Defence Technology and Dual-Use Innovation Key Funding Programmes Companies in Germany and Europe should know

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In innovation funding the focus is now shifting towards dual-use technologies, which serve both civilian and military purposes. This change opens up new funding and growth opportunities in fields like technology, robotics, artificial intelligence, sensors, drones, and cybersecurity.

Significant changes in European security policy are causing a fundamental shift in innovation funding. In the past, defence-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" by which many universities have prohibited cooperation with military research. However, a new dynamic has emerged that is also changing 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 funding and growth opportunities for companies in industries such as technology, robotics, artificial intelligence (AI), sensors, drones, and cybersecurity.

European Defence Fund (EDF) and EU Defence Innovation Scheme (EUDIS)

The European Defence Fund (EDF) is the European Union’s central financial instrument aimed at fostering and supporting collaborative defence research and development projects across the EU, especially in fields such as AI, robotics, sensors, space, communications, simulation, autonomy, and protective technologies. It has a total budget close to €8 billion for the period 2021–2027, with over €1.1 billion allocated for 2025 alone and a similar funding level planned for 2026. Research projects can be funded up to 100%, while development projects can be co-financed up to 90%.

The EU Defence Innovation Scheme (EUDIS), a component of the EDF, specifically supports SMEs and start-ups developing new technologies for the defence sector. For companies with advanced technological expertise in areas such as AI-driven data analytics, sensors, cyber defence or autonomous systems, the EDF is currently Europe's most important funding programme.

Europe’s security landscape is changing rapidly

As defence budgets rise and EU programmes expand, civil technology providers are becoming vital contributors to Europe’s strategic autonomy. The event will act as a neutral platform for dialogue between technology suppliers, integrators, and decision-makers shaping the next generation of European defence capabilities and aims to open doors between civil industry and defence procurement, providing practical insights.

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Defence Innovation Accelerator for the North Atlantic (DIANA) and NATO Innovation Fund (NIF)

DIANA (Defence Innovation Accelerator for the North Atlantic) is NATO’s innovation programme designed to support dual-use start-ups and technology-orientated SMEs. It offers accelerator programmes (e.g., Palladion at the University of the Bundeswehr in Munich), test centres, 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 will have access to state-of-the-art testing facilities. They can also receive funding from the NIF, which has EUR 1 billion at its disposal.

European Investment Bank (EIB) and European Investment Fund (EIF)

In 2024, the European Investment Bank (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 defence and dual-use companies. This programme 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 defence-related (including dual-use) technologies.

In addition to these instruments, which can be used directly by companies, indirect support for companies based in the EU is also to be provided through support programmes for Member States, which are intended to encourage them to pursue joint defence procurement based on a "Buy European" approach. New programmes such as Security Action for Europe (SAFE) and the European Defence Industry Programme (EDIP) are important, for example.

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National Programmes in Germany

Germany complements European funding instruments with its own initiatives. Despite existing administrative hurdles, these funding programmes are actually more accessible in practice for German SMEs and start-ups, which have less experience in this area, especially if no cross-border consortia are involved.

The Cyberagentur GmbH (Agency for Innovation in Cybersecurity) supports disruptive research projects in areas such as cyber defence, AI, and quantum communication, with explicit consideration of dual-use potential.

The 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.

The Federal Ministry of Economic Affairs and Energy has launched an Export Initiative for the Security and Defence Industry that assists companies in accessing international markets. The support services include information events on foreign markets, market research and business development trips, trade fairs abroad, and information trips to Germany for foreign decision-makers.

The Central Innovation Programme for SMEs (ZIM) offers an open R&D funding programme managed also by the Federal Ministry of Economic Affairs and Energy, applicable to dual-use projects.

In addition, the Federal Office of Bundeswehr Equipment, Information Technology and In-Service Support (BAAINBw) opens access to direct research and development contracts in the defence technology sector. This includes budgetary funds which are used to finance research contracts awarded to third parties (universities, non-university research institutions, independent scientists, service providers and industry) as well as grants to promote research projects. These projects are intended to serve the purpose of a targeted defence research and technology development.

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Legal and Regulatory Aspects

Funding defence or dual-use technologies is not only a matter of financing but also of regulatory compliance. Companies that develop and manufacture defence-related technologies operate in a highly complex legal and regulatory environment.

Participation in German or European funding programmes requires not only the fulfilment of specific programme requirements but also compliance with a comprehensive set of export control, arms control, IT security, intellectual property, licensing and public procurement regulations, for instance, set by BAFA or the EU Dual-Use Regulation. For EDF or BAAINBw projects, procurement-specific regulations must be considered, whereas intellectual property and licensing considerations are important in almost all EU co-funded projects.

For most defence-related goods and military-related projects, corporations must obtain security clearances and adhere to stricter confidentiality requirements.

National and European regulations interact with each other in this regard. A good example of this is IT security, where, for good reason, new requirements are constantly being imposed on defence companies at both the national and European levels. Following the NIS-2 directive, the German IT Security Act 2.0 introduced a new category of "companies of particular public interest" (UBI). This also includes manufacturers and developers of military equipment. Whereas previously the special rules for enhanced IT security only applied to operators of critical infrastructure, the scope of application has now been significantly expanded, which leads to a series of strict requirements for manufacturers' IT security.

Proactive compliance management and the early involvement of legal expertise are essential for success in this sensitive area. 

In this regard, compliance with regulatory requirements must not only be checked and determined ex ante prior to participation but must also be ensured during the ongoing programme and upon completion of the programme. This can also be verified in corresponding audits.

To ensure a successful application, it is best to seek legal advice early on, both for eligibility and compliance structuring.

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Conclusion

The funding landscape for defence technology and dual-use innovation is changing significantly. While traditional EU programmes remain primarily civilian in nature, standalone defence and security funds are emerging, targeting industrial high-tech solutions with strategic relevance to security and defence.

This provides attractive financing and growth opportunities for tech-orientated companies in Germany — provided they can align civilian innovation with strategic value for security and defence.