The European defence sector is undergoing a profound transformation. Once the exclusive domain of industrial giants like BAE Systems, Thales, and Airbus, the missile technology landscape is now being disrupted by a new generation of startups. These firms are not only injecting innovation and competition into a traditionally conservative industry, but are also forcing a strategic rethink among policymakers, investors, and established defence contractors. As geopolitical tensions sharpen and military budgets expand, the rise of missile startups is rapidly becoming a defining feature of Europe's defence future.
Historical Context: From Defence Giants to Startup Disruption
For decades, European missile development was synonymous with a handful of multinational corporations. Their dominance was underpinned by deep relationships with national governments, complex procurement cycles, and the sheer capital intensity of defence R&D. This model fostered stability but often stifled rapid innovation and limited the entry of new players. However, the post-2022 security environment—marked by Russia's invasion of Ukraine and renewed focus on NATO's eastern flank—has exposed critical gaps in Europe's defence readiness, particularly in missile stockpiles and advanced systems (Sifted).
In response, governments and investors have begun to look beyond the traditional defence primes. The emergence of startups is being driven by several converging forces: technological advances in propulsion, guidance, and materials; a surge in venture capital interest; and urgent operational needs that legacy suppliers have struggled to meet at speed and scale.
Market Forces and Investment Dynamics
The influx of venture capital into European defence startups is a recent but accelerating trend. According to PitchBook data cited by Sifted, investment in European defence startups has grown significantly since 2022, with a marked uptick in funding rounds targeting missile and launch technologies. This mirrors a broader global pattern, as seen in the US and Gulf states, where defence startups are attracting private capital in response to heightened regional threats and shifting procurement priorities (CNBC).
Notably, the profile of investors is shifting. Traditional defence contractors are being joined by technology-focused venture funds and high-net-worth individuals with backgrounds in software, aerospace, and AI. This cross-pollination is accelerating the adoption of digital engineering, rapid prototyping, and commercial-off-the-shelf (COTS) components in missile development—practices long established in Silicon Valley but novel to European defence manufacturing.
Key Players: Startups Challenging the Status Quo
Among the most prominent missile startups are Germany's Isar Aerospace and Rocket Factory Augsburg (RFA). Isar Aerospace, founded in 2018, has drawn attention for its micro-launcher technology, designed to deliver small payloads to orbit with high precision and rapid turnaround. While its primary market is commercial space, Isar's propulsion and guidance innovations have clear dual-use potential for defence applications (Sifted).
Rocket Factory Augsburg, another German entrant, is developing advanced propulsion systems and modular launch vehicles. RFA's approach emphasizes cost efficiency and scalability, attributes that are increasingly attractive to European defence ministries seeking to replenish missile stockpiles and deploy new capabilities quickly. Both companies have secured multi-million-euro funding rounds and are actively courting defence contracts alongside their commercial space ambitions.
While these startups are not yet direct competitors to established missile primes like MBDA, their agility and willingness to experiment with new business models—such as rapid design iterations and digital twins—are forcing incumbents to accelerate their own innovation cycles. The result is a more dynamic, competitive, and technologically diverse European missile ecosystem.
Procurement Reform: Opening the Door to Innovation
One of the most significant enablers of the startup surge is the ongoing reform of European defence procurement. Traditionally, procurement processes have favoured established suppliers, with long timelines, rigid requirements, and limited opportunities for new entrants. However, the urgency of the current security environment has prompted governments to rethink these practices.
According to a Bruegel analysis, European policymakers are increasingly aware that fostering military innovation requires more flexible, startup-friendly procurement mechanisms. This includes pilot programs, innovation challenges, and the creation of dedicated defence innovation funds. The European Defence Fund (EDF), for example, has earmarked billions of euros for R&D projects led by SMEs and startups, aiming to diversify the supplier base and accelerate technology adoption.
Such reforms are not without challenges. Balancing the need for security and compliance with the agility required by startups remains a delicate task. Nonetheless, the direction of travel is clear: Europe is moving toward a more open, competitive, and innovation-driven defence procurement environment.
Regional Impact: Germany, France, and the New Defence Hubs
The startup boom is not evenly distributed across Europe. Germany has emerged as a leading hub, thanks in part to its strong engineering base, government support for dual-use technologies, and proximity to NATO's eastern frontier. France, too, is seeing a surge in defence innovation, with Paris positioning itself as a centre for advanced missile R&D and attracting both domestic and international investment.
