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European defense startups can raise equity from US investors through ordinary private funding rounds, then use European and NATO programs to complement—not replace—that capital. For a large, primarily defense-focused round, the European Innovation Council’s 2026 STEP Scale Up Defence call is a notable potential co-investor: it offers €10–30 million in equity, usually as part of a much larger round, but requires a qualified investor to precommit at least 20% of the total. A US investor may count, but qualification is assessed rather than automatic.
Which funding routes can a European defense startup use?
| Route | What it provides | Best fit | Key condition or limitation |
|---|---|---|---|
| US private investor | Equity investment and potentially round leadership | A company with a credible growth plan and a clear fit with the investor | Check investor qualification for relevant programs, governance terms, national screening, and export controls. |
| EIC STEP Scale Up Defence | €10–30 million in direct equity from the European Innovation Council (EIC, 2026), intended to join rounds typically totaling €50–150 million or more (EIC, 2026) | Primarily defense companies in eligible jurisdictions raising a major round | At least 20% of the total round must be precommitted by one qualified investor; defense-user traction and fit with priority areas matter. |
| Regular EIC STEP Scale Up | Support for eligible strategic civilian and dual-use technologies under the active call’s rules | Companies with a credible business case in both civilian and defense markets | A dual-use label by itself is not enough, and dual-use proposals do not receive preferential treatment. |
| EIF-backed specialist funds | Venture investment through funds backed by the European Investment Fund (EIF) | Startups that match a participating manager’s stage, geography, and investment thesis | The EIF facility invests through funds; it is not a direct startup grant or an assured allocation. |
| NATO DIANA | €100,000 in contractual funding for selected innovators (NATO DIANA programme page, accessed 2026), plus accelerator support, test access, and investor and end-user connections | Companies whose solutions fit a published DIANA challenge | Competitive selection; the programme describes contractual support, not an equity round. |
How to raise from US private investors
The central task is to make the company investable on its own merits: show that the technology works, explain what is defensible about it, identify a real market, and make the route from product to procurement credible. For a defense startup, a clear need from end users and a realistic path to adoption are especially important. A US investor’s participation does not by itself establish eligibility for any European program or determine whether a transaction will face screening.
Build the round around the company’s financing needs and investor fit. Explain the intended use of proceeds, milestones the capital will fund, and how the company expects to reach relevant customers. Be prepared to discuss who will own and control the business, what information or technical access investors receive, and whether the proposed governance arrangements create issues under national investment-screening or export-control rules.
When the EIC STEP Scale Up Defence call fits
The EIC opened its STEP Scale Up Defence call on 1 July 2026. It is intended for companies whose proposed products, technologies, or services are primarily for defense and align with the call’s priority areas. Companies established in an EU Member State, Ukraine, or an EEA country associated with Horizon Europe can apply. The EIC describes an investment range of €10–30 million and says these investments are intended to help complete larger rounds, typically €50–150 million or more.
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The investor commitment is a prerequisite to plan around
An applicant must have at least 20% of the total funding round precommitted by one qualified investor. In its FAQ, the EIC says a qualified investor must demonstrate experience relevant to the market, technology, and jurisdiction, and pass KYC/AML screening. A high-risk investor may exceptionally qualify with justification. A US investor is therefore neither automatically eligible nor automatically disqualified: confirm the investor’s status with the EIC and counsel before relying on its commitment to meet the threshold.
What the application needs to show
The EIC expects credible traction with defense end users and a realistic path to adoption and scale-up in the European defense ecosystem. It gives an illustrative example of a company raising €100 million that first secures a €20 million investor commitment, then seeks an EIC investment and other capital to complete the round. That example explains the mechanism; it is not a promise that an application will be selected or funded.
How civilian and dual-use companies should assess EIC support
The EIC distinguishes the defense-focused call from its regular STEP Scale Up route. A company whose opportunity is primarily civilian, or genuinely spans civilian and defense markets, should assess the regular call rather than describe a primarily defense product as civilian. For dual-use applicants, the business case needs to demonstrate demand in both markets. The EIC says dual-use proposals are assessed under the same criteria as other eligible innovations, without preferential treatment merely for being dual-use.
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In June 2026, the EIC announced that the EIC Accelerator and STEP Scale Up would support dual-use technologies, with grants of up to €2.5 million and equity investments of up to €30 million under the relevant program rules. These are headline limits, not a guarantee of an award or a description of every instrument available to every applicant. Check the active call text for the instrument, eligibility, and deadline that apply to the company.
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How EIF-backed funds and NATO DIANA can complement a round
EIF-backed funds invest through their portfolios
The EIF’s Defence Equity Facility is a fund-of-funds: the EIF backs venture funds, which then make investments in companies. The facility launched in January 2024 with €175 million in resources, a funding period running through 2027, and an expectation of mobilizing up to €500 million. In a June 2026 update, the EIF reported €161 million committed.
One example is Join Capital Fund III. In March 2026, the EIF announced a €50 million commitment to the fund, which was targeting €235 million and investing in early-stage European deep-tech and dual-use startups. Founders can identify disclosed managers backed by the facility and compare each fund’s stage, geography, and sector thesis with their company. The EIF’s commitment is to the fund; it does not mean a startup can apply to the facility for a direct award or will receive investment.
DIANA offers challenge-based support, not venture equity
NATO DIANA selects innovators through public challenges. Its program page describes contractual funding, tailored accelerator support, access to defense and dual-use investors and military end users, and use of more than 200 test centres across the Alliance. These resources can help a selected company develop and validate a solution while building relevant connections. The page does not characterize DIANA funding as an equity financing round.
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Screening and export controls: address them before closing
EU law provides a framework for Member States to screen foreign investment on security or public-order grounds, but national authorities operate their own mechanisms and apply them to specific transactions. The revised Foreign Investment Screening Regulation (EU) 2026/1386 entered into force in July 2026 and is scheduled to apply from 17 January 2028. It creates a common minimum scope that includes relevant defense and dual-use activity and gives increased attention to indirect foreign control. It does not remove the need to check the national rules in force now for the company’s jurisdiction and transaction.
Ask counsel familiar with the company’s country, business, investor ownership, and proposed deal terms to assess screening before agreeing governance, access, or control rights. Separately, export-control obligations continue to apply regardless of the source of funding, and the company remains responsible for compliance. The available rules do not support a general conclusion that a particular holding-company structure or investor arrangement will avoid review.
A practical fundraising sequence
- Classify the business accurately. Decide whether the offering is primarily defense, dual-use with real civilian demand, or primarily civilian; use that classification to identify the relevant EIC route.
- Build customer evidence. Document end-user demand, product readiness, and a plausible adoption path, particularly if pursuing the defense-focused STEP call.
- Secure and verify an anchor commitment if needed. For STEP Defence, identify one investor able to precommit the required share of the total round, and verify qualification before relying on a US investor’s commitment.
- Map relevant funds. Review EIF-backed managers’ disclosed investment theses and approach those whose stage, geography, and sector fit the company.
- Check DIANA challenge fit. Consider applying when a published challenge matches the technology and the company would benefit from contractual support, testing, or defense-network access.
- Get transaction-specific advice early. Assess national investment screening and export-control requirements before finalizing investor rights, access, or control provisions.
What funding routes cannot tell you
Program terms and facility commitments do not establish which US fund is the best match, what valuation or terms a particular company can obtain, or whether a specific investment will require notification or receive approval. Those questions depend on the company, investor, jurisdiction, and transaction terms; they require company-specific commercial and legal assessment.
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