Industrial AI, Defence & Space Tech: April 2026 VC Rotation

Software ate the world. In Germany, that area is over. If your startup doesn't touch the physical world, capital has already moved on. Welcome to StartUpLead IO, your podcast and YouTube blog covering the German startup scene with news interviews and live events.

This is Startup Breakout. I'm Joe, joining you from Frankfurt am Main, Germany. With me today, not from New York City, is Chris Farnbach. Chris, good to have you here.

Hello. I'm in my childhood home in the middle of Germany, Witzenhausen. So that means we're in the same state in Hesse. And yeah, people who are watching us on, who are actually watching us on YouTube might see some tchotchkes from my childhood behind me.

Good to be here. You got a big episode ahead of us. Yes, we do. A big episode.

Our news cut runs from March 23 to April 22, 2026. The production date is of course also April 22. And the thesis for this month is simple. Dach Venture capital has completed a structural rotation from software to physical infrastructure.

The money is going to companies that build things governments and enterprises cannot do without. Think defense, space, sovereign technology. Not another SaaS layer, not another marketplace. Hardware with procurement contracts.

Yeah, and we can also really see that the numbers are backing that up. So in Germany, for example, we see that companies raised $3.19 billion. So like $3.

2 billion across more than 130 equity rounds through April. That' a plus from of 15% year on year in the Dach region as a whole. So Deutschland, Austria, Switzerland, GSA, as they say in English, has were $4.12 billion deployed in nearly 200 rounds through March.

And Switzerland is forecasted to reach 1.5 billion Swiss Franks in the first half. That's also more than a third more than last year. So yeah, there seems to be like a weird kind of optimism in the market.

Money is there. It is, it is. And I want to add that only the VC funding rounds that have been found. So guys, keep in mind there's a lot of precede, seed, even series A funding rounds that are not on those numbers yet.

Also, the geography has shifted. As we talked about in the last episode, Munich overtook Berlin in venture capital for the first time. 2.7 billion euros versus 2.

4 billion euros, adding up to a very significant number. Oh, my God. That's not a blip. The point of this take is that it is a structural realignment driven by defense, robotics and industrial AI, which is more prevalent in Munich than in Berlin.

We have three predictions on record for this episode. We could be early, but the direction is pretty clear. Thesis number one, Defense tech and space will produce more billion euro outcomes than SAS within 24 months. Thesis number two, Munich's funding lead over Berlin is permanent.

Priorities have shifted away from B2C where Berlin is still dominant. Number three, the Nasdaq IPO window for European climate tech is closed until at least 2028. Let us get into it our segment. Number one, Europe's space.

That a world would not have thought I would ever talk about that here, Chris, we start Artemis. I mean space is the hardest topic at the moment. Everybody loves space. Yeah, exactly.

I do. My sons too. I have to read them space stories at night. By the way, ChatGPT is very good.

If you tell them how old your kids are, what the topic should be, how long you want to read, it comes up and the style of a specific children's book author and it comes up with an amazing good night story. That's how they get you. That's how they get you. Anyway, we start with space because this card gave us two significant signals.

First, ISA Aerospace, we talked about them quite frequently. The munich based lounge company is in talks to raise 250 million euros at the 2 billion euro valuation that is their largest crown today. They have raised over US$654 million total, including a 150 million euro convertible bond from Elbridge Industrials from Elbridge Industries last year. Yeah, and also this is something where the context really matters.

Their second orbital launch attempt from Andoya Spaceport, that's in Norway, scrubbed multiple times in late March, once because of an unauthorized boat entering the danger zone, then because of a pressure tank leak, which is something that sounds really dramatic, but it actually happens quite often, even at the NASA and SpaceX attempts. And their first attempt in 2025 ended about 30 seconds after liftoff with the rocket falling into the sea. So yeah, we will, we will see how well they're doing.

