The clock that only the Kremlin can stop
A single year now governs German defence planning: 2029. The nation’s top military officer estimates Russia could be ready to launch a major war against NATO territory by then — sooner still if the fighting in Ukraine freezes and Moscow regroups. Russia is rebuilding towards an estimated 1.5 million soldiers and producing or refurbishing some 1,500 tanks a year. In several key fields — electronic warfare, loitering munitions, fibre-optic drones — Russia’s battlefield capabilities outflank NATO’s. Germany has only three years to respond. Scaling an ecosystem of defense startups would help massively. Yet Germany’s cultural, institutional and regulatory fabric stands in the way of more innovation.
Larger budgets, more tanks and increased ammunition are necessary, but they do not address the underlying problem. Germany is already spending — the defence budget climbs towards €153 billion, roughly 3.5 per cent of output, by 2029. The limiting factor is speed — how quickly the country can develop, test and deploy new weapons. In Ukraine, drones and their flight-control software are redesigned in months. German defence procurement, which routinely takes ten to fifteen years for a major platform, can’t keep that pace. Whether Germany can radically shrink the time for innovative defence capabilities to come to market will determine whether the 2029 deadline can be met.
This is not abstract. State-sponsored hybrid warfare is plain to see: Sabotage at a Rheinmetall plant, drone overflights of military sites, jamming of satellite-positioning signals, attacks on undersea cables. The German accelerated-defence-procurement law of February 2026 eased some rules, but procurement remains top-down: primes build to spec while available or emerging commercial technology is often dismissed.
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A nation of inventors, not heroes
Germany is good at inventing stuff, at least if we consider patents as a proxy for innovation. With about 133,000 patents filed in 2024, Germans are slightly ahead of the US and China in terms of patents per 1 million people. Yet its risk-averse culture and burdensome general business environment translate to a low success rate for commercializing innovation. The US hosts roughly 1,000 unicorns – private tech companies valued at $1 billion or more – while the UK hosts roughly 100 and Germany roughly 50.
The good news is that Germany now leads Europe when it comes to venture capital invested in defence – €1.5 billion since 2024. Admittedly, much of that venture capital came from US-led funds and €1 billion was allocated to pan-European player Helsing alone. Scale-ups such as Quantum Systems, Stark and Helsing — all founded after 2021 — are already world-class. In November 2025 a €900 million order for some 12,000 loitering munitions was split between the latter two and Rheinmetall.
Yet these champions emerged despite the German system, not because of it. According to the German IT industry association’s 2026 Defence Tech report, half of German def-tech founders would choose other countries than Germany if they faced a choice again on where to base their companies. They are missing the connective tissue between front-line defense requirements and procurement mechanisms that provide a fast-track route-to-market for innovative technologies.
Learning to become a startup nation
To defend its prosperity and security going forward, Germany needs to re-invent its national core competence: process optimization. What is needed in the defence domain is a radically new set of processes and institutional frameworks that elevate, accelerate, and land innovations in pursuit of NATO’s mission to defend free democracies. Germany could adapt some of the processes and institutional frameworks that have served other nations well, such as:
Ukraine’s Brave1 began as a support program for defense-tech startups and is now the largest business angel in the Ukrainian defense technology sector, bringing together the government, the military, scientists, and manufacturers to develop technologies that alter the course of wars. Brave1 also operates a state-run marketplace enabling brigades to order approved drones and electronic-warfare kit directly, with delivery times around ten days.
The Pentagon’s Defense Innovation Unit signs prototype contracts within 60–90 days and allows winners to move straight into series production without another tender.
Britain established UK Defence Innovation in July 2025 to unify its scattered agencies, providing it with a dedicated £400 million budget.
Even China’s military now sources artificial intelligence (AI) from a base of young private firms: a study by Georgetown’s Center for Security and Emerging Technology of 2,857 People’s Liberation Army contracts found that non-traditional, mostly private vendors — two-thirds founded after 2010 — won more awards than the state-owned giants.
Germany is starting to harness its defence tech startup ecosystem via the Bundeswehr’s Centre for Innovation (InnoZBw) near Munich, inaugurated in February 2026.
Bolder steps are needed however for Germany to become a startup nation that serves the need of its Bundeswehr armed forces:
The first is a fast-track contract mechanism: state the problem, not the solution; replace the rules that exclude young firms with a simple competency test; and sign prototype contracts within 90 days, with an automatic transition to series production on success — the “success memo” that gives private investors confidence to finance prototypes in advance.
The second is real spending authority: let the Centre for Innovation procure directly, up to €50 million for each project, so that promising prototypes don’t die in the “valley of death” between pilot testing and full-scale production.
The third is to unleash private capital: In December 2025, Germany announced the Deutschlandfonds, a €130bn fund to boost innovation in energy, infrastructure and defence. However, the players involved – the German development bank KfW and pension funds – are more familiar with ‘bank loan’ lending criteria than with Silicon Valley-style venture investing. Will the Deutschlandfonds serve as a loss-protector to catalyze billions in private funding? Or will it become a politically driven vehicle to hand out government subsidies to players who are not world-class? Germany has a long history of the latter in areas like clean energy.
The fourth is a binding “10 per cent rule” for defence innovation, pioneered in the UK: allocate a minimum portion of the defence procurement budget to innovative autonomous and unmanned systems. This lever is the most potent, because it turns a slogan into an irremovable numerical commitment for any committee.
These four measures all represent a significant departure from German administrative practices and institutional fabrics. That gap is precisely where more courage is required.
How long does it take to swap the engine?
There is no time for peacetime institutional lethargy. The challenges the UK faces in accelerating defense innovation serve as a cautionary tale. Creating an agency like the Bundeswehr’s Centre for Innovation and a fund like the Deutschlandfonds is a good start but does not guarantee a faster path for innovations to reach the soldiers who defend democracy on the frontlines. Germany’s temptation will be identical: to announce a centre, congratulate itself, while leaving the institutional fabric and organizational culture largely untouched.
Germany now faces a historic choice: whether to swap the old engine that has powered post-war peace and prosperity for a new engine.
Merely tuning the old engine will leave the Bundeswehr with newly procured but largely irrelevant legacy systems against an adversary that iterates in weeks and has mastered asymmetric warfare against free and open societies.
Building a new engine of innovation will require a radical willingness to reexamine the German way of doing business – embracing more fluid and faster ways of collaboration and decision making, and actively shaping the direction of emerging technologies, notably AI, to defend democracy and freedom.
During the late 1800s Gründerzeit, the impulse of industrialization turned Germany into a startup nation and the state was modernized. We are now entering a historical phase where prosperity comes disproportionately from founders who take risks, and where the need for government functions to modernize has become quite urgent. Therefore, the innovation engine could even extend to sectors outside defense, and lay the foundation for Germany’s prosperity going forward.
Capital and talent for this journey are in ample supply. What is missing is the political will to change a comfortable status quo before the deadline forces the issue. Russia is not waiting for Germany to reach a state of readiness. The clock is running.
