Dual: Is Deep Tech Expertise the Key to European Sovereignty?

Dual-use innovation – technologies that serve both civilian and defence needs – will benefit from recent political commitments across the continent, but a consistent course and supportive startup environment are needed to empower technological independence in the decades ahead.

Our report maps the shifting venture capital landscape, examines the regulatory bottlenecks, and proposes a path forward through targeted procurement reform, regional coordination, and VC-government collaboration.

Key findings:

• Europe’s R&D paradox – Despite world-leading academic excellence, Europe continues to lag in productivity and R&D investment. R&D spillovers remain underutilised, and structural barriers block effective commercialisation.
• Dual-use tech as a sovereign lever – Technologies such as quantum navigation, AI inference, secure communications, and autonomous machines are essential to both economic and defence goals. Investing in them achieves two objectives with one budget line.
• Europe must strengthen its growth-stage funding – Deep tech startups often require significant capital at the pre-revenue stage, and a strong technical understanding to evaluate investment opportunities based on the value of the technology rather than revenue milestones. This shift is leading to growth investors entering the investment lifecycle earlier, playing an increasingly vital role in advancing European deep tech.
• Government as the first customer – Government contracts and grants play a crucial role in supporting early-stage dual-use companies, helping investors mitigate the risks associated with these technologies. Defence procurement should be streamlined to enable continued technological development, allowing defence ministries to actively shape the innovation landscape and align it with their strategic needs.
• Fragmentation is holding Europe back – A lack of cohesion in procurement, differing national strategies, and overlapping bureaucracies reduce speed and efficiency. A coordinated approach, where states specialise in specific domains, could unlock scale and multi-state collaboration.
• Strategic VC can bridge the gap – Governments need the venture ecosystem’s agility, due diligence, and risk appetite to direct funding towards the most promising technologies. Meanwhile, VC funds must evolve their structures and governance to accommodate sovereign needs.

Ben Prade, Partner at Bullhound Capital: “This report was written to address an inflection point for Europe. Dual-use technologies are emerging as a practical avenue to strengthen Europe’s strategic autonomy while fostering innovation and productivity across sectors. We chose to focus on this theme because Europe’s increased defence spending must be matched by clear thinking on where and how capital should be deployed. Our aim is to contribute to that discussion, and to highlight the role venture capital can play in identifying promising technologies early, supporting their growth, and ensuring that Europe remains competitive on a global stage.”

Tony Frazier, CEO of LeoLabs: “Clear mission requirements, accessible funding, and defined timelines create an environment where companies and founders are more likely to invest early, aligning their efforts more closely with operational goals. A stronger focus on mission needs—alongside more open and inclusive approaches to international collaboration—could also encourage greater investment and engagement from US industry partners.”

Prof Michael Biercuk, Founder & CEO of Q-CTRL: “We see a common challenge to overcome as Europe ramps its investment in dual-use technologies. There’s an urgent need for streamlined procurement – a challenge also faced in the US – in order to ensure technology development and uptake occur at the speed of relevance. We encourage European governments to accept slightly more risk of failure in order to maximize the impact of technological outcomes.”

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About Bullhound Capital
Bullhound Capital is the investment management arm of GP Bullhound, building with founders creating category-leading technology companies. With over €1 billion under management and 25 years of performance, it has invested in global leaders like Spotify, Klarna, Revolut, Slack, Unity, ConnexAI and EcoVadis. Operating from 13 offices worldwide, its platform delivers hands-on, founder-focused support across strategy, growth, and execution. From quantum to entertainment, Bullhound Capital backs global leaders applying Artificial Intelligence to solve real-world problems.