But also here, given what we've learned from space startups and space projects in the last couple of years, it's. It always these, these steps and improvements are always really incremental from one try to the other, from one attempt to the next. For me actually the question is, does the next launch attempt work? If orbit is achieved, it validates attempt decade of European commercial launch investment.

If not, the 250 million round becomes a stress test of investor patience in of course capital intense deep tech Europe needs a sovereign launch capability and ESA Aerospace is the continent's most capitalized bet. And right next to it in Switzerland we see Our second space signal of this episode, Pave Space P A V E that's based in Zurich. They closed a 40 million all in cap because they are paving the way, I guess. They closed a $40 million seed round led by Visionaries Club and Creandum.

They're building the Leoba Ly Oba heavy lift kick stage. That's a 20 metric ton vehicle that can deliver up to 5 metric tons of payload from low earth orbit to geostationary or even lun trajectories in under a day. That's what they say. They were founded in 2024 by EPFL alumni and they plan a demo launch in October.

So it's also an interesting development in that space. I think we'll be looking a lot into space in the future. We already may tell the audience that due to compliance of your current full time job, they may be hearing you before the before summer for the last time here actively with us in startup radio. Very unfortunate.

Let's get back to our topics here. A 40 million dollar seat is a mega round by European space standards. To Dach space signals in just one news cut. The space over in narrative is no longer just policy documents.

It's real venture capital flowing. Yeah. Moving on from space to defense. Yes, the drone industrial base.

Germany's defense budget hits 83 billion euros in 2026. This is a 20 billion euro year on year increase. That's a hell lot of money. Projections reach 162 billion by 2029 including off budget funds.

And the Trump procurement story is just got a new chapter. So. Yeah, because on April 16th a week ago, the German parliament Bundestag budget committee approved a nearly 300 million euro initial order within a 2.4 billion euro framework agreement for Rheinmetall.

So I mean really like a, a supplier in that area that has been around for like decades, probably even centuries to manufacture kamikaze. Kamikaze. Kamikaze. Dr.

This makes Rheinmetall the third drone supplier for Germany's Lithuania brigade alongside Helsing and Stark Defense. So I mean and overall just the fact that we're talking about these companies now, thinking back a couple of years, all of a sudden we talk about developments in defense tech and military so much. It's fascinating for me I think. Yes, like it's, it's fascinating.

Sounds too excited. It's at least like a very visible and interesting shift. Yeah. Yes, exactly.

Let us put the total numbers together here. Chris Helsink has a framework of almost 1.5 billion euros, 1.46 Stark has up to 2.

86 billion, also almost 2.9 billion euros. And now Rheinmetall has 2.4 billion.

That's a lot of money for drone framework. Across all three suppliers exceeding 7 billion billion euros. Germany is building a really competitive multi vendor drone industrial base. Two startups and one legacy prime that is really extraordinary here now they all shall be used, as I said in Lithuania as part of strengthening NATO's eastern flank.

Germany wants to send 5,000 or station 5,000 soldiers there and the UNI wants to be operational in 2027 so next year. And all those drone systems must pass qualification testing by April 2027. So also there are a lot of things happening still under the influence of course of the Ukraine war and Russia's actions there, but also under the influence of the really of the unclear future of NATO or rather America's role in NATO. So there Germany can be seen as really stepping up the structural point here that we're trying to make.

Germany is the only European market where startups have a visible pathway from the prototype to major procurement contracts. That is why defense startup funding has hit $8.7 billion across Europe in 2025. That's 4,43% of all deep tech funding and Germany is at the center of it.

Chris. And now we're talking new unicorns, huh? Shouldn't we. Unicorns you?

Dash zero? I do believe that's how it's pronounced. $110 million series B led by Baldaton Capital valued at 1 billion. They built what they call the autonomous nervous system for production AI agents that build do root cause analysis, remit, remediation, deployment, validation and cost optimization.

Founded only in 2023. Already 600 paying customers including Solando and Taco Bell headquarters are split between Solingen and New York. I think the this headquarter with New York is always a pretty good idea, isn't it? Yeah, obviously.

