The New Frontier: Entering the Defense market in 2025
The defense industry, long regarded as a domain of slow-moving giants and national champions, is undergoing a profound transformation. The rules of engagement are changing. Spurred by geopolitical shocks, accelerated by technological convergence, and framed by Europe’s quest for sovereignty, the sector is no longer just a matter of defense – it has become a central arena where economics, politics, and innovation collide. For businesses, the question is no longer whether defense is relevant, but whether they can afford to ignore it.
The Forces Behind the Boom
By 2027, global defense spending is projected to hit $2.2 trillion, a compound annual growth rate of nearly 5% from today’s levels. Europe alone has expanded its defense budgets by more than 10% in the past three years, reaching €326 billion by 2024. These figures are not simply the result of budgetary shifts – they are the manifestation of a deeper structural realignment.
Three forces stand out. The first is geopolitical instability. Russia’s actions in Ukraine, rising tensions in the Asia-Pacific, and uncertainty in the Middle East have jolted governments into recognizing that defense cannot be postponed. The second is the rise of dual-use technologies. Artificial intelligence, robotics, cybersecurity, and satellite networks are blurring the traditional lines between civilian and military innovation, creating a $500 billion dual-use technology market. The third force is European sovereignty. The EU’s SAFE program and similar initiatives are aimed at reducing reliance on external suppliers and asserting greater autonomy in critical defense capabilities.
Opportunity Meets Complexity
At first glance, the defense market seems irresistible: resilient demand, long-term contracts, and government-backed funding. Defense programs such as the F-35, valued at $2 trillion over their lifetime, provide unparalleled stability. And yet, beneath this stability lies daunting complexity. Regulations are stringent, procurement cycles span decades, and relationships – often opaque and political – determine access to contracts.
This paradox makes defense both attractive and treacherous for new entrants. It is a market where technological brilliance alone rarely suffices. Success requires patience, strategy, and above all, trust. Being early with an innovation can doom a company as much as being late, because alignment with doctrinal timelines and budget cycles is everything.
Lessons from Recent Entrants
The past few years are littered with examples that illustrate the risks. Squadrone System, a promising UAV startup, failed to gain traction in a fragmented and politically complex market, ultimately being acquired by Delair in 2024. Preligens, once heralded as Europe’s answer to AI-powered defense analytics, benefited from strong support from the French Ministry of Defense but struggled to translate this into international scale. Its acquisition by Safran confirmed the challenge of turning defense credibility into commercial success.
These stories reveal a crucial truth: defense innovation cannot rely on technology alone. Without a carefully calibrated go-to-market strategy-one that addresses missions, not just features – startups risk burning capital and time without securing lasting traction.
Cracking the Defense Code
For those bold enough to enter, three principles stand out. First, mission orientation matters. Defense buyers are less interested in raw technology than in how it enables specific missions – urban reconnaissance, anti-drone defense, secure communications. Second, geography matters. Procurement cultures vary widely across Europe, from the openness of the Baltics to the centralized, relationship-driven processes of France. Third, access matters. Ministries of Defense, integrators, and tactical units are distinct buyers with different expectations. Understanding these layers is vital.
Above all, building trust is the ultimate currency. Defense remains a business-to-government market, where institutional buyers prioritize reliability, sovereignty, and long-term engagement. Certifications, security clearances, and proven reliability are as important as product performance. For many innovators, this means partnering with established primes before striking out independently.
Dual-Use Technology as the New Driver
One of the most striking shifts is the inversion of the innovation pipeline. Where once the military set the pace of technological change, today it is the civilian sector that leads. SpaceX redefined launch, NVIDIA drives AI, Microsoft provides cloud, and countless startups are building technologies with both commercial and military relevance. Defense agencies now look outward, integrating commercially-developed capabilities into their doctrines to remain agile in the face of evolving threats.
This trend creates opportunities but also challenges. Dual-use firms must learn to adapt their products to the stringent standards of defense – cybersecurity, certification, resilience – while aligning with procurement timelines that can stretch a decade or more. Success lies in bridging these worlds: retaining the agility of civilian innovation while embracing the rigor of defense contracting.
To Conclude
Defense in 2025 is not for opportunists chasing fast growth. It is for those willing to play the long game, to embed themselves in ecosystems of trust, and to accept the friction that comes with working in a market defined by politics as much as by performance.
The winners will be the ones who combine technological ingenuity with strategic patience, who understand that relationships are as decisive as contracts, and who recognize that in defense, credibility is earned one mission at a time.
In this light, defense is less a market and more a proving ground. For innovators, it offers not just the chance to grow, but the opportunity to shape how societies protect themselves in an uncertain century. The stakes could not be higher – and neither could the rewards.
If you are interested in entering the defense market, please do not hesitate to reach out to us.
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At Starburst, we help players in the aerospace and defense sector innovate, navigate, and invest in this dynamic ecosystem.
