Is Europe’s defense investment wave real, or is it simply venture capital wrapped in a Ukrainian flag?

The debate featured Nicholas Nelson, General Partner at Archangel Ventures, and Sebastian von Ribbentrop, Founding Partner at Join Capital.

At stake is more than narrative. It is about capability, returns, sovereignty — and the structural future of European capital markets.

Until recently, defense investing in Europe was controversial. Many institutional LPs avoided the sector. ESG mandates were interpreted narrowly. Defense was often softened under the label “dual-use.” Russia’s invasion of Ukraine changed the landscape. Defense budgets rose. Political rhetoric shifted. Venture capital began flowing into the sector at unprecedented levels.

But the central question remains:

Is this a structural capital reallocation — or a short-term momentum trade?

The debate crystallizes around one fault line: defense-first vs dual-use.

Nicholas argues Europe’s hesitation to embrace defense-first investing is both strategically and financially misguided. Defense-only startups, he contends, have historically outperformed. Dual-use often dilutes focus by forcing two distinct go-to-market motions. Real capability requires designing directly for the warfighter — not adapting commercial products later. In his view, dual-use in Europe often functions as a reputational hedge rather than a strategy.

Sebastian counters that dual-use is not compromise — it is risk management. Advanced technologies can serve both industrial and defense customers without duplicating entire teams. Diversified revenue reduces concentration risk. Non-dilutive defense contracts can substitute late-stage equity rounds in a region where growth capital remains thin. And Europe’s comparative advantage may lie less in building vertically integrated primes — and more in dominating high-precision subsystems.

As the conversation escalates, it moves beyond product strategy into a deeper structural issue: scale capital. Even where early-stage defense investment has improved, later-stage funding remains limited. Several leading European defense startups have relied heavily on US or Middle Eastern growth capital.

Which raises uncomfortable questions:

Can Europe build independent defense champions without foreign growth capital?
Will its strongest companies inevitably “pick a flag” as they scale?
Is fragmentation across 30+ procurement regimes Europe’s structural disadvantage?

Without coordination at scale, even strong early-stage ecosystems struggle to produce global champions.

What’s covered:

00:30 Framing the question — structural shift or narrative trade?
02:00 From taboo to trend — ESG optics and the Ukraine inflection point
04:15 Defense-first vs dual-use — the core strategic divide
07:30 The defense-first case — focus, procurement alignment, and capability building
11:00 The dual-use counterargument — diversification and risk management
14:30 Subsystems vs primes — where Europe’s advantage may lie
18:00 The growth capital gap — reliance on US and Middle Eastern funding
21:00 “Picking a flag” — sovereignty vs scale
23:30 Procurement fragmentation — 30+ regimes and scaling friction
26:00 Final takeaway — Europe’s defense future depends on capital conviction and coordination