Europe’s Eastern Flank outpaces the US and the rest of Europe in defence tech VC

Second edition of Tough Tech by the Tough Ten maps the companies, capital and partners behind defence, security and resilience innovation in ten Eastern Flank countries from Finland to Bulgaria

London, 29 October 2026 – A new report by Dealroom, Resilience Media and six venture capital firms revealed that the ten countries on Europe‘s Eastern Flank now invest more in defence than the United States and the NATO average - venture capital is following. Since 2024, 32% of all venture capital in the region has gone to tough tech – that is defence, security and resilience tech that addresses NATO‘s priority capability needs - twice the share in the rest of Europe and four times more than in US. Tough-tech venture investment in the region reached about $1.7bn by early October and is projected to hit a record $2.3bn in 2026, more than double last year’s $994.5m.  Across Finland, Estonia, Latvia, Lithuania, Poland, Czechia, Slovakia, Romania, Hungary and Bulgaria – the “Tough Ten” –technology that addresses NATO‘s capability needs is taking a large share of the region’s venture market.

The Eastern Flank outspends the NATO average as well as the US as a share of the GDP in defence. The Tough Ten commit an average of 3.3% of GDP to defence in 2026. A decade ago, they spent less than half that share. Lithuania leads the Alliance at 5.4%, and together with Estonia, Latvia and Poland already exceeds NATO’s 3.5% core-defence threshold for 2035 – nearly a decade early. The flow of capital has turned tough tech into one of the region’s major venture markets. Key findings from the report include:

Key findings

• Space is  2026’s breakout segment, raising more in 2026 than in previous six years combined, with counter-drones  following. Major deals in the space segment include Finnish satellite intelligence provider ICEYE’s Series F transaction of more than €1bn, including €450m in new capital, and Bulgarian satellite manufacturer EnduroSat’s $205m round to expand production in Europe and the US. Counter-drone companies have raised $89.5m so far this year, driven by two large rounds by TYTAN and FT – 93% of everything the segment has raised since 2020 – as drone incursions into European airspace turn a niche capability into an urgent procurement priority. Drone makers are also attracting more capital, with $21.7m raised across seven rounds this year, close to 40% of their total since 2020.

• Tough ten countries are building tech to address front-line needs. The region’s products are tested in battle alongside Ukraine. Latvian companies have won orders for 17,000 drones, Ukrainian designs are entering production in Finland and Romania, and Poland plans to build 10,000 interceptors a year. Finland’s ICEYE, now valued above €10bn, delivered Poland’s sovereign radar satellites in under twelve months.

• The “tough tech” market is scaling, with Series B and C rounds driving growth. Outside space and quantum, the region has already passed its 2025 total without a single mega-deal. Series B and C rounds account for close to nine in every ten dollars invested. Estonia has nearly tripled its funding and Slovakia has raised more this year than in all previous years combined. The report counts 170 venture-backed tough-tech startups across the ten countries, with a combined enterprise value of about $21.8bn.

• Room at the table for new lead investors. The region has raised around four times its 2022 total in 2026 from half as many investors (57 versus 113). Domestic investors now provide half of all tough-tech funding. Clear gaps remain: ground robotics has raised less than $1m since 2020 and there were no maritime robotics rounds recorded, even though uncrewed systems on land and at sea are reshaping warfare in Ukraine.

Quotes

“Relative to GDP, the Eastern Flank now spends more on defence than our allies in the United States and other NATO countries, and venture capital is following. The question for investors is no longer whether to back this region, but whether they can keep pace with it. What Europe’s defence entrepreneurs need now is steady circulation, not occasional transfusions. Don’t stockpile: frequent, smaller orders, with training, support and upgrades built into the contract, keep pace with how fast the battlefield changes. Continuous procurement creates investable demand, and investable demand turns startups into the industrial base Europe needs,” said Viktorija Trimbel, Managing Director of Coinvest Capital, which initiated the report.

