As geopolitical tensions reshape global security, Heartcore Capital, Denmark’s largest venture fund and that has been part of funding many of the most successful tech startups from the region, is turning its focus to defense and dual-use technologies. Identifying AI, quantum computing, robotics, and cybersecurity as critical areas for investment.
In a recent analysis published by the fund, Jimmy Fussing Nielsen, Björn Nilsen and Bérenger Teboul-Danguin highlight how Europe’s urgent need for military innovation, spurred by Russia’s invasion of Ukraine and shifting U.S. commitments to NATO, is creating unprecedented opportunities for early-stage tech investors.
With NATO members pledging to allocate 5% of GDP to defense by 2035 and European defense budgets surging by 17% from 2023 to 2024, the continent is in a race to close the innovation gap with the U.S. and China. Denmark alone has committed € 8 billion to European-made air defense systems, including long-range precision weapons. Yet, Europe’s AI spending lags far behind, accounting for less than 0.5% of its budget compared to 4% in the U.S. and 3% in China.
A Call to Arms for European Tech Investors
“Public funding alone won’t suffice. Venture capital has a pivotal role in scaling the next generation of defense tech.”
say Jimmy Fussing Nielsen, Björn Nilsen, and Bérenger Teboul-Danguin in the analysis.
The EU’s ReArm Europe Plan, aiming to mobilize € 800 billion for defense readiness by 2030, signals a major shift, but private capital will be essential to bridge the gap.
“We believe that Heartcore investments may equally well be early onset research projects of high strategic value (e.g., quantum sensing solutions, advanced materials, biodefence and space applications) as well as high-urgency and immediately clear operational needs,”
the team writes
Modern conflicts, like the war in Ukraine, have proven that cheap, AI-driven drones and electronic warfare can disrupt traditional military economics. With attack-to-defense cost ratios as high as 40:1, Europe must prioritize agile, scalable solutions over monolithic, hardware-heavy systems, they argue.
“We believe the future of active warfare builds on finding asymmetric advantages with inexpensive solutions. As an example, aerial warfare economics have dramatically changed with the advent of cheap attack drones. Moving away from expensive missiles or manned fighter jets have made defence rather than attack uneconomical as countermeasures are trailing.”
the team writes
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