By Martin Coulter
According to industry insiders, Donald Trump's possible return to the White House has sparked a wave of investment in defence-technology startups across Europe. This comes as the Republican candidate has threatened to withdraw the U.S. from NATO and has made statements about not defending allies who do not increase their defence budgets. With the upcoming election on Nov. 5, Trump's unpredictability, coupled with global conflicts in Ukraine and the Middle East, has led to record-high global military spending of $2.4 trillion in 2023, as reported by the Stockholm International Peace Research Institute (SIPRI).
The NATO Innovation Fund (NIF) recently announced partnerships with venture capital firms and defence startups in Europe, with the aim of enhancing security on the continent. Additionally, the European Union unveiled its first-ever defence industrial strategy, committing over $1 billion to military innovation earlier this year.
While Trump's potential presidency is not the sole driver behind these initiatives, it has significantly influenced subsequent investments by governments and venture capitalists in companies specializing in drones, robotics, and quantum computing, as noted by eight industry executives.
One of the leading deep-tech investors in Europe, Vsquared Ventures, based in Munich, has raised a 214 million euro fund to invest in space, robotics, and other cutting-edge technologies. Herbert Mangesius, founding partner at Vsquared, emphasized that Trump's threats have prompted European states to rethink their investments in defence capabilities and contracts, often favoring startups.
As of now, the NIF is supported by 24 NATO countries, with the goal of eventually having all NATO allies participate in the fund, according to Andrea Traversone, the organization's managing partner.
Despite the primary reason for increased defence spending being Russia's invasion of Ukraine, Trump's stance towards U.S. allies has also played a role in shaking up leaders in NATO and Europe, leading to investments in new technology companies.
Defence and security spending in Europe has seen a 16% increase to 552 billion euros since 2022, according to SIPRI data. Startups such as ARX Robotics, a German company specializing in autonomous robots for battlefield deployment, have benefited from funding rounds backed by the NIF.
While global VC funding saw a downturn in 2023, investment in local defence technology startups remained relatively resilient, dropping 21% in the same period. With Europe increasing its investments in defence-tech, companies are preparing for potential changes in the geopolitical landscape.
In conclusion, the surge in investment in defence-technology startups in Europe amid Trump's potential return to the White House signifies a shift towards self-sufficiency and innovation in the defence sector. This trend is driven by the need for European countries to bolster their capabilities and adapt to geopolitical uncertainties. As individuals, understanding these market dynamics can provide insights into potential investment opportunities and the broader implications of political developments on financial markets.