Just as I do. I mean it's interesting, they seem to have a really working use case already and the thesis at Dash O that or Dash Zero is that observability must evolve from monitoring dashboards to autonomous operations. They have a core product called Asian Zero deploying specialized AI agents across the production stack. And if that works and if their thesis proves to be correct and the customer attraction suggests it might be from what we are seeing right now then it's a.

Yeah, this might be a very like some kind of like a default infrastructure layer. A German unicorn in under three years from founding that is quite speed and it is an infrastructure not Consumer the pattern continues. Policy at scale. By the way, if you haven't seen it, we just published my interview with Thomas Yet Tombeck, undersecretary for startups and digital long term listeners.

Longtime listeners will remember him from 2021 where he was a digital commissioner. Heading to 10 billion future fund. Right now I think we're including all the segments up to 55 billion in those instruments. But let us get.

Sorry, I'm always taking detours here. The policy segment is unusually dense this month. The new CDU SBD coalition has delivered the most aggressive startup policy package in Germany. Admittedly that's not a high yardstick.

And Chris, let me walk you through it. Okay? The WIN initiative, it's something we've talked about under the last cholz government. This was delayed, this didn't get started, but it was actually under new government doubled from 12 to 25 billion euros.

The largest public private venture capital commitment in European history. Again, the largest private public venture capital commitment in European history. KFW Capital launched Vaxtungs von Zwei, winning growth fund number two, the second 1 billion euro fund of funds on April 1st. No joke.

The future fund was extended beyond 2030 with a total 30 billion euro commitment. Yeah, and then there's also the institutional infrastructure. So money went to 10 startup factories. 10 startup factories were awarded involving more than 120 universities, 114 industry partners.

There's plans for a 24 hour online company registration, which for German bureaucracy sounds crazy. There's a new digital ministry. Yeah, you got even more. So yeah, yeah.

There are three capital mobilization tracks that are now operating simultaneously. Win two, it's the Private Public Partnership for Institutional Capital vaccums four two funder funds. Basically KFW Capital will use it to seed new VC funds. So those VCs can have them as anchor investment.

Very likely. And then raise private capital. And the startup factories for deep, for the deep tech pipeline. They help students, PhD candidates, PhDs, professors to launch out of universities.

And this is structural policy that is not really election cycle signaling. Yeah. So I mean even if we sum up what we talked about for now, yeah, we have like defense procurement, we have the space thing, we have venture capital going up now here, these tax incentives, infrastructure being improved. So yeah, what we definitely can see, I mean another, it's another question how internationally competitive it is.

But what we can see, just looking at Germany itself, this really means, it feels like what is like the most comprehensive startup industrial policy in the country's history. So that's really interesting. One question is execution what comes out of it as it as is always the case but we can definitely say that things are happening. Segment number five, you can totally tell via very analytical here.

On our way with the space thing. Segment number five, let's talk a little bit about fintech tokenization and the IPO reshuffle. Two fintech signals and one IPO story that ties everything kind of a little bit together for us. First, Midas in Berlin, $50 million Series A led by RRE and Crandom.

You remember them from the other story with Franklin Templeton and Coinbase Ventures on the cap table. They have powered over 1.4 billion euros in tokenized assets insurance and are launching a liquidity layer for instant redemption on tokenized products. Yeah, and I mean if you look at this Franklin Templeton and Coinbase on the same cap table, that's like a real.

That tells you that real world asset tokenization is crossing from what used to be like crypto native experimentation to now institutional Rails. And here we see. We talked so much about Munich so far, but here we see that really Berlin is becoming an infrastructure hub for this type of tokenized finance in Europe. And then Bitpanda, the Austrian unicorn, we're talking about quite a lot.

The Vienna based platform is advancing a Frankfurt IPO at a 4 to 5 billion euro valuation. Goldman Sachs, Citi and Deutsche bank are advising they choose Frankfurt over London. Explicitly. Explicitly, sorry.

