7 Open Categories in Defense-Tech Investment for 2026

Defense-tech investment in 2026 has a paradox at its core: the sector has never raised more money, yet most of its highest-priority categories still have no dominant, fully funded winner. Twenty-six new billion-dollar defense startups have emerged globally since the start of 2025, and in Europe alone the sector pulled in 8.7 billion dollars in 2025 — a 55 percent jump year-on-year, according to Dealroom and the NATO Innovation Fund. Drones and counter-drones absorbed that first wave so thoroughly that the category now looks closed to new entrants.

Key takeaways:

• Seven categories remain open for new entrants: missiles, propulsion, subsea, space, nuclear energy, cyber offense, and biodefense
• Drones and counter-drones are the one closed category — too many funded winners for a newcomer to break in
• CEE is the fastest-growing region for defense-tech deal activity in Europe, even where funding volume still trails the UK and Germany
• Missile production is shifting from bespoke to mass-scale, led by the US's 12.6 billion dollar FAMM program
• Western Balkans capability — legacy ammunition plants, Croatian UGV expertise, Slovenian simulation know-how — lines up directly with several of these gaps

Missile Investment: From Bespoke Weapon to Mass-Produced Commodity

Missiles were historically low-volume and expensive, built in the hundreds for wars expected to be short. That assumption no longer holds. Russia now fires missiles into Ukraine by the thousands, and in a twelve-day exchange in June 2025, Iran launched roughly 550 ballistic missiles at Israel — intercepting them consumed a quarter of America's THAAD stockpile.

Washington's answer is the Family of Affordable Mass Missiles (FAMM): a 12.6 billion dollar Pentagon program to procure 28,000 low-cost cruise missiles, built on a saturation doctrine — cheap weapons fired in volume to exhaust an adversary's expensive interceptors. Castelion, Anduril, the bootstrapped Co-Aspire, and Kongsberg's Zone5 have already won large contracts.

Europe followed at the Ankara NATO summit this month: twelve members signed onto Deep Precision Strike, a UK-led, 50 billion dollar, ten-year pledge for long-range strike, alongside interceptor programs from MBDA and Destinus. Ukraine's Fire Point, maker of the 3,000-kilometer Flamingo, and Hypersonica, which just flew Europe's first privately funded hypersonic test, are the first serious challengers in a field still wide open.

Propulsion Technology: The Bottleneck Behind Every Defense System

Every missile, drone, and interceptor in this buildup needs a motor, and the supply chain is stretched thin. Russia launched around 11,000 Shahed-type drones at Ukraine in 2024 and more than 38,000 in 2025; the newest jet-powered variants fly at 500–600 km/h — too fast for the propeller-based interceptors built for earlier versions. A turbojet can close that gap, but spool-up takes up to two minutes, from one of the industry's tightest supply chains.

That bottleneck is drawing its own generation of entrants: Ursa Major in rocket motors, Volund Manufacturing in low-cost gas turbines, Venus Aerospace in hypersonic rocket engines, and Greenjets in electric jet propulsion.

Subsea Defense Investment: The Next Battlefield

Naval innovation's first wave played out on the surface — Saronic's strikes during the Iran conflict, and UFORCE, whose Magura drones destroyed roughly a third of Russia's Black Sea Fleet, reaching unicorn status in March. The next front is underwater, and it's directly relevant to a Mediterranean and Adriatic-facing region: Russia is running a hybrid campaign against the cables and pipelines Europe depends on, and tracking just three of its submarines this spring cost Britain's Royal Navy 500 personnel, a frigate, and 450 flying hours.

Governments are answering with autonomous platforms: Britain's Atlantic Bastion (1.5 billion pounds over four years) will scatter listening drones across the North Atlantic from 2027, and eighteen EU states have signed a joint seabed-defense project carrying an indicative 43 to 72 billion euros by 2036. M&A has followed — Lockheed Martin paid 3.45 billion dollars for sonar maker Ultra Maritime, and Kraken Robotics spent 615 million dollars on Covelya.

