DONALD Trump's potential White House return has helped spur a flurry of investment in defence-technology start-ups across Europe, according to eight prominent industry executives and investors.
The Republican presidential candidate has threatened US withdrawal from the North Atlantic Treaty Organisation (Nato) and said he would not defend allies that did not increase their defence budgets.
He's locked in a tight race with Vice-President Kamala Harris in the Nov 5 election.
Trump's unpredictability, combined with the war in Ukraine and tensions in the Middle East, has contributed to global military spending reaching a record high of US$2.4 trillion last year, according to the Stockholm International Peace Research Institute.
In June, the US$1.1 billion Nato Innovation Fund (NIF) announced partnerships with venture capital firms and defence start-ups across Europe, aiming to bolster security on the continent.
Meanwhile, the European Union earlier this year unveiled its first-ever defence industrial strategy, committing more than US$1 billion towards military innovation.
While the prospect of a Trump presidency was not the only factor behind those initiatives, it has been a significant driver of subsequent investments made by governments and venture capitalists alike in manufacturers of drones, robotics and quantum computing, the eight executives said.
Operating out of Munich, Vsquared Ventures is one of Europe's leading deep-tech investors, having recently raised a €214 million fund to invest in space, robotics and other technologies.
"Trump's threats have made European states think very differently about investing in their own capabilities and giving contracts out, often to start-ups," said Herbert Mangesius, founding partner at Vsquared, which has partnered with the Nato fund.
"We want to see faster cycles, broader experimentation, and better capabilities. The planning in a ministry is so slow, and the VC world is one potential answer to this problem," he added.
Vsquared's portfolio includes IQM, one of Europe's leading quantum computing companies, and Isar Aerospace, a rocket manufacturer which has itself raised more than €400 million of private capital.
At present, the NIF is backed by 24 Nato countries, with eight remaining countries — including Canada and the US — not involved. "My ambition is to eventually have all Nato allies join the fund," Andrea Traversone, the organisation's managing partner said.
Asked if Trump's potential return had influenced the NIF's activities, he said: "I don't think it will make a difference to our mission. This matters to anyone who is interested in our mission of protecting citizens of allied partners."
While Russia's invasion of Ukraine has been the primary reason for higher spending, some defence industry investors say Trump's approach towards US allies has shaken leaders in Nato and across Europe. That has resulted in governments increasing their defence spending, investing in, and partnering with new technology companies.
Ricardo Mendes, chief executive officer of Lisbon-based drone manufacturer Tekever, which has contracts with Britain, Ukraine, the EU and others, said: "The potential of a second term for President Trump brings various implications for both American and European defence enterprises."
"Discussions are ongoing regarding the overhaul of procurement procedures, with a focus on more flexibility and introducing agility, which would favour smaller and midsize tech companies," he added.
As of 2023, defence and security spending across Europe had risen 16 per cent to €552 billion since 2022, according to data collated by SIPRI.
ARX Robotics, a German start-up which recently raised a €9 million funding round backed by the NIF, builds autonomous robots that can be deployed on the battlefield.
Asked if the potential for a Trump victory in November was influencing defence investment, CEO Stefan Roebel said: "Absolutely. That's something everybody has in the back of their heads. Europe needs to up its investment in defence, and you're seeing a shift in momentum now."
Germany is easing red tape for investments in defence companies, Finance Minister Christian Lindner said in February, as Berlin ramps up its military spending.
Mangesius cited Quantum Systems, a German drone manufacturer which has recently signed deals with its home government, as a company that has directly benefited from Germany planning for a Trump return.
The writer is from Reuters