German venture capital firm Project A has announced the closure of a €325 million (US$373 million) fund to support European startups.

This fund is the firm’s fifth and largest to date.

The new fund will focus on investments in defense technologies, fintech, AI, and supply chain software, according to partner Malin Posern.

Project A plans to invest between €1 million (US$1.07 million) and €8 million (US$8.56 million) in early-stage startups.

Founded in Berlin in 2012, Project A manages €1.2 billion (US$1.28 billion) in assets.

The firm has historically focused on software startups like Trade Republic.

Since 2022, it has also invested in defense companies, including Quantum Systems, a drone manufacturer involved in Ukraine, and Arx Robotics, which develops battlefield robots.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Europe’s defense spending surge creates new venture opportunities

The EU is projected to increase defense spending by up to 1.5% of GDP by 2028, driven by geopolitical tensions, creating substantial market opportunities for startups in the sector 1.

Germany specifically plans to boost its defense budget from 1.9% of GDP in 2024 to 2.8% by 2027, exemplifying the continent-wide priority shift that’s attracting venture capital 2.

This spending acceleration has created a ripple effect in private markets, with European space ventures—often dual-use technologies with defense applications—securing a record €1.5 billion in 2024, representing a 56% year-over-year increase 3.

2️⃣ Institutional investors are creating specialized defense tech vehicles

Project A’s defense-focused fund is part of a broader trend where financial institutions are developing dedicated investment vehicles for the sector, overcoming historical hesitance toward defense technologies.

The European Investment Fund recently committed €40 million to Keen Venture Partners’ European Defence and Security Tech Fund targeting early-stage companies in AI, robotics, cybersecurity, and space technologies 4.