Research status: 16 August 2026

Executive Summary

Europe's defence technology sector is undergoing a fundamental change. Rising defence expenditure, the experience of the war in Ukraine and the growing strategic importance of autonomous systems, artificial intelligence, drones, space technologies and advanced sensors have created a new generation of European defence technology companies.

Yet Europe's ability to finance these companies has historically been considerably weaker than its ability to create them.

It is against this background that Earlybird and AVP launched E2D - European Dual-Use and Defence - in June 2026, a new growth-stage investment fund targeting EUR 500 million.

E2D aims to invest in approximately 20 European companies, with an average investment of around EUR 25 million. Its mandate covers technologies operating across space, air, land, maritime and subsurface domains and includes both defence-native and dual-use businesses.

The fund is notable for several reasons. It addresses the growth stage, where European technology companies frequently require substantially more capital than traditional venture funds can provide. It is a Franco-German initiative combining Earlybird's European venture and deep-tech experience with AVP's international growth-investment capabilities. Airbus Defence and Space has become E2D's anchor investor, creating a potentially important connection between growth capital and one of Europe's largest defence-industrial groups.

Finally, E2D intends to provide portfolio companies with more than capital. Through its investment team, industrial relationships and strategic committee, the fund aims to help companies gain access to European armed forces, major defence contractors and strategic industrial customers.

Its first announced investment, Alta Ares, provides an early indication of this strategy.

E2D therefore represents an interesting experiment in European defence finance: an attempt to connect entrepreneurial technology, private growth capital, established defence industry and military demand within a single investment ecosystem.

1. The European Defence Transformation

E2D has not emerged in isolation. Its creation forms part of a much broader transformation of European defence, involving not only higher military expenditure but also a reconsideration of how Europe develops, finances, procures and ultimately owns strategically important technologies.

The change began with Russia's invasion of Ukraine but has since developed into something considerably larger. Europe is moving from rearmament toward reindustrialisation.

For investors, the distinction is important. A temporary increase in defence budgets creates additional demand. Reindustrialisation implies something more durable: rebuilding manufacturing capacity, supply chains, technological capabilities and financing structures that may remain important for decades.

A structurally larger market

European defence expenditure has entered a substantially higher trajectory. At NATO's 2025 summit in The Hague, allies committed to investing 5% of GDP annually by 2035 in defence and defence-related security requirements. This consists of at least 3.5% for core defence requirements and up to 1.5% for areas including critical infrastructure, resilience, innovation and the defence industrial base.

The European Union is simultaneously attempting to ensure that a larger proportion of this expenditure strengthens Europe's own industrial capacity. The Defence Readiness Roadmap 2030 proposes greater joint procurement and targets at least 55% of defence investment procurement from the European Defence Technological and Industrial Base.

This matters for funds such as E2D. Their potential market is being driven not simply by investor enthusiasm for defence technology, but by a fundamental increase in the amount governments expect to spend.

Technology is changing the defence industry

Traditional European defence groups such as Airbus, BAE Systems, Thales, Leonardo, Saab and Rheinmetall remain essential. Aircraft, ships, armoured vehicles and missile systems will continue to require enormous industrial capabilities.

But an increasing part of military effectiveness is being created by technologies surrounding and connecting these platforms: software, artificial intelligence, autonomous systems, drones, sensors, satellites, secure communications and battlefield networks.

This is creating room for a new generation of European defence companies. Businesses such as Helsing, ICEYE, Quantum Systems, Tekever and ARX Robotics illustrate this development. Some are increasingly described as 'neo-primes': technology-led companies that have the potential to become substantial defence contractors rather than remaining specialist suppliers.

The likely future European defence industry may therefore consist of three interconnected groups: established defence primes, new technology-led primes, and a much larger ecosystem of specialised technology suppliers. E2D is being created precisely as this new industrial structure begins to take shape.

