EU defence start-ups face two funding gaps, MEPs warn

A European Parliament report backed by more than 400 MEPs on Thursday warned that EU defence start-ups and small companies face two financing gaps before new technologies reach military buyers.

The Nov. 12 report matters for the European Commission’s Readiness 2030 plan, a rearmament programme built around a €150 billion loan package and a target of strengthening defence by decade’s end.

The report’s rapporteur, Latvian Green MEP Mārtiņš Staķis, said small firms are producing technologies that often fail to scale inside Europe. “Our small companies invent excellent new defence technologies, but too often they never make it into production, or they end up growing in the United States or elsewhere,” he said.

Staķis linked the problem to procurement culture as well as finance. “Our defence systems are still built for yesterday’s wars and are afraid of failure,” he said.

The report described two “valleys of death,” a term for a period when companies can exhaust cash before revenue starts. The first gap appears between invention and proof of military effectiveness; the second comes after validation, when firms must win paying customers.

MEPs urged EU funding tools to cover both stages, including support after successful projects to help companies secure first contracts and later orders from member-state armed forces. The report also said smaller suppliers need improved access to test sites, military users and the infrastructure needed to demonstrate, validate and certify products.

The bureaucracy complaint is central to the report’s industrial-policy argument. MEPs said long approval processes and regulatory burdens can leave smaller businesses behind established defence contractors, which have more capacity to manage procurement procedures.

The findings come as the Commission’s Readiness 2030 plan seeks to expand production of strategic equipment including air and missile defence, artillery systems, missiles, ammunition and anti-drone systems. The plan was presented last year and is described as the centrepiece of the EU’s rearmament drive.

The political backdrop is NATO’s security environment. The Euronews report said western intelligence agencies have identified the end of the decade as the period when Russia could attack NATO, an alliance that includes 23 of the EU’s 27 member states.

The report adds to earlier concerns over Europe’s capacity to convert higher defence spending and political will into output. European People’s Party MEP Riho Terras, a former Estonian Army general, said at Euronews’ Defence and Space Summit in September that Europe’s defence industry was not yet able to deliver “in the numbers, in the speed, and in the quality which is needed for our armed forces to speed up”.

The parliamentary vote gives the recommendations political weight, but the report’s proposals still depend on funding design, procurement access and orders by national armed forces. Those elements will determine whether start-ups remain suppliers to Europe’s defence push or shift growth to larger markets abroad.

Source: news report, Euronews, Nov. 12