NextFin News - European defense technology is preparing for its public market debut. German reconnaissance drone maker Quantum Systems and Swiss-based tactical drone developer Destinus are actively interviewing investment banks to lead initial public offerings targeted for 2027, according to Bloomberg. This dual move represents the first major wave of European defense startups seeking to transition from venture capital backing to public equity markets, riding a wave of military procurement triggered by the war in Ukraine.
Quantum Systems, led by Chief Executive Officer Florian Seibel, has become a critical supplier to the Ukrainian armed forces. Its flagship Vector drone, an electric vertical take-off and landing reconnaissance aircraft, has provided real-time battlefield intelligence. The Munich-based company has raised over €100 million from high-profile backers, including Peter Thiel’s Founders Fund, positioning it as a prominent player in Europe's emerging sovereign tech sector.
Destinus presents a more unconventional trajectory. Founded by Mikhail Kokorich, a serial aerospace entrepreneur who renounced his Russian citizenship in protest of the war, the company initially set out to build hydrogen-powered hypersonic cargo planes. However, the immediate demands of the conflict in Ukraine prompted a rapid pivot. Destinus now manufactures low-cost tactical drones and loitering munitions, supplying hundreds of units to Kyiv while continuing its long-term hypersonic research.
The planned 2027 listings mark a structural shift in how defense technology is financed in Europe. Historically, institutional investors and venture capital funds avoided defense due to environmental, social, and governance mandates. The push for European defense self-reliance has intensified under U.S. President Trump, whose administration has repeatedly urged European NATO members to meet or exceed their defense spending targets of 2% of GDP. This geopolitical pressure, combined with the ongoing conflict on Europe's eastern flank, has forced European governments to scramble to rebuild depleted arsenals, driving defense budgets to historic highs.
While some investment bankers are eager to pitch for the mandates, defense sector analysts urge caution. Sebastian Clauß, a defense industry analyst at Munich-based private bank Hauck Aufhäuser Lampe, who has historically maintained a conservative stance on early-stage military hardware valuations, suggests that public markets may not offer the same valuation premiums as private venture rounds. Clauß notes that defense tech startups often struggle with lumpy procurement cycles and low capital efficiency compared to software-as-a-service businesses. His cautious view is not yet a consensus on Frankfurt's trading floors, where retail and institutional appetite for defense stocks remains high, but it highlights the valuation gap these startups must bridge.
Some market participants remain skeptical about whether defense tech startups can maintain their lofty private valuations in the public sphere. Unlike software companies with 80% gross margins, hardware-heavy drone manufacturers face significant supply chain constraints, rising component costs, and intense competition from low-cost manufacturers. While European defense spending is projected to remain elevated, public investors may apply a steep discount to companies whose revenues are concentrated in a single conflict zone.
The race to the public markets will serve as a litmus test for the entire European defense tech ecosystem. If Quantum Systems and Destinus succeed in securing robust valuations, it will pave the way for a broader cohort of military startups to tap public capital. For now, the two companies are laying the groundwork, betting that the geopolitical landscape of 2027 will still favor those who build the machinery of modern warfare.
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