Ukraine has accelerated the innovation cycle

The war in Ukraine has changed the speed at which military technology develops. Traditional defence procurement can take years. Ukraine has demonstrated development cycles in which drones, autonomous systems, electronic warfare and software can be deployed, tested, modified and redeployed within months or even weeks.

For investors, battlefield deployment can provide a form of technological validation that conventional testing cannot reproduce. Defence innovation is becoming closer to the iterative development model familiar to technology investors, while governments are simultaneously looking for faster mechanisms to acquire technologies that demonstrate operational effectiveness.

That convergence helps explain why conventional venture and growth investors are increasingly entering a sector they historically avoided.

The emergence of strategic technology capital

A second transformation is taking place in finance. European governments historically supported defence primarily as customers, regulators and providers of research funding. They are increasingly becoming investors as well.

The NATO Innovation Fund introduced a multi-sovereign venture-capital model for strategic deep technology. The European Investment Bank is expanding its Defence Equity Facility towards a EUR 1 billion fund-of-funds, potentially supporting as many as 20 specialised investment funds across defence, security, space and cybersecurity. Germany has announced plans allowing the state to take direct equity positions in defence startups.

Private capital is moving in parallel. Lakestar closed its $300 million Resilience I fund in July 2026 for defence and dual-use technologies. E2D is targeting EUR 500 million. Other specialist funds and established venture investors are increasing their exposure to the sector.

Capital itself is therefore becoming part of Europe's strategic infrastructure. The underlying question is increasingly: Europe may be capable of inventing strategically important technologies, but can it finance them until they reach industrial scale?

The European scale-up problem

Europe has repeatedly demonstrated that it can produce world-class science, engineering and technology companies. Its weakness frequently appears later, when successful businesses require substantial amounts of growth capital.

In conventional technology sectors this is primarily an economic problem. In defence, space, artificial intelligence and critical infrastructure, it can become a question of sovereignty.

A company may be European in origin, employ European engineers and own strategically important European intellectual property. But if its later financing increasingly depends on non-European investors, ownership and ultimately strategic decision-making can migrate elsewhere.

That is the financing gap E2D is specifically attempting to address. Its EUR 500 million target and approximately 20-company portfolio place it beyond conventional seed financing. Its purpose is to provide meaningful amounts of growth capital at the point where promising European defence companies need to industrialise production, expand internationally and compete for major procurement programmes.

But capital is not the only bottleneck

Providing more capital does not automatically create successful European defence companies. The largest unresolved problem remains procurement.

Defence startups cannot scale in the same way as ordinary software companies because their principal customers are governments. Governments purchase slowly, procurement systems remain fragmented nationally, certification can take years and requirements differ between countries.

This creates a fundamental mismatch. Private growth capital expects rapidly increasing revenues. Traditional European defence procurement operates through long programme cycles. Europe may therefore increasingly have the technology and the capital while still lacking sufficiently rapid customers.

This makes E2D's relationship with Airbus particularly interesting. Airbus can potentially provide something that capital alone cannot: a connection between emerging technology companies and the established European defence-industrial and procurement ecosystem.

From financing startups to building an ecosystem

Seen in this broader context, E2D is not simply another EUR 500 million investment fund. It is part of an emerging European attempt to connect innovation, growth capital, industrialisation, defence primes and government procurement.

If those connections work, Europe could create an environment in which promising defence technologies are not only invented in Europe but also financed, manufactured and scaled in Europe.

There are nevertheless significant risks. Investor enthusiasm can push private valuations ahead of actual procurement revenues. Defence companies may become dependent on a small number of government customers. Industrialising a prototype is very different from producing thousands of reliable systems. Political priorities and defence budgets can change. And the sector is likely to consolidate as successful startups are acquired by established primes or develop into larger integrated defence groups themselves.

These risks make investment selection particularly important. But they also explain why the timing of E2D is significant.

The question is therefore no longer simply whether Europe can create innovative defence companies. It is whether Europe can provide them with the capital, customers and industrial partnerships necessary to become major companies while remaining strategically anchored in Europe. E2D is one attempt to provide that missing link.

