The €1bn NATO Innovation Fund is deploying venture capital to support dual-use technologies, as governments seek to accelerate defence, stability and resilience innovation.
As defence spending rises across the transatlantic alliance, governments are increasingly turning to venture capital to accelerate innovation. The €1bn NATO Innovation Fund (NIF) has emerged as one of the most prominent efforts to channel capital into deep-tech and dual-use startups developing technologies relevant to defence, security and resilience (DSR).
Launched by NATO allies and operating as a standalone venture capital fund, the NIF aims both to generate financial returns and to strengthen the technological capabilities of the alliance. Its backers hope the fund will also play a catalytic role by attracting more private capital into a sector that historically struggled to secure institutional investment.
To hear more on this topic, attend Longview Networks’ Defence and Security Investing Summit in London on 25 March.
“The fund is the only multi-sovereign venture fund in the world,” says Erin Hallock, a partner at the NATO Innovation Fund who focuses on deep-tech investments. “We’re backed by 24 allied countries that have collectively committed €1bn to advance the defence, security and resilience of the alliance through deep-tech investments.”
The fund invests across a broad range of sectors including autonomy, advanced computing, biotechnology and energy technologies, as well as more traditional defence technologies. It typically invests from seed to Series B, with initial cheque sizes ranging from roughly €1m to €15m, with space to also make follow-on investments.
Since becoming operational two years ago, the NIF has made 19 direct investments in startups and nine commitments to venture funds investing in earlier-stage or emerging markets.
Hallock says the fund’s structure allows it to operate with the speed of a private venture capital firm while remaining closely connected to the strategic priorities of NATO governments.
“We operate independently of NATO, which is important, because the partners make the investment decisions,” she says. “But the mission is broader than financial returns alone. We are also focused on strengthening the defence and resilience of the alliance and building the broader innovation ecosystem.”
Addressing capability gaps
The NATO Innovation Fund was launched alongside the Defence Innovation Accelerator for the North Atlantic (DIANA), an accelerator programme designed to support early-stage startups developing technologies relevant to defence and security.
Together, the two initiatives were created in response to concerns among NATO governments that parts of the alliance were falling behind in technological innovation, particularly in areas of deep technology that require long development cycles and substantial capital.
The NIF was designed to complement DIANA by providing venture capital funding capable of supporting companies as they scale.
According to Hallock, the fund takes a thesis-driven approach to investing that is informed by demand signals from NATO and national ministries of defence.
“Probably the biggest differentiator for us is the demand signals we get from NATO and ministries of defence,” she says. “That helps us identify where there are capability gaps and build investment theses around those areas.”
Institutional Investment Conferences & Summits from Longview Networks
One example is unmanned maritime systems. After identifying strong demand across allied defence ministries for unmanned surface vessels, the fund conducted research into the sector before backing Kraken, a UK-based company developing autonomous maritime technologies.
The link between NATO demand signals and venture investment can also help accelerate commercial traction for portfolio companies, Hallock says.
“Because those demand signals already exist, there’s a high probability that these technologies will translate into real procurement opportunities,” she says. “That can help companies secure early customers and generate revenue much faster.”
Catalysing the DSR ecosystem
Beyond backing individual companies, the NATO Innovation Fund was also designed to help build a broader defence-technology investment ecosystem across Europe and the wider alliance.
Part of this strategy involves investing in venture capital funds operating at earlier stages or in emerging markets, where local investors may have stronger access to early-stage deal flow.
“We reserve a portion of the fund to invest in managers operating in more nascent markets,” Hallock says. “They often go earlier than we do and have much deeper knowledge of those ecosystems.”
The fund’s creation was also intended to send a signal to private investors that defence and dual-use technologies represent a viable investment opportunity.
Interest in the sector has grown rapidly in recent years. Venture funding for dual-use technologies reached €8.7bn in 2025, according to a recent industry report co-sponsored by the NATO Innovation Fund, representing a 50% increase compared with the previous year.
That surge reflects growing geopolitical tensions and rising defence budgets across NATO countries, as well as increasing recognition that many emerging technologies – from artificial intelligence to advanced energy systems – have both civilian and military applications.
“There has been a significant increase in capital going into dual-use companies,” Hallock says. “When the fund was first conceived about five years ago, this was still a relatively nascent space.”
Investing in deep technology
The NATO Innovation Fund’s investment mandate extends beyond conventional defence technologies to include a range of deep-tech sectors that underpin long-term security and industrial capabilities.
Advanced computing, semiconductors and quantum technologies are among the areas the fund sees as strategically important, alongside energy systems and advanced materials.
Hallock says she’s particularly interested in energy technologies because of their role in powering military operations and infrastructure.
“Energy underpins everything,” she says. “If we don’t have energy sovereignty and reliable supply, it creates vulnerabilities across the entire system.”
Battery technology, for example, has direct implications for the performance of drones, autonomous systems and other equipment used in extreme environments such as the Arctic or desert conditions.
The fund has also invested in technologies aimed at improving the sustainability and resilience of defence supply chains, including companies developing circular approaches to recycling industrial and military equipment.
The need for patient capital
Despite the recent growth in defence-technology investing, Hallock says significant challenges remain in financing the next generation of deep-tech innovation.
Many technologies relevant to defence – including advanced computing and energy systems – require longer development cycles and larger capital commitments than traditional software startups.
“We need to make scaling industrial capability an investable asset class,” she says.
Unlike many venture investments that aim to reach scale within five years, deep-tech and defence technologies may require a decade or more before reaching full commercial maturity.
That means a broader range of investors – including banks and institutional capital providers – will need to participate in the funding ecosystem.
“We need capital across the entire stack,” Hallock says. “That includes venture investors, banks and long-term capital willing to support these companies as they scale.”
For the NATO Innovation Fund, the ambition is to become the first port of call for startups developing deep-tech innovations relevant to defence and security.
“If you are a deep-tech company in Europe with dual-use ambitions,” Hallock adds, “the NATO Innovation Fund should be one of your first calls.”