The geopolitical situation has changed drastically – and the German state, which has long been rather sluggish, has relaxed its previously tight restrictions on investment, especially in defence and infrastructure spending. Meanwhile, the German financial sector never tires of emphasising the indispensable contribution of private capital. However, they do not yet seem to have gone far beyond lip service. In any case, the latest capital raised by Munich-based defence start-up Helsing shows where Germany is still firmly dependent on foreign funding for defence technology.

The unicorn is relying almost entirely on international investors for its largest ever financing round of 600 million euros, including the investment company of Spotify founder Daniel Ek, and a number of well-known US companies such as Accel, Lightspeed Ventures and General Catalyst.

Helsing is not alone in this dependency. Stark Drones Corp, which also specialises in drone technology, recently brought on board US venture capital firm Sequioa Capital as sole investor for major start-up financing. Sequioa has set itself a goal of benefiting in its portfolio strategy from increased defence spending in the EU.

However the German VC sector is not completely on the sidelines. Munich in particular, a hotspot in the defence and aerospace sector, has recently sourced capital from domestic investors for a number of start-ups. Quantum Systems and Arx Robotics, for example, have so far limited themselves to financing rounds in the double-digit million range. One reason for the rather small tickets issued by venture capitalists in Germany compared to US investors is the continuing reluctance of institutional investors to participate. They traditionally have little appetite for risk. Even after years of debate about the potential returns of new asset classes, insurance companies and pension funds have not yet made any radical changes to their investment strategy. They mainly invest in interest-bearing securities.

According to an Atomico study, European pension funds invest only 0.01% of their assets under management of around 9 trillion dollars in venture capital. In order to finance start-ups in the scaling phase, the brakes need to be loosened here too.