Porsche Automobil Holding SE and Deutsche Telekom AG are in advanced discussions to anchor a €500m ($586m) venture capital fund dedicated to European defence technology, according to a report by Bloomberg.

The fund will be managed by Hamburg-based DTCP, a former Deutsche Telekom unit spun off a decade ago. Its size and investor composition could still change, sources said.

Porsche SE, the holding company for the billionaire family behind Porsche AG and Volkswagen AG, announced plans to create a dedicated defence investment vehicle, dropping its previous restriction on backing only dual-use technology. 

The move comes amid a surge in European military spending driven by Russia’s full-scale invasion of Ukraine and uncertainty over long-term US support for NATO.

The initiative aligns with a broader push by private equity and venture investors, including Lakestar, Tikehau Capital, and CVC Capital Partners, to deploy capital into the defence sector, historically avoided due to ethical and regulatory hurdles. 

While European defence startups have traditionally relied on US backers, public financiers such as the European Investment Fund and Germany’s KfW are easing policies to encourage domestic capital flows.

Porsche and Deutsche Telekom already share investment ties with DTCP, including stakes in drone maker Quantum Systems, which achieved a valuation of more than $1bn in May.

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