欧洲防务扩张中的5000亿美元机遇

All right, so for this one, we're going to do something special and hand the baton to Bruno to introduce our lovely guests today. Bruno is a host for us with Strike and at Villa Charlotte. So, Bruno?

Perfect. We're here today with Aistis, who was leading Palantir's commercial business for Europe and is now a co-founder and CEO at Onodrim Industries. We're also here with George Hadjiminas, who is the chief strategy officer at Theon. Thank you guys for coming.

Thank you, Bruno. Thank you.

For the audience, without much context, we're going to be talking about European defense right now. I would love to start with both of you. Just give us a little bit of background.

Onodrim's mission is strengthening the foundations of European defense. Our company isn't building another prime or neo-prime. We actually look to find very good manufacturing and critical mission systems businesses in Europe, acquire them, and make them, uh, not about the next European defense to make sure that the defense primes can deliver the others in the next decade. So that's our mission.

Theon is an established player in the European defense industry. The focus is electro-optics, both for man-portable and platform applications. An example for everyone would be night-vision systems, augmented reality, head-up displays, and things like this.

We are one of those companies that was well positioned to take advantage of this boom in European defense over the past few years, both through an IPO in 2024 and by having a pretty strong growth trajectory since then.

So what is the current state of European defense, and how has warfare changed since the start of the Ukraine war?

1. Europe Rebuilds Its Defense Base

To answer this question, we have to look at where Europe was a few years ago versus where it is today. Europe really was underspending on defense for the past few decades. Ukraine proved that this can no longer be the case. We need to prepare, we need to be ready, and we need to industrialize.

It showed a lot of the weaknesses that we had in terms of our own ability to manufacture at scale and supply our militaries at scale. Now, obviously, there is a very large influx of money being poured into defense as Europe and European nations aim to strengthen their arsenals and build up their armies.

This provides a very interesting opportunity for a lot of companies to scale up, develop technologies, create new technologies, and really achieve a scale that a few years ago would not have been achievable in this industry in Europe.

I'll add to that, elaborating on the scale paradigm. I think the biggest lesson for defense companies from Russia's invasion of Ukraine and the war that's happening is that the advantage is technology and volume. Just having technology is not enough. If you had to pick between the two, you would go for volume. Volume wins. Large scale wins.

You'd rather have a million of something than one of anything. Ideally, we have to do both, but really, I think a lot of the defense industry before the full-scale invasion of Ukraine was focused on exquisite, advanced technologies that were the dreams of generals but could not be mass-produced.

Now we're seeing a shift in the realities of defense. Anything you do has to be produced in tens of thousands, hundreds of thousands, or millions. So volume matters a lot. This is, I think, the biggest conceptual change. Ideally, it also has to be technology and, ideally, it also shouldn't be easily copy-pastable.

Mm.

To double down on what Aistis said, a lot of the systems that were new and tested in the United States and deployed in Ukraine, frankly, didn't work at the beginning of the war. They needed to go through iterative cycles where they kept being updated and made better.

So even before they reached scale, they had done extremely well in testing environments, but they just had not managed to perform as well as expected toward the beginning of the war.

Bruno, I'm actually curious, because you have mapped out the whole market: How do you categorize what people are building most in defense right now, and where do you think there are still gaps?

2. The Manufacturing Gap

There has been a very big focus on neo-primes like Helsing, and each core geography has some emerging players that are likely to seize a very large part of the defense spend in that country.

But one of the biggest gaps that we've noticed is, as Aistis has pointed out, a lot of those systems are going to need to be produced at massive scale, and a lot of those systems will, more importantly, need to be produced in Europe. In order to do that, you're going to have to acquire a very fragmented manufacturing base.

The lead times for some of those components could also be years, which is why certain primes take 4 or 5 years to deliver on certain contracts. So I really think that the white space is very much in the manufacturing gap: supplying some of those next-generation primes that are building systems on outdated supply chains.

Have you had any issues with hiring and talent?

