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10/15/2025

Funding Programs for Defense Tech and Dual-Use Innovation in Germany and Europe (as of 2025)

The geopolitical shift in Europe is driving a profound transformation in innovation funding. Historically, defense-related topics were often met with disinterest or rejection by the tech industry and academic research institutions due to political and ethical concerns, such as the implementation of so called “civil clauses” that prohibited cooperation with military research. However, a new dynamic has emerged, leading to changes in the funding landscape. Dual-use technologies—those with both civilian and military applications—are increasingly becoming the focus of European and German funding policies. This shift is creating new financing and growth opportunities for companies in industries such as tech, robotics, AI, sensors, drones, and cybersecurity.

Below, we outline the most relevant programs currently in focus:

 

1. European Defence Fund (EDF)

The EDF is the EU’s central instrument for supporting collaborative research and development projects in the defense sector. With a budget exceeding €1.1 billion for 2025, the European Commission funds initiatives in fields such as AI, robotics, sensors, space, communications, simulation, autonomy, and protective technologies. A similar funding level is planned for 2026.

Research projects can receive up to 100% funding, while development projects may be co-funded up to 90%. The EU Defence Innovation Scheme (EUDIS), a component of the EDF, specifically supports SMEs and start-ups aiming to develop new technologies for the defense sector.

For companies with advanced technological expertise in areas like AI-driven data analysis, sensors, cyber defense, or autonomous systems, the EDF is currently Europe’s most significant funding program.

 

2. NATO DIANA – Defence Innovation Accelerator for the North Atlantic & NIF – NATO Innovation Fund

DIANA is NATO’s innovation program designed to support dual-use start-ups and technology-oriented SMEs. It offers accelerator programs (e.g., Palladion at the University of the Bundeswehr in Munich), test centers, mentoring, and seed funding for technologies with security-related applications (e.g., energy, materials, communications, and sensors).

DIANA serves as a bridge between start-ups, industry, research, and military applications. Selected companies gain access to state-of-the-art testing facilities and may also receive funding from the NIF, which is endowed with €1 billion.

 

3. European Investment Bank (EIB) & European Investment Fund (EIF)

In 2024, the EIB adjusted its internal funding regulations to better support dual-use projects. Key areas of funding include infrastructure, space, sensors, and communications projects that are civilian in use but also strategically relevant for security.

The EIF has introduced the Defence Equity Facility (DEF), a pioneering venture capital instrument aimed at facilitating investments in early-stage defense and dual-use companies. This program is particularly appealing to tech start-ups with capital needs and limited prior experience in securing funding. Investments are made indirectly through private equity and venture capital funds, which are supported by €175 million in total, targeting defense-related (including dual-use) technologies.

 

4. National Programs and Structures in Germany

Germany complements European funding instruments with its own initiatives:

•    Cyberagentur GmbH (Agency for Innovation in Cybersecurity): Supports disruptive research projects in areas such as cyber defense, AI, and quantum communication, with explicit consideration of dual-use potential.
•    Cyber Innovation Hub of the German Armed Forces (CIHBw): Facilitates the adaptation of civilian software or products from start-ups to meet the needs of the German Armed Forces. While no direct funding is provided, the hub fosters collaborations with the Bundeswehr.
•    Central Innovation Program for SMEs (ZIM): An open R&D funding program managed by the German Ministry for Economic Affairs and Climate Action (BMWK), applicable to dual-use projects.
•    Export Initiative for the Security and Defense Industry (BMWK): Assists companies in accessing international markets.
•    Research Contracts by the Federal Office of Bundeswehr Equipment, Information Technology, and In-Service Support (BAAINBw): Direct research and development contracts in the defense technology sector.

 

5. Legal and Regulatory Aspects

Funding defense or dual-use technologies is not only a matter of financing but also of regulatory compliance. Companies must particularly consider the following:

•    Export control and licensing requirements (e.g., BAFA, EU Dual-Use Regulation)
•    Security clearance and confidentiality requirements for military-related projects
•    Procurement-specific regulations for EDF or BAAINBw projects
•    Intellectual property and licensing considerations in EU co-funded projects

For successful grant applications, early legal consultation is recommended—both to assess funding eligibility and to ensure compliance.

 

Conclusion

The funding landscape for defense tech and dual-use innovation is undergoing significant change. While traditional EU programs remain primarily civilian-focused, standalone defense and security funds are emerging, targeting industrial high-tech solutions with strategic relevance to security and defense.

For tech-oriented companies in Germany, this shift presents attractive financing and growth opportunities—provided they can align civilian innovation with strategic value for security and defense.

SKW Schwarz advises companies on the legally compliant structuring, application, and execution of funding projects in the defense tech and dual-use sectors, from assessing funding eligibility to drafting contracts with European and non-European partners.
 

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