US investors fund nearly half of European defence tech as Italy weighs dual-use

European defence start-ups raised $7.4 billion in venture capital in the first nine months of 2026 — almost triple the $2.6 billion raised in all of 2025, according to The State of Defence Tech 2026, the Dealroom and Resilience Media report published on 5 October 2026. The year-end projection stands at $10.5 billion. But US investors now account for 47 per cent of funding for European defence tech, up from 17 per cent in 2020. Europe's defence sector is largely being financed by American dollars.

Those figures framed the first edition of Outpost Rome, the Italian summit on innovation in defence and dual-use technologies held on 1 November 2026 at the Ara Pacis in Rome. The Defence Staff, the Ministry of Foreign Affairs (MAECI), the Italian Space Agency, ESA, NATO DIANA, CDP Venture Capital, the European Investment Fund and Lazio Innova attended, alongside industrial groups, start-ups and venture funds. NATAM Management Company promoted the event; Ulixes Capital Partners organised it, with Lazio Region cohesion policy funding and patronage from the Ministry of Defence. NATAM manages the NVM Venture Lazio sub-fund of NVM Ventures, which has raised €23.6 million to date.

What does 'dual-use' actually mean?

The term covers goods, technologies and know-how serving both civilian and military purposes — a phenomenon dating back to Haber's ammonia synthesis, which produced both fertilisers and explosives. The label originated during the Cold War as a customs category in the CoCom lists of what could not be sold to the Soviet bloc. Europe imported it in the 1990s as a common export licensing regime, now governed by Regulation (EU) 2021/821.

The turnaround came when a definition built to prohibit became a gateway for funding. After ReArm Europe, the European Investment Bank — previously barred from the sector — found in 'dual-use' the key to opening credit lines for SMEs and start-ups. The loophole became the norm: the Commission proposed a Horizon Europe successor that is 'dual use by default', and in June 2026 Member States made 'dual use by design' a horizontal principle of the programme, ending forty years of exclusively civilian European research.

Why is Italy the problem case?

Pierluigi Paracchi of the Praexidia Foundation said: "two out of every three companies in which private equity has held a stake over the last 25 years have been bought by non-Italians, so we are losing a vital part of our industrial heritage." He puts the stakes at 800 companies that will be sold, of which "we will lose 500 of them because they will be bought by non-Italian firms."

The 'golden power' could brake that domino effect, but Giulio Napolitano of Chiomenti warned: "The key point is to strike the right balance, because these rules must be applied on a case-by-case basis and there is obviously an element of political and administrative discretion involved."

Cesare Battaglia of PwC Italy noted European defence spending has risen 50 per cent since 2021, with 68 per cent earmarked for procurement. "Procurement fills an existing gap; research determines what capabilities we will be able to acquire, produce and control on the battlefield of tomorrow," he said.

Mariangela Dejana of D-Orbit argued dual-use cuts timescales and costs: institutional procurement can no longer afford dedicated development cycles. On golden power, she said: "it is an effective tool, but it always comes too late."

Can a country against rearmament accept dual-use?

An ECFR survey of 15 European countries in May 2026 found 58 per cent of Italians oppose further increases in defence spending, against 28 per cent in favour — the only country in the sample where 'no' prevails. A 2025 European Parliament Eurobarometer found 62 per cent of Italians see other priorities ahead of raising EU defence spending to 5 per cent of GDP.

Paracchi said Europe's "bureaucratic monster" can't match US pace: Anthropic, founded five years ago, struck deals with the Department of Defence, the government and the CIA. Bonabello countered the alarm directly: "I, on the other hand, would be afraid of failing to invest in technologies that form the backbone of our autonomy and resilience." He noted GPS, the internet and AI all originated in defence. His fund excludes weapons systems under European rules but could back a company 100 per cent defence-focused in theory — though the civilian market usually moves faster.

Where does the money now sit?

The European Defence Fund holds roughly €7.3 billion for 2021–2027, with around €4 billion already allocated to 224 projects. The EIB disbursed over €4 billion in 2025 alone, four times the prior year. SAFE's €150 billion in subsidised loans went entirely to 19 countries — but funds military purchases, not innovation. Private equity invested €5.9 billion in European aerospace and defence in Q1 2026 alone, per PitchBook, while VC totals about €12.6 billion since 2021.

The public sector now spends and lends; venture capital — nearly half of it American — bears the innovation risk.