I previously cofounded a miltech startup in the US (as a foreigner), and have currently funded a European-based one (again as a foreigner). Nothing big, although we were able to exit the first one at a good-enough situation via an IP sale (which was practically forced upon us).
The US and European defence markets are very different. USA has a larger pie, but it's also very fragmented. More fragmented means more contractors and subs, which keep adding more layers of pricing into the contract. European defence is more consolidated - you have the few big players who get all the contracts, so there's very little room for new entrants to come in but that also means less layers to work with. This makes the final product less expensive compared to the American ones, at the cost of fewer specialized features added in by niche contractors. That's in part due to the nature of the militaries too - the American military will request frequent changes and new features to new battle conditions on the go, to the point of making your product the equivalent of military SAP - very flexible and usable for any battlefield situation, but also very bloated to develop and operate. On the other hand, European military contracts are usually relatively static in comparison, which means that the burden of knowledge acquisition and operating under different situations falls on the operator and not the technology itself. The last bit is also what translates into budgeting - American products are delivered with significant delays and higher costs due to back-and-forth bureaucracy internally, while European products can be delivered sooner if there is a pressure to deliver - like if the customer is a priority customer who has paid significantly upfront (read, Arab militaries).
I would argue that the US military sector is artificially inflated, because it's a significant jobs programme for the huge network of firms, contractors and subcontractors. In a way, it's a military budget that's adjusted for the economy size and not for the actual needs of the military. That lets the US military also fund a ton of whacky pioneering technology that's at the forefront of the innovation (like the internet, or drones, or even social media manipulation), but it also leaks a lot of money through the cracks for ostensibly results that are only marginally better than European countries with comparable militaries such as the UK and France.
That being said, it's much easier and more lucrative to start up in the US than anywhere else, at least till now. Second would be the UK, although with their exclusion from the recent European defence loans programme, that's questionable now. France is increasingly pulling its weight now, and I'm expecting a lot of growth here. The French government has been exceedingly friendly for miltech companies for a while now.