I think hiring into defense has been great. People like Europe's ambition to rearm and reindustrialize. Honestly, from our monitoring perspective, we see top talent.

My co-founder, Alex, our CTO, spent 17 years in the United States, and now he came back to Germany 2 weeks ago with his family to strengthen European defense. We see a lot of that demand, especially with companies with big ambitions, which I think Europe has not seen enough of.

Helsing has seen the same thing. They have no problem attracting the best talent. So I really think this is a very favorable environment.

In the US, defense is funded by the government, and ventures also come into the scene. What has the process been like for funding, and how is it different?

3. Defense Funding Follows Government Demand

The government is the buyer. There are theories that private military corporations will be the next way to do defense, but that's not yet the case.

Funding is from the government, with a lot of initiatives from the European Union. That obviously attracts venture funding when there is a trillion dollars being poured into defense. By 2030, this triggers venture and private funding for companies to make use of those funds. So this has been the dynamic in Europe.

As warfare becomes more and more autonomous, there's more robotics involved, there's AI, and there's software. How does that change the supply chain?

4. Autonomy Makes Scale Essential

The key thing—and I'll let George say it—is that everything has to become cheaper. If a radio could cost $30,000 4 years ago for the military and that was acceptable, this is no longer acceptable when you're talking about autonomous mass technologies and a lot of robots, hundreds and tens of thousands of them.

A lot of components that were exquisite—and I mentioned radios specifically as an example, but there are more—have to become significantly cheaper in price and significantly higher in scale. Cameras are actually the same. So I think that's the big impact. Again, coming back to volume, it becomes a significant issue.

I could not have said it better. Scale is the most important parameter here, but also having the underlying supply-chain networks that allow for that scale to be reached.

In 20 years, do you think defense companies will look more like technology companies or industrial companies?

5. Technology Meets Industrial Scale

I personally don't see this as being mutually exclusive. I think, with our example with Theon, we were mostly an industrial company about 4 to 5 years ago. The main product we were making was night vision, and still is, to be honest.

But since then, we’ve branched significantly into new technologies. Mind you, the militaries of the world were not very quick to adopt new technologies a few years ago. This is changing. It is not so much a revolution, I would say; it is more of an evolution as new technologies get gradually adopted into existing platforms and systems.

To answer your question, I think the right recipe is a combination of both. Prototypes don’t fight wars. No matter how good they are, they cannot win wars. So if you want to be competitive in today’s world, you need to have good technology. You need to be at the forefront of technological development and also be industrially astute enough to be able to deliver this at scale.

My view here is slightly, maybe, controversial, but I think you need the 2 types of companies. I think technology companies that do AI and software for defense and the connected battlefield should not also be the manufacturing giants of the world.

Essentially, I think the success recipe for Europe, and for the world, is having technology companies that focus on the tech, the software, AI, weapon final assembly, and testing to make sure that they work. And then there are industrial companies that are extremely good at producing components that those companies making technology need. The synergy between the 2 should not be competitive in nature, but non-zero-sum, where they collaborate to produce at scale. I think this is my winning recipe for this part.

So I asked this question yesterday when we were interviewing FEMA on photonics about the state of AI in Europe versus the US and the dynamics there. But the question for you both—and Bruno, too—is: What is the biggest misconception about European defense?

6. Europe Has a Procurement Problem

European defense has, to a very large extent, similar technological capabilities to the US. I don’t place them as far apart as a lot of people might think. We have some fantastic companies in Europe.

I’d say one main differentiator is the prevalence of startups in the US that have become scale-ups, so to speak. Anduril being one of them, Palantir being another—and “scale-ups” is an understatement of what these companies are. In Europe, the traditional primes are very similar to the traditional US primes, with the only difference being that we have some countries that protect their own interests.

We have conflicting interests between countries, so you have a lot of national champions in Europe because there are simply many countries. It’s not like the states in the US. I would say that the difference is that we have more companies than are needed in a lot of ways, because so many are national champions that would not survive in otherwise competitive landscapes. Whereas in the US, all of the US primes seem to have found their niche. This is where I would compare one with the other.