This regional clustering is creating new jobs, stimulating local economies, and reinforcing the strategic importance of the defence sector. It is also fostering cross-border collaborations, as startups seek to tap into pan-European supply chains and access a broader pool of technical talent. According to the Carnegie Endowment, this regional pragmatism is also reshaping the transatlantic defence-industrial relationship, with northeastern European states seeking greater autonomy and resilience in their missile supply chains.
Technical Deep-Dive: Innovations Driving the Next Generation of Missiles
The technological advances underpinning the rise of missile startups are substantial. Startups are leveraging breakthroughs in propulsion—such as hybrid rocket engines and additive manufacturing—to reduce costs and improve reliability. Digital engineering tools, including simulation and digital twins, are enabling rapid prototyping and iterative design cycles, dramatically shortening time-to-market compared to traditional defence projects.
Guidance and control systems are also benefiting from advances in artificial intelligence and sensor fusion. While much of this technology has been pioneered in the commercial aerospace and automotive sectors, its adaptation to missile systems is enabling greater precision, autonomy, and adaptability. For example, AI-driven targeting and navigation algorithms are being explored to enhance the effectiveness of both defensive and offensive missile systems (CEPA).
Another area of innovation is the integration of uncrewed and autonomous systems. As the Center for European Policy Analysis notes, the development of uncrewed missile platforms and swarming technologies is opening new operational concepts for both deterrence and active defence, particularly in challenging environments like the Arctic and Baltic regions.
Industry Reactions: Incumbents Respond and Collaborate
Established defence contractors are not standing still. Companies like MBDA, which remains Europe's leading missile integrator, are ramping up their own innovation efforts, investing in digital transformation, and exploring partnerships with startups. In some cases, primes are acting as anchor customers or strategic investors, providing startups with access to test facilities, supply chains, and regulatory expertise.
This collaborative dynamic is increasingly seen as essential for the rapid fielding of next-generation missile systems. By combining the agility and creativity of startups with the scale and experience of incumbents, the European defence sector can accelerate technology adoption and maintain its competitive edge globally. As Bruegel's analysis suggests, such partnerships are also vital for overcoming the "valley of death" that often separates promising prototypes from large-scale deployment.
Risks, Barriers, and Strategic Uncertainties
Despite the momentum, missile startups face formidable challenges. The regulatory environment for defence technologies remains complex and fragmented across Europe. Export controls, security clearances, and compliance with NATO standards can be particularly onerous for young companies lacking dedicated legal and compliance teams.
Funding volatility is another risk. While venture capital is flowing today, the defence sector is notoriously cyclical, and shifts in political priorities or economic downturns could quickly dry up private investment. Startups must therefore build resilient business models and diversify their revenue streams to weather potential shocks.
Integration with legacy systems is a further hurdle. Many European militaries operate ageing missile platforms, and the adoption of new technologies often requires costly upgrades or bespoke interfaces. Startups must navigate these technical and operational complexities to achieve meaningful market penetration.
Non-Obvious Implications: Strategic Autonomy and Transatlantic Tensions
One less-discussed consequence of the missile startup boom is its impact on Europe's quest for strategic autonomy. As the Carnegie Endowment notes, northeastern European states are increasingly seeking to reduce dependence on US suppliers and build indigenous capabilities. The proliferation of missile startups—many with dual-use or exportable technologies—could accelerate this trend, reshaping the balance of power within NATO and the broader transatlantic alliance.
This shift is not without risks. Divergent procurement standards, competition for talent, and potential duplication of effort could undermine interoperability and collective defence. At the same time, a more vibrant European defence tech sector could serve as a counterweight to US dominance, fostering greater resilience and innovation across the alliance.
Future Outlook: What Happens Next?
The trajectory of European missile startups appears robust. As these companies mature, they are likely to expand beyond niche applications and play a central role in the continent's defence posture. The next phase will likely see increased consolidation, with successful startups being acquired by or merging with larger players, and a growing emphasis on export markets in the Middle East, Asia, and Africa.
Policy support will be critical. Continued reform of procurement processes, investment in dual-use R&D, and the creation of cross-border innovation clusters will determine whether Europe can sustain its current momentum. The integration of AI, uncrewed systems, and advanced materials will further blur the lines between commercial and military technology, demanding new approaches to regulation, ethics, and international collaboration.
Conclusion: A Pivotal Moment for European Defence
The rise of missile startups marks a pivotal moment for European defence. By challenging entrenched incumbents and introducing new technologies, business models, and talent, these companies are reshaping the continent's strategic landscape. The stakes are high: success could mean a more agile, resilient, and technologically advanced Europe, while failure could leave the continent vulnerable to emerging threats and dependent on external suppliers. As the sector evolves, the interplay between startups, incumbents, policymakers, and investors will determine the future of European security—and its place in the global defence order.