2. The Gap E2D Is Designed to Fill

The new generation of European defence and dual-use companies often faces its most difficult financing challenge after the early venture stage. Once a company has demonstrated technology and initial commercial or military relevance, industrialisation and international expansion can require tens or hundreds of millions of euros.

E2D is designed for this growth phase. AVP and Earlybird describe the objective as helping Europe retain capital, talent and intellectual property while closing important European defence capability gaps.

The fund therefore sits between conventional venture capital and the much larger financing requirements of mature defence-industrial businesses. Its relevance will depend not only on the availability of capital but also on whether it can help portfolio companies reach procurement programmes, industrial partners and customers.

3. The Structure of the Fund

E2D has a target size of EUR 500 million and expects to construct a relatively concentrated portfolio of approximately 20 companies, implying an average investment of roughly EUR 25 million.

Twenty investments from a EUR 500 million vehicle imply sufficient capital not only to make meaningful initial investments but potentially to support portfolio companies through subsequent financing rounds.

The fund was launched jointly by Earlybird and AVP. Specialist reporting indicates that a dedicated E2D general partner has been established in Luxembourg, owned equally by AVP and Earlybird, with a dedicated Franco-German investment team.

This gives E2D an institutional identity separate from the existing investment funds operated individually by Earlybird and AVP.

4. The Investment Mandate

E2D's mandate covers five broad operational environments: space, air, land, maritime and subsurface.

Within these areas, the fund seeks growth-stage companies developing technologies applicable either directly to defence or simultaneously to defence and commercial markets.

This dual-use dimension is particularly important. The objective is apparently not simply to finance weapons manufacturers. E2D can invest in technologies whose underlying capabilities have broader commercial applications while addressing identifiable military requirements.

Potential areas naturally falling within this mandate include autonomous systems, artificial intelligence, sensing, intelligence and surveillance, communications, cybersecurity, robotics, space infrastructure and other advanced technologies. However, the public E2D material does not yet provide a detailed sector-by-sector allocation or investment taxonomy, so these categories should not be treated as formal investment quotas.

Public reporting has indicated that the fund intends to invest where companies can become dual-use during E2D's holding period, suggesting that commercial optionality is an important element of the investment thesis.

5. Earlybird and AVP

Earlybird

Earlybird was founded in 1997 and today manages approximately EUR 2.5 billion. Its investment history encompasses technology companies from early development through subsequent growth stages.

Its involvement brings long experience in European venture capital, deep technology and defence-related companies. Roland Manger, co-founder of Earlybird, has described E2D's objective as backing high-growth European deep-tech companies capable of closing defence capability gaps while simultaneously addressing commercial markets.

AVP

AVP was established in Paris in 2016 and manages more than EUR 2.5 billion. Its broader growth strategy focuses on established technology businesses with proven monetisation models and credible routes toward profitability.

AVP's existing growth strategy typically invests EUR 40 million to EUR 150 million per company, illustrating the organisation's experience with significantly larger financing rounds than conventional venture capital.

E2D therefore combines venture and deep-tech expertise with institutional growth-capital capabilities.

6. Airbus as Anchor Investor

A major step occurred on 21 July 2026, when Airbus Defence and Space announced that it would become E2D's anchor investor.

Airbus presented the investment as part of a broader effort to expand Europe's future technology ecosystem of suppliers and partners. Michael Schoellhorn, CEO of Airbus Defence and Space, emphasised the need to scale European deep technology while keeping critical capital, talent and intellectual property within Europe.

Airbus's participation potentially changes the significance of E2D. A specialist growth fund can provide capital. A major defence prime can provide something equally important: access to industrial programmes, integration expertise, procurement ecosystems and customers.

For emerging defence technology companies, this connection can be critical. The difficulty is frequently not simply developing an innovative product but moving from a successful technology demonstration to large-scale procurement and integration into existing military systems.

