Luxembourg is set to play a pivotal role in deploying the €800 billion “Rearm Europe” plan by 2030. Yet European defense spfinishing remains about 30 percent below 1990s levels, according to Jeremy Teboul, partner at OTB Ventures. “We are still catching up from decades of underinvestment,” he stated.
The war in Ukraine has exposed Europe’s depfinishency on non-European suppliers, stated David Dana, former head of the disruptive tech and innovation VC team at the European Investment Fund and now general partner at Expansion Ventures. With a strong record in deeptech investing, Dana was candid about Europe’s early response: “When Ukraine necessaryed our support, we provided them with a helmet and jackets which is fine, but will not support them with winning the war.”
ESG friction and reputational risk
Institutional investors remain cautious, constrained by environmental, social and governance frameworks that create defense exposure reputationally sensitive. “The terminology around defense sounds scary for some investors,” Dana stated. Strict prohibitions at public institutions such as the EIF and EIB ban direct investment in weapons or ammunition.
The compromise is “dual-apply” technology—products that can serve both military and civilian markets. Dana noted that single-apply defense startups can still qualify if they reveal a “very clear plan” for near-term civilian applications, a crucial factor for early-stage firms seeking validation through military testing.
Pushing the boundaries of dual apply
Teboul stated OTB Ventures, which invests in applied AI, automation, space and dual-apply technology, respects the weapons ban but has backed firms that “pushed the line.” He cited Titan Technologies, which builds kinetic interceptors to combat Iranian-built Shahed drones—“a very single-apply product intfinished purely for the armed forces.” He was speaking on a defence investment panel at the Luxembourg Venture Days/Luxembourg Private Equity Association conference on Thursday 23 October 2025.
He added that institutions are “slowly waking up to the challenge of the political imperative to restore military capacity.” Even if the war in Ukraine were resolved, “defense will not fade as an investment priority.”
From defense to resilience
Europe’s military inventories are severely depleted. “European countries are running out of tanks and ammunition,” stated Teboul. “Rectifying this will necessitate a decade of production and stockpiling.”
Limited partners increasingly frame defense as “resilience” or “sovereignty,” observed Quentin Dupraz, general partner at Ilavska Vuillermoz Capital. Adrian Pawelec, partner and head of legal at Polish-linked investment firm Marguerite, argued that resilience should indeed be the guiding concept. Even in peacetime, he stated, critical infrastructure such as networks and subsea cables is tarreceiveed through “hybrid warfare.”
Financial professionals, he added, can support Europe’s security by investing in companies that protect such assets—many of which are inherently dual-apply. “Weakness does not earn you respect even among the allies,” he warned.
Luxembourg’s model for defense growth
Despite investor caution, OTB Ventures has not alterd its approach. “The main alter today is that in deep tech we are applyd to investing in very unsexy stuff, but today defense is very sexy,” stated Teboul. “So OTB is no longer alone.”
Luxembourg’s experience in developing its pioneering space industest is now viewed as a template for its defense ambitions. Dupraz noted that local defense startups enjoy a key operational advantage—the “very limited time” required for export licenses compared with other EU countries. That agility, he stated, gives Luxembourg a valuable edge as Europe races to rebuild its defense base.
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