The Nato Innovation Fund has made a dozen investments in dual-use technologies that are already deployed in areas of conflict and with allies' armed forces.
Eighteen months since the launch of Nato’s €1bn ($1.05bn) innovation fund, its startup investments have been deployed on the frontline of the Ukraine conflict and with the UK’s naval warfare force.
Portfolio company Arx Robotics has been deployed at the front in Ukraine where its automated robots can be used to carry anything from injured soldiers or civilians to ammunition that is needed on the battlefield.
Another startup investment, Aquark Technologies, a quantum sensing technology that helps to secure critical infrastructure, has undergone testing on one of the UK Royal Navy’s vessels.
The Nato Innovation Fund, backed by 24 Nato allies, has so far made 12 direct equity investments in dual-use startups whose technologies have both defence and commercial applications.
The fund also invests in other defence tech-focused VC funds including Alpine Space Ventures, a VC focused on space technologies; OTB Ventures, a central European fund; German VC Join Capital, a deep tech fund; and Vsquared Ventures, an early-stage deep tech investment fund.
Since its launch, the Nato Innovation Fund has hit some bumps. Two of its founding partners, Thorston Claus and Andrea Traversone, left the fund just a year after its launch. It has yet to announce replacements.
Missing key Nato members
Another problem is that two large members of Nato – the US and France – have not joined the fund, leaving it without the support of the alliance’s most important strategic partners.
It is unlikely the US will join the Nato Innovation Fund anytime soon, given that US President-elect Donald Trump has been a vocal critic of the alliance and has threatened to withdraw from it.
But the election of Trump, who has repeatedly called on European nations to spend more on defence, may add impetus to investments as more of its members come under pressure to increase defence and military spending.
In April, Sweden became the latest member of the Nato Innovation Fund, shortly after it joined Nato in March. The fund operates independently from Nato.
The fund welcomes other Nato allies to join at any time, says Amalia Kontesi, chief communications officer. The US’s possible withdrawal from the defence alliance does not change its strategy, she says.
“We are a €1bn fund. That amount has been committed by 24 nations. That is a very significant commitment of the fund by the allies that have already joined. If the US or any other country that has not joined the fund and would like to join at any point, we very much welcome them,” she says.
Its most recent direct equity investment, announced in November, was in Tekever, a European company in the AI-enabled unmanned aerial systems sector. The startup raised €70m in a round with participation from Baille Gifford, the National Security Strategic Investment Fund, Crescent Cove, Iberis Semper and Cedrus Capital.
Last month, it announced two investments in other funds: Faber, a seed-stage, deep tech fund focused on southern Europe; and BSV Ventures, a pre-seed and seed investor in deep tech, life sciences and dual-use technologies in the Baltics.