Space Defense Investment: Orbit Becomes a Battlefield

Orbit underpins nearly every modern military function, and it's already being tested as a target. Russia hacked Viasat an hour before invading Ukraine in 2022; in May this year it parked five satellites within 500 meters of ICEYE's Finnish radar spacecraft used by Ukraine.

Golden Dome is the clearest preview of a full space-warfare architecture: 185 billion dollars for an initial capability by 2028, with 7,800 orbiting interceptors, funding True Anomaly, Anduril, Turion, Impulse, and Sierra Space. Europe's largest commitment is German — 35 billion euros for military space by 2030 — backing Helsing and the ICEYE-Rheinmetall joint venture, which secured a 1.7 billion euro contract for roughly forty radar satellites.

Nuclear, Cyber Offense, and Biodefense: Three Emerging Investment Categories

Three categories sit earlier on the curve. Microreactors solve a real base-power problem, and the US Army's Janus Program is mandated to run small reactors on military bases by September 2028, backing Radiant, Antares Nuclear, Valar Atomics, and Oklo.

Cyber offense has shifted from bespoke espionage to statecraft — France nearly tripled its military cyber budget since 2018, Germany just made cyber a fourth armed-forces branch — but the spending has bought headcount, not scale, a gap Twenty, Method Security, and Open Minds are starting to close.

Biodefense is the smallest category, but exposure is growing as AI lowers the barrier to engineering dangerous pathogens. The US spends roughly 27 billion dollars a year here; Europe has the pharma and AI talent but no equivalent yet.

What This Means for CEE and Western Balkans Defense Industry

CEE is already the fastest-growing region for defense-tech deal activity in Europe, per Dealroom's tracking, even where funding volume still lags the UK and Germany. Estonia's Frankenburg Technologies — interceptor missiles against drone saturation — signed a manufacturing deal with Poland's state-owned PGZ in March, exactly the kind of prime-startup pairing that gives smaller markets a route to production scale.

The Western Balkans has assets that map directly onto the categories above: former Yugoslav ammunition plants with spare industrial capacity, Croatian expertise in uncrewed ground vehicles [previous AD coverage of Croatian UGV programs], and Slovenian simulation-technology SMEs. Propulsion and munitions production — the bottleneck identified above — is the legacy capability the region can revive fastest. Subsea remains the least explored opening: the Adriatic carries the same undersea-infrastructure exposure as the North Atlantic, with no comparable regional investment signaled yet.

FAQ: Defense-Tech Investment in 2026

What are the seven open categories in defense-tech investment for 2026?

The seven categories still open to new entrants are missiles, propulsion, subsea systems, space, nuclear energy, cyber offense, and biodefense. Drones and counter-drones are considered closed, with enough funded winners already in place to leave little room for newcomers.

What is the Family of Affordable Mass Missiles (FAMM)?

FAMM is a 12.6 billion dollar Pentagon program to procure 28,000 low-cost cruise missiles, built on a saturation doctrine: fire cheap weapons in volume to force adversaries to expend expensive interceptors. Production begins in autumn 2026.

Why has subsea warfare become a defense-tech investment priority?

Russia is running a hybrid campaign against undersea cables and pipelines in the North Atlantic, and tracking just three Russian submarines cost Britain's Royal Navy 500 personnel and a frigate in one season. Autonomous underwater drones are replacing manned surveillance because no navy can monitor an ocean manually.

What is Golden Dome?

Golden Dome is the US space-defense architecture budgeted at 185 billion dollars for an initial capability by 2028, including 7,800 orbiting interceptors plus tracking, communications, and launch infrastructure layers.

What does the 2026 defense-tech shift mean for CEE and the Western Balkans?

CEE is the fastest-growing region for defense-tech deal activity in Europe. The Western Balkans specifically holds legacy ammunition-production capacity, Croatian UGV expertise, and Slovenian simulation know-how — capabilities that align with the propulsion and munitions gap identified as one of the seven open categories.