The landscape of technology is undergoing a seismic shift as dual-use technologies—innovations that serve both civilian and military purposes—emerge as a dominant force in the global market. Once relegated to the fringes due to stringent limitations on defense-related investments, these technologies are now at the forefront of attention for governments, venture capitalists (VCs), and startups alike. This transformation is driven by a confluence of factors, including escalating geopolitical tensions, soaring defense budgets among NATO countries, and an increasing recognition that critical future capabilities will not solely arise from traditional defense contractors but also from nimble, high-growth startups.
As of May 2025, there are approximately 17,619 dual-use tech scaleups operating across NATO nations, representing a significant 27% of the total scaleup population identified in a recent analysis of 47 countries. Within this cohort, 1,025 scaleups are categorized specifically as defense tech, which includes 200 startups focused exclusively on military applications and 825 that have evolved from civilian technologies to incorporate defense-oriented solutions. This shift signifies a broader trend where dual-use tech is no longer viewed merely as a niche but rather as a burgeoning sector with immense potential.
The surge in dual-use technologies is not just a passing trend; it is a robust movement characterized by explosive growth. A collaborative analysis conducted by Fincantieri, Mind the Bridge, and Crunchbase revealed that the number of dual-use tech scaleups increased from 15,260 to 17,619 within a mere six to eight months—a remarkable 16% rise. Furthermore, defense tech scaleups surpassed the 1,000 mark, reflecting a 13% increase, with pure defense tech companies growing even faster at a rate exceeding 18%. Investment in dual-use tech has skyrocketed by 25%, climbing from $954.5 billion in Q3 2024 to nearly $1.2 trillion by May 2025. Defense-specific investments also saw a substantial uptick, rising by 27% to reach $70.8 billion.
Between October 2024 and May 2025 alone, 4,311 new scaleups were established across NATO and allied countries, with more than half—2,359—identified as dual-use tech companies. Notably, around 70% of all new scaleup investment during this period was directed toward dual-use tech startups, underscoring the growing confidence in this sector.
The geographical distribution of dual-use tech innovation reveals distinct leaders in the field. Israel has long been recognized as a pioneer, effectively converting military research and development into a thriving startup ecosystem. The United States follows closely behind, bolstered by a growing network of integration programs such as the Defense Innovation Unit (DIU), AFWERX, and the National Security Innovation Network (NSIN), which aim to incorporate commercial innovations into the defense landscape. Europe is rapidly catching up, with the European Union committing €1.5 billion to defense-related research and development initiatives in 2024, alongside national programs expanding their support for defense innovation. For instance, the United Kingdom pledged ÂŁ400 million for defense innovation, while Germany doubled its military procurement budget. NATO’s €1 billion Innovation Fund has begun backing dual-use startups across the alliance, further solidifying the region’s commitment to fostering innovation in defense technology.
Even smaller, digitally advanced nations are making significant strides in integrating their startup ecosystems into national defense strategies. Estonia stands out for its proactive approach, but it is joined by Ukraine, Poland, Czechia, and other Eastern European countries that are investing heavily in defense innovation. This collective effort reflects a broader recognition of the importance of dual-use technologies in enhancing national security and defense capabilities.
Despite the momentum surrounding dual-use innovation, significant challenges persist. Startups in this space often develop hard technologies with critical military applications, necessitating lengthy research and development cycles and substantial funding rounds. Data indicates that defense tech startups are more capital-intensive, with pure defense tech scaleups raising an average of $80 million, compared to $66 million for dual-use tech and $50 million for purely civilian tech scaleups. This disparity highlights the financial demands placed on companies operating in the defense sector.
Moreover, the time-to-market for dual-use technologies can be prolonged due to procurement bottlenecks and outdated acquisition models, creating a notorious “Valley of Death” phase post-pilot. Common barriers faced by these startups include concerns about survivability due to their inherent fragility, as well as the unfamiliarity of many armed forces with working alongside technology readiness level (TRL) 6-stage startups. Scaling and field deployment remain major hurdles, as defense startups often lack the infrastructure necessary for large-scale hardware production.
Additionally, dual-use startups frequently grapple with a “not here nor there” syndrome, caught between two demanding markets without fully committing to either. This situation can dilute their strategic focus and impede growth. Fundraising and exit opportunities present another friction point, as many institutional limited partners (LPs) remain hesitant or constrained in their ability to invest in defense-related ventures. Exit options are also limited, with national security restrictions often blocking foreign mergers and acquisitions, while local buyers are few and far between.
Nevertheless, the landscape is evolving. Mind the Bridge has identified 74 VC funds globally that actively invest in dual-use startups, with more than one-third (35%) based in the United States, followed by 12% in the United Kingdom and 22% in Ukraine, the Baltics, and Eastern Europe. This growing interest from investors signals a shift in perception regarding the viability and potential of dual-use technologies.
The dual-use tech surge represents a pivotal moment in the intersection of innovation and security. As governments and private investors increasingly recognize the strategic importance of these technologies, the potential for transformative advancements in both civilian and military applications becomes clearer. The ongoing evolution of dual-use tech not only reshapes the defense landscape but also redefines how innovation is approached in an era marked by rapid technological change and heightened geopolitical uncertainty.
In conclusion, the rise of dual-use technologies is a multifaceted phenomenon that reflects broader trends in global security, innovation, and investment. As the world grapples with complex challenges, the ability to harness the power of dual-use tech will be crucial in shaping the future of defense and security. The journey ahead may be fraught with challenges, but the opportunities for growth and advancement in this sector are immense, promising a new era of innovation that bridges the gap between civilian and military applications.