Dual-Use Tech Is Reshaping Innovation and Defense
Startups and Governments Accelerate Investment in Dual-Use Tech Solutions
Dual-use tech—technologies with both civilian and military uses—is rapidly gaining ground across the global innovation landscape. Once sidelined due to funding limits on defense ventures, it has now become a central focus for governments, venture capital firms, and startups.
Why Dual-Use Tech Is Growing Fast
Several factors are fueling the surge in dual-use tech:
- Rising geopolitical tensions
- Increased defense budgets among NATO members
- A shift in innovation from traditional contractors to agile startups
From AI surveillance tools to autonomous systems and secure communications, future defense capabilities are now being driven by the startup ecosystem.
How Big Is Dual-Use Tech?
As of May 2025:
- 17,619 dual-use tech startups operate across NATO countries
- They make up 27% of all scaleups in the 47 countries analyzed
- 1,025 are classified as defense tech startups
- 200 focus solely on military applications
- 825 started as civilian startups and later expanded into defense
This means roughly one in four scaleups are now working on technologies with potential military applications.
Massive Growth in Just Months
Between October 2024 and May 2025:
- The number of dual-use tech startups jumped by 16%
- Investment in the sector rose 25%, reaching $1.2 trillion
- Defense tech funding specifically grew 27%, totaling $70.8 billion
- 4,311 new startups were founded, with more than half classified as dual-use tech
- Nearly 70% of all startup funding during this period went to dual-use ventures
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Who’s Leading the Way?
- Israel leads globally, turning military R&D into successful startups
- The U.S. has expanded programs like DIU, AFWERX, and NSIN to bring startups into the defense fold
- Europe is catching up quickly:
- The EU pledged €1.5 billion to defense R&D
- The U.K. committed £400 million to defense innovation
- Germany doubled its defense procurement budget
- NATO launched a €1 billion fund to back dual-use tech startups
Smaller countries are also innovating. Estonia has integrated its startup scene into national defense. Others—like Ukraine, Poland, and Czechia—are following suit with significant investments.
Challenges Facing Dual-Use Startups
Despite strong momentum, startups in the dual-use tech space face several hurdles:
- High R&D costs and long development cycles
- Tougher funding rounds, especially for pure defense tech
- Slower time-to-market due to outdated procurement systems
Funding data reveals:
- Pure defense tech startups raise an average of $80 million
- Dual-use tech startups average $66 million
- Civilian tech scaleups typically raise $50 million
Key obstacles include:
- Difficulty scaling hardware
- Complex field deployment processes
- Armed forces unaccustomed to early-stage startups
- Limited acquisition and exit opportunities due to national security restrictions
Some startups also struggle with identity, being caught between commercial and military markets, which can weaken focus and stall growth.
Investor Interest Is Rising
Despite these barriers, the investment environment is changing.
- 74 venture funds worldwide now actively invest in dual-use tech
- 35% are based in the U.S.
- 12% are in the U.K.
- 22% operate in Ukraine, the Baltics, and Eastern Europe
This growing investor base reflects the increasing strategic importance of dual-use tech on both national and international levels.