Defence Tech in the Spotlight at Techarena 2025 – But Funding Remains a Major Hurdle

At Techarena 2025, defence technology emerged as a surprising – but timely – focal point. This year’s discussions revealed a growing urgency around innovation in defense and security in an arena typically associated with fast-scaling climate tech, fintech, and AI.

Kicking off the event, Sweden’s Prime Minister Ulf Kristersson highlighted the term “peace tech” – a nod to the increasingly blurred lines between military innovation and civilian resilience. The theme also echoed throughout a standout side session co-hosted by EKN (the Swedish Export Credit Agency) and Danske Bank Growth, titled “Empowering Defence Tech – Funding for Growth.”

Despite surging geopolitical tensions and record-high demand, many defence tech startups struggle to raise the capital they need to scale. As several speakers noted, the problem isn’t market readiness – it’s financing.

“Defence tech is arguably the best investment you can make, because a strong defence is the foundation of prosperity and freedom,” said Stefan Granlund, Head of Growth & Impact at Danske Bank.

Defence Exceeds AI

According to a study by Danske Bank, the Nordic region is home to roughly 130 defence tech startups with a combined valuation of SEK 3.7 billion. In Sweden, startups now make up half of the members in the national industry association SOFF. Across Europe, investment in defence tech has even surpassed investment in AI, according to the Financial Times.

And yet, funding remains elusive. Granlund emphasized that many venture capital firms and institutional investors still lack a mandate to invest in defence, often requiring “dual-use” products that serve both civilian and military applications.

“Patience and capital are two of the keys to success in this sector,” added Jens Holzapfel, entrepreneur and Business Director at Nordic Air Defence. “Even if you secure funding for the early phase, you still have to survive the long gap between customer engagement and product delivery. In Sweden, that can take up to two years – you need money in the bank to make it.”

Sector Friction to Address

Nordic Air Defence is currently scaling the production of anti-drone technologies – a hot area with strong demand but fierce technical competition. “It’s all hands on deck,” said Holzapfel. “Defence tech needs more VC support, but we also need government to step up – with better procurement policies, more funding support, and fewer moral hangups about what counts as ‘ethical’ innovation. This is another vital sector, and it should be treated as such.”

Cailin Greiner, Associate at Forward.one Venture Capital pointed out the core friction: venture capital relies on predictable returns, and the defence sector often moves too slowly to match investor expectations.

“VCs want to see clear business cases, strong exits, and unicorns. More success stories are needed,” she said. “That’s why some entrepreneurs turn to debt financing instead – it doesn’t dilute ownership and is often more flexible.”

Danske Bank’s growth unit offers venture debt solutions and works closely with EKN to help scaleups secure loans backed by export guarantees. “With an EKN guarantee, it becomes much easier for early-stage companies to access bank financing,” said Åsa Larsson, Senior Underwriter at EKN and moderator of the panel.