Part 1/5: 𝗛𝗼𝘄 𝗩𝗲𝗻𝘁𝘂𝗿𝗲 𝗖𝗮𝗽𝗶𝘁𝗮𝗹 𝗶𝘀 𝗧𝗿𝗮𝗻𝘀𝗳𝗼𝗿𝗺𝗶𝗻𝗴 𝗗𝗲𝗳𝗲𝗻𝗰𝗲 𝗜𝗻𝗻𝗼𝘃𝗮𝘁𝗶𝗼𝗻
In my thesis, I have interviewed VC investors with funds ranging from €15m to €1.4bn AuM and analysed how VC is stepping up to drive innovation and modernisation in this traditionally government-driven industry. Here’s a closer look at why this matters and what’s changing:
𝗪𝗵𝘆 𝗶𝘁 𝗺𝗮𝘁𝘁𝗲𝗿𝘀:
Defence spending has long relied on government budgets, limiting the speed and scope of technological advancements. However, with evolving geopolitical landscapes and increasing security threats, there's a growing need for new funding sources. This is where VC comes into play, injecting much-needed capital and fresh ideas into the defence sector.
𝗞𝗲𝘆 𝗱𝗿𝗶𝘃𝗲𝗿𝘀:
- Geopolitical Tensions: Rising global conflicts and the push for military sovereignty are driving nations to seek innovative defence solutions.
- Technological Innovation: Defence Tech is evolving rapidly, with new advancements in AI, cybersecurity, drones, and other cutting-edge technologies. VC can accelerate the development and deployment of these technologies.
𝗘𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗼𝗽𝗽𝗼𝗿𝘁𝘂𝗻𝗶𝘁𝗶𝗲𝘀:
The defence sector presents lucrative investment opportunities for venture capitalists as many people are now noting a trend that is just starting out which will eventually end up at a higher level than previously after the trend curve flattened.
𝗧𝗵𝗲 𝗿𝗼𝗹𝗲 𝗼𝗳 𝗩𝗖:
- Bridging Gaps: Venture capitalists bring business acumen and market insights, helping defence companies navigate the commercial landscape.
- Driving Collaboration: VC fosters collaboration between the private sector and government entities, leading to more integrated and effective defence solutions.
𝗖𝗵𝗮𝗹𝗹𝗲𝗻𝗴𝗲𝘀 𝘁𝗼 𝗰𝗼𝗻𝘀𝗶𝗱𝗲𝗿:
While the potential for innovation is vast, the defence sector presents unique challenges for VC investors, such as navigating a complex landscape, where many investors are lacking in needed experience, and ethical considerations around dual-use technologies.
𝘐𝘯 𝘵𝘩𝘦 𝘶𝘱𝘤𝘰𝘮𝘪𝘯𝘨 𝘱𝘰𝘴𝘵𝘴, 𝘐’𝘭𝘭 𝘥𝘪𝘷𝘦 𝘥𝘦𝘦𝘱𝘦𝘳 𝘪𝘯𝘵𝘰 𝘵𝘩𝘦𝘴𝘦 𝘢𝘴𝘱𝘦𝘤𝘵𝘴 𝘰𝘧 𝘮𝘺 𝘳𝘦𝘴𝘦𝘢𝘳𝘤𝘩, 𝘦𝘹𝘱𝘭𝘰𝘳𝘪𝘯𝘨 𝘵𝘩𝘦 𝘦𝘮𝘦𝘳𝘨𝘪𝘯𝘨 𝘵𝘳𝘦𝘯𝘥𝘴, 𝘤𝘩𝘢𝘭𝘭𝘦𝘯𝘨𝘦𝘴, 𝘢𝘯𝘥 𝘴𝘵𝘳𝘢𝘵𝘦𝘨𝘪𝘤 𝘳𝘦𝘤𝘰𝘮𝘮𝘦𝘯𝘥𝘢𝘵𝘪𝘰𝘯𝘴 𝘧𝘰𝘳 𝘪𝘯𝘷𝘦𝘴𝘵𝘰𝘳𝘴, 𝘴𝘵𝘢𝘳𝘵-𝘶𝘱𝘴, 𝘢𝘯𝘥 𝘨𝘰𝘷𝘦𝘳𝘯𝘮𝘦𝘯𝘵𝘴. 𝘐 𝘸𝘪𝘭𝘭 𝘱𝘶𝘣𝘭𝘪𝘴𝘩 𝘰𝘯𝘦 𝘱𝘰𝘴𝘵 𝘢 𝘸𝘦𝘦𝘬 𝘴𝘰 𝘴𝘵𝘢𝘺 𝘵𝘶𝘯𝘦𝘥 𝘧𝘰𝘳 𝘭𝘦𝘴𝘴 𝘰𝘣𝘷𝘪𝘰𝘶𝘴 𝘢𝘯𝘥 𝘥𝘦𝘦𝘱𝘦𝘳 𝘪𝘯𝘴𝘪𝘨𝘩𝘵𝘴 𝘪𝘯𝘵𝘰 𝘩𝘰𝘸 𝘷𝘦𝘯𝘵𝘶𝘳𝘦 𝘤𝘢𝘱𝘪𝘵𝘢𝘭 𝘪𝘴 𝘳𝘦𝘴𝘩𝘢𝘱𝘪𝘯𝘨 𝘵𝘩𝘦 𝘧𝘶𝘵𝘶𝘳𝘦 𝘰𝘧 𝘥𝘦𝘧𝘦𝘯𝘤𝘦!
Thank you to the following people and funds for supporting my research and allowing me to share their names (not-exhaustive): Christian Reber, William McManners, Nils Seele, Eric Slesinger, Christian Ziach