The trillions that governments around the globe are spending to prepare for a new era of high-tech warfare in a more combustible world are transforming the way modern nations equip their fighting forces.
In Europe, where Russia is using drones to bombard Ukraine and even test NATO’s resolve, a new generation of start-ups is sidestepping how countries have traditionally built their arsenals. Instead of waiting for governments to propose and fund projects, private investors are using their own money to speed up financing, research and prototypes, hoping that buyers will follow.
“It’s a pretty big revolution in the defense industry,” said Gundbert Scherf, a former adviser in the German defense ministry and partner at McKinsey and Company who helped found a defense tech company called Helsing in 2021 with seed money from Spotify’s chief, Daniel Ek, and others. “It’s a totally different business model.”
Helsing, which has headquarters in Munich, began arming Ukraine with drones and then updating them every few weeks to counter shifts in technology and strategy. Helsing is now valued at 12 billion euros ($14 billion) — making it one of the most valuable start-ups in Europe.
The idea is that a competitive ground-up approach can deliver innovations faster and more efficiently than a top-down system. Yet there are risks. Private investors’ first priority is profit, which could be at odds with strategic and security goals. There is the danger of bloating a military industrial complex, and worries about how advances in military technology could be used.
Entrepreneurs and their investors are driven, to varying degrees, by money and a sense of mission. Globally, venture capital investment in defense-related companies leaped to $31 billion last year, a 33 percent increase from the year prior, according to McKinsey.
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