The Dealflow by Founders Capital - Edition 1

This week: European defence tech is surging as military budgets rise across the continent. The UK is boosting its defence spending, Germany is signalling a shift in transatlantic relations, and the US is scaling back - a shake-up that’s driving investors to rethink their exposure to the sector. From cybersecurity to drone warfare, the rearming of Europe is fuelling a new wave of innovation and capital deployment.

Key News and Trends

Britain’s defence budget is getting a major upgrade - because nothing says ‘strategic autonomy’ like a £75 billion rearmament plan. The UK is raising defence spending to 2.5% of GDP by 2027, marking its largest military buildup since the Cold War. The investment will fast-track hypersonic missiles, AI-driven warfare, and naval expansion, reinforcing the UK’s ability to act independently. With NATO pushing for stronger European defence, funding debates are intensifying, from national budget hikes to EU defence bonds and joint procurement. As governments pour billions into military tech, private capital is following, with venture-backed startups securing major contracts in autonomous drones, AI-powered intelligence, and cyber warfare. Defence is no longer just the domain of legacy contractors, it’s a fast-growing frontier for private markets and deep-tech investors. Read more here.

Qatar’s Investment Authority (QIA) is on a VC shopping spree - because who needs unicorns when you can buy the whole stable? The QIA is evaluating eight new VC firms for inclusion in its $1 billion “fund of funds”, which has already invested nearly $500 million to date. It aims to address funding gaps in Series A, B, and C rounds, as part of the country’s push to diversify its economy beyond oil and gas. By involving international VC firms, QIA is fostering closer ties between MENA, Silicon Valley, and Europe. Read more here.

Perplexity isn’t just answering questions anymore, it’s writing cheques too. The AI-powered search startup has established a $50 million venture fund, backed by top-tier investors like IVP and NEA, to invest in early-stage AI companies. Perplexity’s move mirrors strategies by OpenAI and Anthropic, who have leveraged their platform positions to back the next wave of AI innovation. This signals a growing trend of AI-native companies not just building the future, but funding it - blurring the lines between startups and investors in the race for AI dominance. Read more here.

AI is the new co-founder, and it doesn’t argue over equity. The share of startups founded by solo entrepreneurs has doubled over the past decade, now making up 35% of new ventures in 2024. This shift is driven by advancements in AI, which allow individuals to automate tasks, streamline operations, and scale businesses without large teams. The rise of early-stage venture capital availability has also emboldened solo founders, as investors increasingly back AI-augmented startups. While funding still favours multi-founder teams, the growing trend suggests a changing investor mindset and a new era of tech-enabled solo entrepreneurship. Read more here.

With Europe ramping up military spending and sovereign wealth funds doubling down on venture, defence is back in focus. But is it right for your portfolio? Let’s explore in this week’s Founder’s Take.

Founder’s Take: Investing in Defence - A Moral Minefield or a Golden Opportunity?

The defence industry is like pineapple on pizza - people either love it or hate it. For investors, it’s one of the most polarising sectors out there. But regardless of where you stand, one thing is clear: the world isn’t getting any less dangerous. With global tensions on the rise, defence companies are seeing a flood of capital - but not all of them will benefit equally. The US is tightening its defence budget, which means legacy giants like Lockheed Martin may feel the squeeze. Meanwhile, tech-native players like Palantir and Anduril are redefining military capability, positioning themselves as the ‘Tesla of defense tech.’

Does this mean the old guard is finished? Not quite. While they may struggle to match the speed of tech startups, they still hold a fortress of advantages - deep infrastructure, an embedded workforce, and decades of government relationships. But there’s no denying that technology is becoming increasingly critical to military strategy. Autonomous drone swarms, AI-driven battlefield intelligence, and cyber warfare are not just more effective - they’re also more cost-efficient than traditional military assets. At the end of the day, defence is an eternal industry. The only real question is how much exposure you want to it. Whether you see it as a necessary safeguard or an ethical dilemma, the reality is that investors who pick the right players today could be backing the future of warfare. And with capital pouring in, those players are emerging fast.

Top Venture Deals 

Saronic – $600M Series B (Sequoia, Andreessen Horowitz)

• Last week, Saronic Technologies, a defence startup specialising in autonomous surface vessels (ASVs), raised $600 million in Series B funding, bringing its valuation to $4 billion. The funding round will support the construction of Port Alpha, a next-generation shipyard aimed at scaling the production of autonomous naval vessels. Read more here. 

NinjaOne – $500M Series C (ICONIQ Growth, CapitalG)

• NinjaOne, an automated endpoint management platform, has raised $500 million in funding at a $5 billion valuation, more than doubling its previous raise of $231.5 million at a $1.9 billion valuation in February 2024. The firm, which serves over 24,000 customers, also announced plans to acquire cloud data protection company Dropsuite for approximately $252 million. Read more here.

Rune Technologies– $6.2M Seed Round (Andreessen Horowitz)

• Defence technology startup Rune Technologies has secured $6.2 million in seed funding to advance its mission of modernising military logistics. Rune is developing TyrOS, an AI-driven system for autonomous military logistics and supply tracking. The firm was founded last year by David Tuttle and Peter Goldsborough, both former employees of Anduril. Read more here.

Upcoming Public Offerings

KNDS 

• European military supplier KNDS is considering a public offering off the back of Europe’s bid to increase defence spending. The firm, which has production lines in Germany and France, generated $3.45 billion in revenue during the fiscal year 2023 according to its website. Read more here.

CoreWeave 

• Cloud computing provider CoreWeave is considering filing publicly for an initial public offering within a week. The firm, an early backer of Nvidia’s graphics chips for data centres, is looking to raise $4 billion from the listing and is targeting a valuation greater than $35 billion. Read more here.

The landscape is shifting, and capital is following. Whether it’s defence, AI, or sovereign wealth funds, the biggest plays of tomorrow are being decided today.

See you in the next edition,
Sam Scott and the Founders Capital Team