AVP and Earlybird raise €500M for European defence fund

Since 2019, the United States has captured roughly 85 percent of all NATO defence-tech venture funding, while Europe has claimed just 6.2 percent of that total in 2025, according to the founders of a new initiative launching today. This imbalance persists even as European nations pledge hundreds of billions to bolster their military capabilities. Now, two established venture firms aim to reverse that trend and keep more of the continent’s innovation homegrown.

AVP and Earlybird have jointly launched E2D, a €500 million growth-stage fund dedicated to European defence and dual-use technology. The fund’s explicit mission is to prevent the flight of startup capital, talent, and intellectual property across the Atlantic. Each investment will target roughly €25 million into approximately 20 companies. A first close is scheduled for 30 June, backed by major financial institutions and corporate partners, with the first deal expected before the end of summer.

The timing reflects a historic shift in European security spending. France has committed €76 billion to defence, Germany €152 billion, and the European Union has outlined an €800 billion plan. Yet the venture capital needed to build the underlying technology has not kept pace with political ambition. Until recently, most institutional investors refused to touch defence, creating a gap between rhetoric and reality. European defence-tech funding has roughly doubled in a year, but from such a low base that a single country like Germany can absorb nearly all of it.

E2D specifically targets the growth stage, the critical point where European startups have historically turned to American or Asian investors to scale. The fund will back what it calls “modern operating models” , agile, fast-moving startups rather than traditional prime contractors , across space, air, land, sea, and underwater domains. Its priority list reads like a map of the new defence stack: semiconductors, high-performance computing, AI, New Space, effectors such as robots and drones, and directed energy. An advisory committee composed of NATO, armed-forces, and industry figures will help guide the investment decisions.

Neither firm is a newcomer to this space. AVP manages over €2.5 billion and has backed more than 60 companies since 2016. Earlybird, founded in 1997, also manages around €2.5 billion and counts nine IPOs across nearly three decades of European deep-tech investing. Both say they were active in defence and dual-use technology long before most European funds were allowed to be.

The harder question is scale. E2D joins a still-thin field that includes the NATO Innovation Fund’s €1 billion and a handful of others. Large growth-stage defence funds remain rare, and €500 million is modest against the €800 billion spending plan and the intellectual property drift it is meant to reverse. So the number to watch is not the half-billion euros. It is the 85 percent. Whether one Franco-German fund moves that needle, or whether it takes ten more like it, is the question Europe’s defence-tech ecosystem will be living with for the next decade.