EU tech funding turns toward sovereignty and defence

European startup funding is becoming more selective, with fewer deals and larger rounds. Q2 2026 brought $25.6B across 1,636 deals, slightly below Q1’s $26.0B, while H1 2026 reached $44.5B against $63.8B for all of 2025. AI and defencetech drew strong investor attention alongside biotech and alternative energy, with capital concentrated in the UK, Germany, and France.

The most prominent priorities are European alternatives to US platforms, defence and dual-use technology, sovereignty-focused infrastructure, and AI, infrastructure, and computing. The European Commission’s €180M sovereign cloud tender avoided US hyperscalers and introduced SEAL levels from SEAL-0 to SEAL-4, including SEAL-4 requirements for a full EU supply chain from chips to software.

The shift reflects growing concern over dependence on the U.S., China, Taiwan, and Russia for software, finance, defense, materials, semiconductors, energy, chips, and computing. Many companies remain funded by U.S. investors, leaving Europe with a gap between building local technology and controlling the capital behind it. Stronger market density, easier cross-border hiring and selling, and a functioning single market remain central to Europe’s next phase.