Citing weak liquidity on the London Stock Exchange. Lse. If Big Panda succeed, it validates Frankfurt as a viable tech IPO venue. Yeah, especially since okay, I now am like the bearer of bad news.

On the other side of the Atlantic we see eins, fun 1.5 a company working in the climate climate change space which has shelved its nasdaq. NASDAQ listing. It's with.

They have the seat in Hamburg. It's a Hamburg climate tech unicorn. Even they have 520 million euros in revenue. They but they were citing tariff turmoil.

So I mean definitely the mood in the US at least coming from the government regarding anything climate tech has really shifted. They may delay until after the 2028 US election. You were hinting at it in the beginning already that this might be the case for several climate. And it's the first major German IPO casualty of transatlantic trade friction.

So you have Bitpanda going to Frankfurt. Eins Kommer kind of running away from nasdaq. The total IPO geography is shifting in real time as we're looking at it. Chris, our prediction, Frankfurt becomes The default European IPO tech listing.

Venue within let's say 18 months. Your prediction? My prediction. Let's do a little lightning round.

Planetary in Switzerland. 23 million euros for a full stack fermentation startup building bioeconomy infrastructure led by Radical Capital. Meaning Radical Capital but spelled with a K in the radical and at given Ventures announced April 20. But you know, it's either it should be Radical Capital or it should be Radical Capital, but they decided for Radical Capital in the right.

Ah, these are the things I, I want to be part of those meetings so I can be like the grumpy German and be like actually so anyway, peak Quantum in Munich. 2.2 million euro pre seed for fault resistant superconducting quantum chips. It's a spin off of tum, the technical University of Munich selected to operate the EU Chips act supreme pilot line.

They have a total funding of 5 million euros. They announced it in April 14 early. But Munich deep tech pipeline here keeps producing. Yes guys, let us close here with the big picture.

Three predictions on record. One, defense and space will out produce SaaS in billion euro outcomes within 24 months. Yes Chris, I know my prediction. Two, Munich lead over.

Munich's lead over Berlin is permanent. Three, the NASDAQ window is closed. Frankfurt takes over. Yeah, and so we also see here that there's a connecting thread which is procurement.

So every major signal this month has a buyer on the other side. Governments are buying drones, airlines are booking launch slots, pension funds are buying tokenized yield. And so like the startups winning the cycle are the ones where someone already has has a budget and has a budget plan. Good for them.

Yeah, that is the editorial line. If your customers have. If your customer has a procurement budget and your product touches the physical world. Dark cattle markets have never been more receptive.

If you're building another software layer for crowded market, the funding environment just got harder. And also what we talked about, the policy infrastructure in Germany is finally catching up. 25 billion euro wind capital, a second fund of funds, three parallel capital tracks running simultaneously. And we can really say that Germany has never deployed this much capital infrastructure for startups.

Again, not a very high bar, but the the numbers 55 million is totally staggering. Let's do a little bit last word. For me, the old question was can Germany build startups? The new question is can Germany execute on the startup is has already built the capitalist there, the procurement is there, the policy there.

Now it is about delivery. Yes. Chop chop people does have a budget line. You are not building a startup, you're building a story.

Guys, thank you very much. And as we said this the next maybe the last startup used for Chris and after 11 years he joined me for the Startup News in May 2015. Chris, can you believe it? Yes, yes.

No it feels doesn't feel this long. Yeah I know I have good friends that I know less longer that sounded horrible but yes. Oh yeah. 11 years.

That's it. Yeah and you'll hopefully join us for the main use again and then maybe the news will only be me you we will see guys for a final goodbye. We will see if as but all of it. Nothing is permanent.

At least for now. Yeah but you are not leaving startup radio. You're only dropping the active mic. I will be in the background.

I will be in the background for like as part of the company as I was before but just not hosting anymore. Guys, thank you very much. Was a pleasure. Thank you.

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