Interview, Fireside Chat
Torsten Reil, Helsing Founder: Raising $828M to Build the Defence Champion of Europe | E1237
- A "big wave" driven by autonomy and software is expected to reshape the defense sector, described as "unstoppable," creating a risk of a "Tesla moment" where incumbents fail to adapt without significant industry-wide evolution.
- A conflict between China and Taiwan is considered "plausible" with a timing that may occur "quite a lot sooner than that," prompting a forecast that NATO nations will increase defense budgets, with Poland rising "drastically" and others increasing "a little bit," though the speed of global action remains uncertain.
- By "next year," a single operator is predicted to control "multiple drones" via advanced algorithms, countering adversarial strategies that rely on "thousands and tens of thousands of strike drones" to oversaturate defenses of expensive systems like tanks.
- European sovereignty in energy and semiconductors is anticipated as achievable within five to ten years, but unlikely within the "next two or three years," driven by the view that partners may lack the "capability" or "willingness" to protect Europe long-term.
- The defense market composition is expected to remain dominated by existing "primes" and suppliers, with a "very small number" of new primes emerging, while companies with "programs of record" are identified as the "biggest opportunity to deploy dollars" compared to R&D-only entities.
- Software is forecast to remain the critical "10x multiplier" in defense capabilities, with "software first" strategies allowing companies to shift complexity from hardware to enable mass manufacturing, though "exit opportunities" for private companies will likely require priming for an IPO.
- Capital availability in defense is noted as sufficient, but the missing elements for European growth are identified as "ambition," "aggressiveness," and the integration of US investment capital to foster a larger scale mentality.
- Adversaries such as Russia and Iran are predicted to bypass ethical red lines, forcing democratic societies into a "race" for autonomy where sending humans onto battlefields becomes "impossible and ethically extremely problematic" against large numbers of autonomous systems.
- Talent acquisition focuses on finding "exceptional" individuals, with "talent density" viewed as more cost-effective than larger teams of average employees, despite anticipated scarcity in "go-to-market," "government relations," and "compliance" expertise.
- Performance management and rigorous hiring are deemed necessary to prevent organizational inefficiency, with the "nine to five mentality" characterized as a "myth" in favor of intense work, though "performance improvement plans" are viewed as having no guaranteed success.
- Political and social risks include the potential for "radicalizing political views" via social media algorithms, a public desire to spend more on defense that is hard to maintain due to cuts in other areas, and the risk that "compliance rules" in procurement are not always applied timely or correctly.
- Helsing's specific strategy prioritizes "European sovereignty" over "revenue optimization," with the goal of making Europe safer and addressing challenges like GPS jamming by moving from remote-controlled to "autonomous" systems.
- Founders face significant hurdles, with the belief that "work smart, not hard" is "bullshit" because competitors will combine both, and that "founder groups" require mutual respect and shifting roles rather than static specializations.
- Future conflicts may involve "shape-shifting anti-aircraft radar systems" that AI must read, while current simulation environments may fail to cover unexpected "realities of conflict," necessitating robust testing beyond theoretical models.
- The speaker expresses concern that "capital is available" but "ambition" is missing in Europe, contrasting with the view that "politicians" generally want to do the right thing but operate within a system where incentives are not fully aligned.
- Social media platforms are described as "extremely dangerous" due to their "dopamine loop" and "addictive" nature, which can facilitate political manipulation, while the public often prefers to comment on LinkedIn rather than start companies or invest.
- Economic shifts include the prediction that countries are becoming "dependent on state subsidies" and "uncompetitive" without action, though defense spending increases will eventually force a re-channeling of money despite widespread "budget pressures."
- The speaker notes that "capital" provides security to take risks but emphasizes that "founder quality and ambition" matter less than regulatory factors like taxation for a country's overall success, even as they predict "VCs that really get defense" have made their initial bets while a second wave funds technology teams without clear exit routes.
- The speaker anticipates that "talent" in Europe is "amazing" and that "nine to five" working models are outdated, allowing for intense work, yet notes that "talent" is in "scarcity" in specific areas like government relations and compliance, with many companies competing for a small pool.
- The defense sector is described as having "too much" complexity for a single founder, necessitating co-founder teams for bandwidth, while "US culture" and investor mentality are viewed as useful tools to help European companies think bigger if injected at the right time.
- The speaker predicts that "adversaries" will have the ability to take shortcuts regarding ethics, while democratic societies will struggle to maintain the "luxury" of ethical constraints, creating a divergent path in the development of autonomous systems.
- The speaker expects that "defense spending" will increase to fix broken systems and fund new equipment, with a portion allocated to new technology, but notes that not every country will act at the same speed due to budget constraints.
- The speaker believes that "software" will always be the core of Helsing, integrating hardware to optimize it, while "primes" will not disappear but grow if the ecosystem functions correctly.
- The speaker anticipates that "talent" in Europe is "amazing" and that "nine to five" is a myth, but also notes that "talent" is scarce in specific functional areas and that "VCs" not understanding defense may see investments go to zero if companies fail to scale to "programs of record."
- The speaker expects that "defense spending" will increase but "not everyone" will act quickly, while "primes" will not disappear and "defense" is too complex for a "single founder" to manage alone.
- The speaker predicts that "software" will always be the "core" of Helsing, even as they integrate hardware, and that "talent" in Europe is "amazing" and the "nine to five mentality" is a myth.
- The speaker anticipates that "defense spending" will increase but "not everyone" will act at that speed, while "primes" will not disappear and "defense" is too much for a "single founder."