At the same time, an important governance question remains open from the publicly available information: what formal role, if any, does Airbus have in individual E2D investment decisions? Being anchor LP does not by itself establish investment approval or veto rights, and the public announcements reviewed for this report do not disclose such rights.

7. The Investment Team

E2D has assembled a dedicated investment team rather than simply allocating responsibility among the existing Earlybird and AVP organisations.

Public reporting identifies Roland Manger of Earlybird and Benoit Fosseprez of AVP as leading figures. Specialist reporting has stated that they are joined by a third partner recruited from Airbus Ventures, together with three investment directors.

This produces an interesting combination: venture capital, growth investment and defence-industrial investment experience.

The precise composition of the complete E2D team is not yet clearly presented in the public material reviewed for this report. Greater public visibility of this team will be useful as E2D develops.

8. The Strategic Committee

Another distinctive element of E2D is its international strategic committee.

According to the fund's launch material, this committee brings together senior military and industrial figures with backgrounds including armed forces, NATO and leading European defence companies.

Its purpose appears to extend beyond conventional investment advice. Defence technology investors need to understand questions that conventional technology investors rarely encounter: military doctrine, procurement processes, operational requirements, interoperability, security clearances and integration with existing platforms.

Access to experienced military and industrial advisers can therefore materially improve investment selection and portfolio development. However, the membership of this strategic committee does not appear to have been publicly disclosed in the sources reviewed for this report.

9. First Investment - Alta Ares

E2D's first announced investment provides the clearest indication so far of what its strategy may look like in practice.

Alta Ares is a French-headquartered defence technology company developing AI-powered hardware and hardware-agnostic software for intelligence, surveillance and reconnaissance (ISR) and counter-unmanned aerial system missions.

E2D announced the investment on 21 July 2026. The amount invested was not publicly disclosed.

Alta Ares is particularly interesting because its relationship with Airbus predates E2D's investment. Airbus Defence and Space and Alta Ares had already agreed to cooperate on next-generation European counter-drone solutions, including integration with Airbus's battle-management environment.

This creates an interesting early example of the ecosystem E2D is attempting to construct: technology company -> growth capital -> defence prime -> operational market.

Rather than merely financing Alta Ares, the ecosystem potentially helps the company integrate its technology into larger European defence systems.

10. What Makes E2D Different?

Europe is seeing a rapid expansion in defence-oriented investment vehicles. E2D therefore enters an increasingly competitive market.

Its differentiation appears to rest on four characteristics:

Growth rather than seed capital: E2D is designed principally to finance companies that have moved beyond initial technology development and require substantial capital to scale.

Meaningful investment size: an average investment of approximately EUR 25 million gives E2D the ability to become a significant shareholder rather than a marginal participant in financing rounds.

Franco-German platform: the partnership between Earlybird and AVP gives the fund a cross-border European identity from inception.

Industrial integration: Airbus's participation potentially connects portfolio companies directly with Europe's established defence-industrial ecosystem.

Together, these characteristics make E2D more than simply another specialist venture fund. It is attempting to create an institutional bridge between Europe's defence startups and Europe's defence industry.

11. The Broader European Question

E2D also illustrates an important evolution in European capital markets.

Europe's challenge has historically not necessarily been creating technology. The more persistent problem has been scaling European technology companies into globally significant businesses while retaining ownership, intellectual property and decision-making in Europe.

Defence makes this problem strategically more important. If promising European defence technologies become dependent on non-European growth capital, Europe risks losing influence over technologies that are directly relevant to its own security.

E2D is therefore attempting to address two objectives simultaneously: financial return for investors and strategic strengthening of Europe's technological sovereignty.

Whether those two objectives consistently align will be one of the most interesting aspects of the fund to observe.

What to Watch Next

Alta Ares is only the beginning. If E2D ultimately invests in approximately 20 companies, the next several investments should reveal much more about its underlying strategy.