Investors Focus on Security and Defense Industry
Thirty percent of German investors have already invested in the security and defense industry. Nearly half plan to increase their investments in the sector in the coming twelve months.
The security and defense industry (SVI) is attracting growing interest from investors in Germany, according to a survey by KfW Research and the German Private Equity and Venture Capital Association (BVK). The study found that 30 percent of German investors have already invested in companies within the SVI.
Investor interest is particularly focused on companies with a high "dual-use" potential, meaning products that can be utilized for both civilian and military purposes. Areas such as cyber defense, robotics, artificial intelligence, and surveillance and reconnaissance systems are rated as highly attractive. While traditional military sectors like weapon systems and vehicles rank lower, communication systems are viewed favorably.
Nearly half of the respondents (45 percent) anticipate investing in SVI companies within the next twelve months. However, most investors plan to do so opportunistically, should attractive opportunities arise, rather than through dedicated investment strategies or funds focused on the SVI sector.
Investors identify regulatory hurdles, particularly concerning ESG (Environmental, Social, and Governance) requirements, as the primary obstacles to investing in the SVI. Dr. Dirk Schumacher, Chief Economist at KfW, noted that the security and defense industry is expected to gain greater significance in Germany, with young, innovative companies holding the potential to rapidly develop solutions for emerging threats.
Venture capital investments in defense technology and dual-use sectors in Germany have seen a significant increase. In 2019, the deal volume in these areas was only 28 million euros, whereas in 2024, it reached nearly 800 million euros.