dual-use technologies, opening a €100 million call for defence scale-ups with direct equity investments of up to €30 million per company. The call runs from June 30 to October 28, 2026. That is a complementary public-sector signal that the direction of travel is structural, not cyclical.
What E2D Signals for Institutional Capital
E2D's first close was set for June 30, 2026, with major financial institutions and corporates among its limited partners. The fund has not disclosed the exact amount committed at first close. The headline €500 million remains a target, but the identity of the LPs will be the real signal. If European pension funds and insurance companies commit meaningful capital to a dedicated defence-tech growth vehicle for the first time, it changes the baseline assumption for the entire asset class.
The dual-use structure is the risk hedge that makes this possible. By explicitly backing companies that sell into both defence and commercial markets, E2D widens its exit universe beyond the handful of European primes and government procurement programmes. Commercial acquirers, strategic buyers in the US and Asia, and eventually public markets become realistic outcomes. The dual-use framing also lowers the reputational and regulatory barrier for institutional LPs that have historically excluded defence from their mandates.
The competitive field is already crowding. The NATO Innovation Fund backs later-stage rounds across the alliance. American firms including General Catalyst and Andreessen Horowitz's American Dynamism practice are expanding into European defence-tech. A dedicated European growth vehicle with a Franco-German base and a NATO advisory committee has the structural positioning to win the best deals, but it will need to move fast.
Most institutional investors refused to touch defence until recently, leaving a gap between ambition and money. E2D is aimed at the growth stage specifically, the point where European startups have most often had to turn to American or Asian investors to keep scaling.— Tamara Djurickovic, Tech.eu
The number to watch is not the €500 million target. It is how much of that figure was committed by European institutions at first close, and how quickly the fund deploys its first three cheques. If E2D demonstrates that defence-tech growth equity can generate institutional-grade returns within a European fund structure, expect a wave of copycat vehicles within twelve months. If it struggles, the 85% ratio will hold and the strategic cost to European sovereignty will compound.
