Key takeaways
- Europe’s rearmament creates a multi-year opportunity for Israeli defense and resilience startups.
- Germany is the anchor market, while Europe’s eastern flank offers urgent demand and Poland significant untapped potential.
- Counter-drone systems, sensing, AI, cyber and critical infrastructure protection are promising entry points.
- European primes and fast-growing defense startups offer routes to customers through subsystem partnerships.
- Local production, integration partners and design customers will be crucial to navigating Europe’s procurement requirements.
Europe is rearming faster than at any time since the Cold War, and it has become Israel’s largest defense export market. In 2025 European countries signed about $6.9 billion worth of Israeli defense contracts, nearly double the 2022 level. For Israeli founders building in defense, resilience and critical infrastructure, Europe may grow faster over the next five years than the US. Here is the data, where the money is going, and where the risks are.
My partner Eze and I have lived and worked in Europe for more than a decade, so we know this market from the inside. This is also a new chapter for Remagine Ventures: we have started investing in defense, resilience and critical infrastructure, and have already backed four companies in the space (more on them below).
Europe is spending like never before
Every major dataset points the same way, and equipment purchases are rising even faster than overall budgets.
- Total spending: European military spending rose 14% in 2025 to $864 billion, the highest SIPRI has ever recorded. European NATO members grew spending faster than in any year since 1953.
- EU-27: defense spending reached €418 billion in 2025 (+20%) and is projected at €454 billion in 2026.
- Equipment purchases: EU procurement went from €61 billion in 2023 to €88 billion in 2024 and €115 billion in 2025.
- Imports: European arms imports in 2021–25 were 210% higher than in 2016–20. Europe now takes a third of all global arms imports.
- Breadth: 23 of 27 EU states spent at least 2% of GDP in 2025. Germany, Poland, Italy and Spain all grew spending by 20% or more.
This is not a one-year spike. NATO allies have committed to 3.5% of GDP on core defense by 2035, plus 1.5% for defense-related spending such as infrastructure and resilience.
Europe is now Israel’s biggest defense customer
Israel Ministry of Defense (SIBAT) annual export reports, 2021–2025; Europe value = total × Europe share
Europe has been Israel’s largest export region in two of the last three years. Total Israeli defense exports have grown every year since 2021, and Europe’s dollar value grew with them.
What happened in 2025?
Europe’s share fell from 54% to 36% in 2025, but that is mostly arithmetic, not a retreat. Total Israeli exports rose 30% to a record $19.2 billion, and Europe stayed the largest region. Four things explain the dip:
- One mega-deal inflated 2024. The Arrow 3 contract with Germany made 2024 Europe’s spike year. Take it out and 2024 looks like a normal year.
- Asia grew faster. Asia-Pacific jumped from about 23% to 32% of export contracts, which shrinks Europe’s share even as Europe’s dollars held up.
- Western European politics cost real deals. Spain cancelled roughly €1 billion of contracts, and France restricted Israeli firms at Paris trade shows.
- The data is lumpy. These figures count signed contracts, not deliveries. A single $3 billion signing can move a region’s share by 15 points.
The forward signal is strong. In 2026 alone Greece signed a $3.4 billion air defense package and Romania a Spyder deal worth about €2 billion. My estimate is that Europe’s share climbs back to roughly 40-45% this year.
Germany: the anchor customer
Germany is now Europe’s biggest military spender and Israel’s most important European customer. As a German living in Israel, I see this relationship from both sides, and it has never been deeper.
- Budget: German military spending rose 24% in 2025 to $114 billion, the largest in Western and Central Europe for the first time since reunification. The defense budget is planned to reach €152 billion by 2029, triple the 2023 level.
- Arrow 3: the original $3.5 billion contract was expanded by $3.1 billion in December 2025, making it the largest export deal in Israel’s history. It is the upper layer of the German-led European Sky Shield Initiativ.
- Cyber and drones: in January 2026 Germany and Israel signed a cyber and security pact covering a German “Cyber Dome”, a joint AI and cyber innovation center, drone defense and civilian warning systems.
- Local production: Spike missiles for the Bundeswehr come through EuroSpike, a joint venture of Rafael, Rheinmetall and Diehl. This is the model that works in Europe.
Germany has also changed how it buys. The Bundeswehr procurement acceleration law (BwPBBG) passed the Bundestag on 15 January 2026 and has been in force since 14 February 2026. It allows advance payments specifically so startups and smaller firms can win contracts, and it runs until 2035.
Germany’s defense landscape: your customers and design partners
Germany now has two defense industries: long-established primes with decades of Bundeswehr contracts, and a new generation of venture-backed startups. Both buy subsystems: sensors, optronics, electronic warfare, navigation without GPS, secure communications and AI. That is where Israeli startups are strongest.
German defense landscape · 12 established players, 9 startups with $10m+ raised; funding as of November 2026
Defense tech took 36% of all German startup funding in the first nine months of 2026, almost all of it going to Helsing, Quantum Systems and Stark. These scale-ups are ramping production fast and need proven subsystems, so they are often a faster design partner than a prime.
The eastern flank cannot afford to cancel
Countries that face Russia directly are signing the biggest Israeli deals, and they are not walking away from them. Their argument is simple: delivery time and combat-proven performance matter more than politics.
Israeli defense deals with frontline European states · 6 signed deals and 1 in talks, 2023–2026, largest first
Outside Germany, that is roughly $9 billion of deals since 2023. Prague has also said it will block EU sanctions against Israel.
Poland is the open opportunity. It is NATO’s top spender at more than 4.8% of GDP and the largest recipient of EU SAFE loans (€43.7 billion), yet it buys mainly from South Korea and the US. Israel’s foothold is small but real: Rafael’s Spike missiles have been built there with local partner Mesko since 2003.