“Founders across the Eastern Flank are rising to the challenge of a turbulent geopolitical moment, building and scaling technologies that respond directly to today’s most urgent security needs. Their geography gives them real-time insight from end users that few others can match,” said Patrick Schneider-Sikorsky, Partner at the NATO Innovation Fund.

“Capital is now coming: since 2024, tough tech has taken 32% of venture funding in the Tough Ten, twice the European share. What founders lack is a first paying customer, and too many pilots end as pilots. If ministries and primes buy from young companies early, this region will build the firms Europe needs,” said Petr Šima, Managing Partner at DEPO Ventures.

“Europe does not have a shortage of exceptional technology. What we still lack is the speed and capital to turn it into companies of global scale. The next challenge is not proving that they work – it is moving faster from validation to procurement,” said Sandra Golbreich, General Partner at BSV Ventures.

“Capital for defence and dual-use is no longer scarce. Conviction is. Founders on Europe’s eastern flank need investors willing to write the first cheque, commit more capital as they grow, and stay the course through long, complex development cycles,” said Jarek Pilarczyk, Partner at Balnord.

“Lithuania’s founders are building technologies our security depends on, but capital has to reach them early and at the right scale. By working alongside private investors and EU instruments, we aim to help the strongest companies grow from first contracts into industrial players at home and across Europe,” said Tadas Gudaitis, Board Member at ILTE.

“Europe needs to invest in technologies that can become industries. Once a business reaches European scale, it has a shot at becoming a global category leader,” said Marko Kyyrönen, Managing Partner at Sparkmind Capital.

“Sustained investment in early-stage and growth-stage defence companies is vital to the security, resilience and economic strength of our region. Their success requires long-term capital, trusted partnerships and access to cross-border markets,” said Kadri Kallas, Partner at TEGOS.

About the report

Tough Tech by the Tough Ten 2026 was initiated by Coinvest Capital, Lithuania’s sovereign VC fund, together with BSV Ventures, Balnord, DEPO Ventures, the NATO Innovation Fund and Sparkmind Capital, in partnership with TEGOS, Dealroom, ILTE and Resilience Media. It is co-funded by the European Union. The report combines Dealroom venture data, NATO defence-expenditure figures and national sources with the insights of investors who work directly with the region’s founders. Ten country profiles map each ecosystem’s funding, stakeholders, policy developments and companies to watch.

The report can be downloaded at www.investingfordefence.com and on the Dealroom platform.

Notes to editors

“Tough tech” refers to science- and engineering-led companies in defence, security and resilience that operate within NATO’s nine innovation priority technology areas. Venture data is from Dealroom.co as of 2 October 2026; the 2026 full-year figure is a projection. Defence spending figures are NATO estimates for 2026; the Tough Ten figure is an unweighted country average.

Press contacts

FComm: Vaidotas Vyšniauskas, +370 612 73 474, v.vysniauskas@fcomm.lt

Viktorija Trimbel, Managing Director, Coinvest Capital – viktorija.trimbel@coinvest.lt

About Coinvest Capital:

Coinvest Capital is a sovereign venture capital fund established by the national development bank ILTE. The fund invests public funds of EU and Republic of Lithuania, alongside private investors, in promising European start-ups that create value for Lithuania. Since the beginning of its operations, the Fund, together with its partners, has made 91 investments in 54 startups and exited 11 companies. The total venture capital deployed amounts to more than €76.3 million, of which €30.5 million was contributed by Coinvest Capital. Under the profit-sharing model, private co-investors have contributed €14.7 million, while an additional €30.1 million has been invested under the pari-passu model.

The Fund offers a globally unique profit-sharing program, capping its annual return on investments at 4 to 8 percent. In the event of a successful exit, any return exceeding this cap is allocated to accredited private co-investors. Out of the €56 million in committed capital entrusted to the Fund, €20 million remains available for new investments.