To add further to George’s point, I think one of the biggest misconceptions is that the processes in the US and in Europe for procurement of defense systems are similar. They actually aren’t. They’re quite fragmented, and it’s sort of country by country or on the European level.

Because of that, a lot of the current existing military-industrial complex is very outdated. Countries like Germany and others have large volumes of systems that are not necessarily working. In the US, companies like Anduril or Hadrian have partnered with the government in joint-venture initiatives to really change how this relationship between government spending and defense OEMs exists.

We think that Europe is certainly going in that direction, but it’s very much behind in terms of those partnerships. I would say that’s the biggest misconception.

Do you think we’re at risk of a defense bubble, or is it still too early? Is it too late?

From a venture landscape point of view, I would say that a lot of companies have been funded with minimal amounts of capital, like $5 million or $10 million, and the products that those companies have built can potentially be even better than the existing systems.

The problem is, if you don’t have hundreds of millions of dollars on your balance sheet and the end customer is the government, they have very little belief in your ability to actually deliver and manufacture the product at scale, versus a company that has been working with the government for 10 or 20 years and has thousands of employees and millions or hundreds of millions on its balance sheet.

I think a lot of those companies in Europe are not going to do well, even though their product might be deemed superior compared to traditional OEMs. At the same time, certain companies have already become de facto kingmakers, like Helsing in Germany or ICEYE on the European level for SAR applications. Those companies are just going to keep eating away at market share from traditional primes.

Mm-hmm. I asked this before we started rolling and taping, but I have to ask you again: What do you think is a secret you know about the world that no one else does?

7. The Future Is Already Changing

I think that choice is an illusion. I think there is more and more research actually showing that we think after we feel. So that’s my answer to this question. George?

George?

How could I top that? That was—

How can you follow that?

Yeah, that was deep. I think Bruno should take that.

Well, thank you very much for the reins. I think Aistis is hard to beat. One secret about the world that nobody else knows—is that the question?

Yeah.

Should we talk about the Ukraine-Russia conflict? No. I would say one secret about the world that very few people know is—and this might be a bit of a cliché—but I think that the next 5 to 10 years of scientific knowledge because of AI would be the equivalent of 100 years of manual human research.

It may not be seen as a secret, but I think the world is very much going to fundamentally change over the next 5 or 10 years in more ways than we imagine, and all of our lives are going to change because of this. So I don’t know if that’s a secret or not, but—

It’s a good answer.

I’m not sure many people are aware of that.

Aistis, I have to ask you: What is the biggest lesson you learned from Palantir, and maybe Alex Karp?

Focus on being important and valuable, and the money will come. So that’s Palantir not being profitable for, I don’t know, over 15 years, and now being fit, is good. I think that’s the lesson I always remember when people ask, “What do you sell tomorrow? What’s your next year’s revenue?”

How am I creating value? Why are we becoming more important as a company for the world—

Mm—

—and then the money will come.

Amazing. Okay, so as we close out, you guys get the question everybody else gets. We have to know: What is your hottest take right now?

I briefly mentioned this before. I think a somewhat controversial take is that defense does need more of this ability to scale rather than crazy innovation or revolution, so to speak, on the technology side.

This is a very interesting thing to tell to people who are in the VC world: It’s not about finding something that’s going to revolutionize everything, but finding the right fit that has the capacity to scale to be successful. So I would say scale-ups over startups in defense is a somewhat controversial take.

Mm-hmm. Bruno?

Well, very tough to beat both of those, but I believe that because of how large the defense market is, especially in Europe, and how close we are to the front lines, if Europe can truly do exceptionally well both at manufacturing locally and at building the intelligence layer for defense, there could be a half-a-trillion-dollar company coming out of Europe in the defense space that was founded probably in the last 5 years or so.

How long will it take? Well, don’t quote me on that, but I think it could be done in the next decade.

Amazing. Well, that’s a wrap. Thank you, guys.

Thank you.

Thank you.

Great job.