Spain is the opposite case. It cancelled a €700 million SILAM rocket launcher contract based on Elbit’s PULS and a €287.5 million Spike missile order, and passed an arms embargo law. Spain votes on 29 November 2026, and polls show the People’s Party and Vox winning a majority. Vox opposed the embargo, and PP leader Feijóo criticised cancelling signed contracts, though the PP has not committed to repealing the law. My bet is that Spain returns to the table, because the embargo law already allows exceptions in the national interest.
Where the money goes next: sectors for Israeli startups
There is no single public list of future European tenders, but four public sources show where the money is heading.
- The EU’s four flagships (Defence Readiness Roadmap 2030): drone defense, Eastern Flank Watch, Air Shield and Space Shield. The first two target initial capacity by end of 2026, though EU leaders have not yet formally endorsed them.
- SAFE’s eligible categories: ammunition and missiles, artillery, drones and counter-drone, air and missile defense, critical infrastructure protection, space asset protection, cyber, AI and electronic warfare.
- National plans: Poland’s published SAFE plan puts 26% into air defense, drones and counter-drone, its largest category, and Germany sent its parliament a list of 154 contracts worth about €83 billion through December 2026. Most other plans are not public.
- Joint buying: the EU wants 40% of arms purchases made jointly by end of 2027, up from about 20%.
European Defence Agency, Defence Data 2025–2026 · EU-27 · ‘other’ = total minus procurement and R&D
Together, these point to the sectors where Israeli startups have the strongest fit:
- Counter-drone and low-cost interceptors: the most urgent gap in Europe, from Poland’s SAN to the EU drone initiative.
- Layered air and missile defense: radars, sensors, command and control, and interceptors, where Israel’s combat record is unmatched.
- Sensing, optronics and ISR: observation and optronics rose to 22% of Israel’s export deals in 2025, from 6% a year earlier.
- AI, cyber and electronic warfare: including navigation without GPS and software that connects sensors, drones and command systems.
- Space asset protection: satellites and ground stations, an EU flagship of its own.
- Critical infrastructure protection: see the next section.
Critical infrastructure: the civilian market opening next
The next wave of demand will come from power grids, ports, hospitals and data centers, not only ministries of defense. In Germany it now has a legal basis.
- KRITIS umbrella law (KRITIS-Dachgesetz): passed by the Bundestag on 29 January 2026 and approved by the Bundesrat on 6 March 2026. For the first time it requires operators to protect the physical resilience of their sites against all hazards, including sabotage and terrorism.
- Who it covers: operators serving around 500,000 people or more. They must register with the federal civil protection office (BBK), run risk analyses and put resilience measures in place. Detailed minimum standards are not expected before 2030, so early movers can help shape them.
- The threat is real: Germany has seen a steady rise in physical and cyber attacks on infrastructure since 2022, and growing numbers of suspicious drone flights over military, energy and transport sites.
- Israel is already the partner: the January 2026 German-Israeli pact covers the Cyber Dome, drone defense and civilian warning systems.
For Israeli startups, this opens civilian budgets for perimeter and site security, drone detection over facilities, operational-technology (OT) security, resilience software and emergency warning. The EU’s SAFE loans also list critical infrastructure protection as an eligible category.
Headwinds, and how to play them
The biggest barrier is not trade-show politics. It is the EU’s new “buy European” rules.
- SAFE’s 65% rule: products bought with SAFE loans need at least 65% of their component value from the EU, EEA/EFTA or Ukraine. Israel is not on that list, so countries can buy Israeli systems only with their own money. The EU’s defense-industry program (EDIP) uses the same rule.
- Western European politics: Spain cancelled contracts, and France has limited Israeli firms at its Paris shows repeatedly since 2024. So far this has not dented the totals, but it hurts smaller exporters most.
- US dependence, now easing: some Israeli systems, such as Iron Dome and David’s Sling, need US approval for export. That is starting to change. Israel and the US are negotiating a new framework to replace the aid deal that expires in 2028, moving from grant aid to joint R&D and co-production. Less dependence on US aid should give Israel more freedom to sell to other countries.
The winning playbook is already visible: build in Europe. EuroSpike in Germany, Mesko in Poland, and EuroSpike in Germany and Mesko in Poland both turn an Israeli product into European content. For a startup, that means a European entity, a European manufacturing or integration partner, and a European design customer from day one.
Where we go from here
Europe is in a multi-year buying cycle: EU spending of €454 billion in 2026 and rising. Germany is the anchor, the eastern flank is the growth engine, and Poland is the prize Israel has not yet won. The 2025 dip in Europe’s share was a statistical echo of one giant deal, not a retreat.
For Israeli founders, the sweet spot is counter-drone, layered air defense, sensing and AI, cyber, and critical infrastructure resilience. The companies that win will be the ones that build with Europeans, not just sell to them.
We at Remagine Ventures are excited to invest in these categories, and we already have. Four of our portfolio companies are building here. They are still in stealth, so no names yet:
- Critical infrastructure resilience: a simulated model of a critical facility that runs attack scenarios, so operators can see where they are exposed before an attacker does.
- Flight safety: flight data read in real time to catch failure signals before an aircraft or mission is lost.
- Stratospheric coverage: a persistent stratospheric layer of aircraft that stay aloft for months to deliver coverage from above.
- Sovereign AI: a way for a company to train and run its own models on its own data, so its AI is genuinely its own.
We are open to more investments in this space. If you are an Israeli founder building for Europe’s defense and resilience market, we would love to hear from you.
Research and drafting for this post were done with the help of AI. All figures were checked against the primary sources; the views and conclusions are our own.
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