The European investor community is grappling with an increasingly urgent and complex question: How should we invest in technologies with military applications?

While many venture capital funds express a willingness to support dual-use technologies—those with both civilian and defense applications—they often exclude investments that are explicitly defense-focused. However, the line between the two is anything but clear, and both venture capitalists and their limited partners (LPs) are actively redefining where that boundary lies.

Where Is the Line?

A common approach is to assess whether the technology is primarily designed for military purposes. For instance, Finnish Industry Investment Ltd considers any technology built mainly for military use to be defense technology, not dual-use.

But distinctions aren’t always simple. Consider WhatsApp—it’s used for everyday messaging but can also be used for battlefield communication. Intent, design, and context matter.

Still, there are signals. Technologies that conform to NATO STANAGs (Standardization Agreements) are typically designed with military integration in mind. These standards ensure interoperability among NATO member forces, and compliance is usually a strong indicator of a military-specific use case.

At the other extreme, some hold a permissive view: that any technology qualifies as dual-use unless it is literally arming a weapon. This view may allow more flexibility but risks oversimplifying serious ethical and strategic concerns.

Why It Matters for Investors?

Most VC funds operate within the ethical frameworks defined by their LPs—often funds of funds, pension funds, or institutional investors. These groups typically have firm ESG (Environmental, Social, and Governance) mandates, many of which exclude defense technologies.

That’s why, when evaluating a startup, it’s critical to ask:

• What percentage of revenue comes from defense?
• What is the primary function of the product?
• Does the technology comply with NATO standards?
• Could it be used exclusively in military operations?

The Strategic Dimension

Beyond ethics, there's a strategic angle: If Europe avoids investing in military technology, what happens to its security and sovereignty?

Emerging defense areas—such as autonomous drone swarms, cyber resilience, or battlefield AI—are advancing rapidly. If European startups lack the funding to compete, others will fill the void.

Final Thoughts

The debate around dual-use versus MilTech is more than academic. It shapes funding decisions, startup strategies, and Europe’s future ability to ensure its own defense.

Defining the line will remain messy, but ignoring it is no longer an option. For founders and investors alike, it’s time to understand where you stand—and why it matters.