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Updated Jun 18, 2024, 12:00am EDT
business

NATO venture capital fund makes first investments to boost defense tech

Inquam Photos/George Calin via REUTERS
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NATO’s €1 billion venture capital fund announced its first investments on Tuesday, as the Western security alliance seeks to strengthen its technological edge amid growing geopolitical tensions.

The NATO Innovation Fund (NIF) has invested in four “deep tech” startups — firms seeking to solve substantial scientific or engineering challenges. They are ARX Robotics, a German company making unmanned ground vehicles; Fractile, a startup looking to speed up the training of AI models; iCOMAT, which makes lightweight materials; and Space Forge, a company seeking to move manufacturing to space.

NIF will also support several VC funds that invest in cutting-edge technology with military capabilities, focusing in particular on European regions that have limited access to early-stage funding.

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“We believe that our investments are the first of what will be many across the breadth of technology verticals,” NIF partner Chris O’Connor, told Semafor. “So you see investments in artificial intelligence, advanced materials, and space.”

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Established last year, the NATO Innovation Fund is the world’s first multi-sovereign venture capital fund, backed by 24 of the 32 alliance’s member states. While it has restrictions on investing in weapons technology directly, it invests in emerging technologies that the alliance hopes will strengthen its defense and resilience down the road.

The fund will aim to leverage its ties within the alliance to help support their investments. “For the most part, early stage companies are completely overwhelmed and have no idea how to engage [government and defense] organizations,” O’Connor said. “We’re uniquely positioned to help our portfolio companies through that growth and through that partnership between commercial and government organizations.”

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NIF will also seek to make sure that Western deep tech startups are able to grow without having to look to Beijing for funding, a NATO official said last year, noting that the lack of European venture capital meant startups had been forced to turn elsewhere. “When European deep tech startups reach growth stage, more than half of them are predominantly owned by entities outside of Europe,” Kelly Chen, a partner at the fund said. “That’s certainly a dynamic that we’re battling.”

Giedrimas Jeglinskas, a former NATO Assistant Secretary General, told Semafor that the success of the fund would ultimately be determined by whether its investments “find their way into the defense capabilities of allies.” “That’s probably a 10-year horizon,” Jeglinskas said, adding that “it’s on track to do that.”

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