Venture capital could become NATO's ultimate weapon. Here's why

The NATO summit held in Washington DC this week marked the alliance’s 75th anniversary and was an important opportunity to reaffirm the role that transatlantic venture capital investment plays in fostering cooperation between member states.

Staying at the forefront of technological innovation is more important than ever to strengthen our nation's readiness in these turbulent times and secure the future of NATO's one billion citizens. This is not only necessary for our security, resilience, and ultimately prosperity, it also makes good business sense.

New domains of conflict are emerging that blur the lines between civilian and military technology. Instead of land, air, and sea, we are seeing strategic competition and conflict in space, the internet, border control, technology, supply chains, and even financial systems. Technologies first developed in the private sector are now increasingly being used for defense. This phenomenon has accelerated on the Ukrainian battlefield, where off-the-shelf drones, advanced communications systems, and software platforms are being used to thwart Russian aggression.

Synergies between advanced technologies developed in Europe and North America could further accelerate this transformation.

The European tech scene has changed dramatically over the past two decades, going from challenger to global competitor. And while the US saw a decline in deep tech venture capital funding growth last year, the European market saw a continuous increase in funding. According to Dealroom data, deep tech investments in the 24 countries currently backing the NATO Innovation Fund (an independent venture capital firm that invests in defense, security and resilience technologies) grew by 22.4% between 2018 and 2022. This creates strong advanced technology adoption opportunities for all members of the alliance and provides the fund's portfolio companies with the opportunity to expand their business in multiple markets.

This dramatic change reflects the ambitious rise of European entrepreneurship, continued investment in breakthrough technologies and the presence of excellent STEM talent. The region's boom in dual-use technologies offers huge opportunities for commerce and defense, with certain sectors such as space, biotechnology, new materials and manufacturing, and artificial intelligence leading the way in terms of both deal activity and investment volume.

For example, space has become integral to both civilian and military life. The liberal internationalism of past decades, which viewed space as neutral, has been replaced by geopolitical competition between NATO countries and other great powers. Instead, space has become a realm of strategic competition. We are in an era reminiscent of the days when Sputnik, the moon landing, and the Strategic Defense Initiative defined our approach to space. But the lines between commercial and military capabilities are blurring, and governments are increasingly relying on private companies to meet their space launch requirements. Commercial sensing and communications capabilities complement those of the military.

Just as Operation Desert Storm in the 1990s was the first to use Earth observation capabilities significantly in military operations, Ukraine's reliance on satellite communications and new commercial sensor capabilities in its war with Russia has demonstrated that space is a critical pillar of modern warfare.

Space is already essential for transportation, communications, and disaster relief. The commercial market for space services is expected to reach $1.8 trillion by 2035. This market is growing rapidly as launch costs fall and demand for data, sensors, and software increases. Thus, as economic connectivity grows and access to space becomes more affordable, the space economy will impact the value and resilience of nearly every industry around the world.

While the United States will likely continue to hold the lead, China's bold space program aims to challenge U.S. power militarily, economically and diplomatically. Countering China and its allies' growing space presence requires a robust transatlantic effort. This must include dual-use technologies so NATO can leverage diplomacy, state-to-state relations and R&D advantages to maintain and improve its strategic advantage.

While the United States leads space innovation, its rapid growth could be further supported by the European space industry, which has become more promising over the past decade. According to a 2022 analysis by Fondazione E. Amaldi, European space tech startups have raised $7.1 billion since 2010. And since 2019, venture capital investment in the space sector has increased 4.4-fold to $783 million.

European governments are using their resources to accelerate this trend: the European Space Agency (ESA) has allocated more than €1 billion to developing new capabilities, and France has invested €2.5 billion in its space sector, including reusable micro-launches to make space cheaper and more accessible.

In addition to the continent's technological potential, increased investment in European advanced technologies could counter hostile capital in highly strategic North American and European technology areas. Increasing European investment and cooperation in dual-use technologies would have the benefit of countering and inhibiting the ability of hostile powers to fund and influence promising start-ups and markets that provide a competitive technological advantage to North America and Europe.

Greater transatlantic cooperation has resulted in joint support for promising, diverse, and innovative technologies as well as adoption of these technologies across the alliance. It is central to defense strategy, military interoperability, weapons systems, industrial procurement, and production policies. Adoption across the alliance also reduces the burden on governments compared to building national capabilities from scratch. Sharing the burden across the alliance allows for greater impact in a capital-efficient manner.

The 2024 Washington Summit was a unique opportunity for NATO leaders to identify technology opportunities that can help secure the future of the Alliance and its member nations. By investing in and adopting emerging dual-use technologies, NATO can leverage the innovation power of the private sector and the transatlantic talent pool to counter the influence and ambitions of our strategic competitors.

A transatlantic deep tech dual-use ecosystem will not only strengthen the security and resilience of NATO countries, but it will also foster economic growth and innovation across the Atlantic. We are stronger together, so the time to act is now.

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