Sifted - Defence 'FOMO'?

Good morning there,

Some of the technology that we cover in this newsletter seems somewhat dystopian: AI girlfriends, meat grown in a lab — and, now, autonomous strike drones that could self-identify targets.

As the war in Ukraine rages on, founders are working on building technology that can use AI to identify and strike targets themselves — with or without human intervention. I recently spoke with one German founder at the centre of the hot drone and defence tech space, Quantum Systems’ Florian Seibel. He gave me fresh details about his new startup Stark, which is building autonomous strike drones, as well as his older, and well-funded, company Quantum Systems, which makes unmanned aerial surveillance drones being used in Ukraine. 

We had a wide-ranging conversation about the moral considerations around building weapons, Stark’s recent fundraise and the FOMO investors are having over defence tech right now in my latest interview, which you can dig into below.

Elsewhere today:

• Spain’s Seaya Ventures closes €300m climate tech fund.
• Semiconductor startups scouted by Sifted.

— Anne Sraders, senior reporter

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🇫🇷 France’s chômage is safe — for now. French far-right party Rassemblement National (RN) took a clear lead in the first round of a snap parliamentary election called by president Emmanuel Macron at the start of June, with 33% of the vote.

• Just after the results were published, prime minister Gabriel Attal announced that the government would suspend a controversial reform proposed earlier this year to reduce the duration of France’s unemployment benefits scheme. The reform, which both the NFP (a coalition of left-wing parties) and the RN oppose, caused a stir among French entrepreneurs, many of whom say that the country’s generous scheme is the reason they were able to launch successful companies.

🇪🇸 Seaya Ventures has closed a €300m climate fund, bringing total assets under management to €650m and making it the largest venture firm in Spain. 

• Madrid-based Seaya has previously backed the likes of delivery app Glovo, EV charging startup Wallbox and transportation provider Cabify. Its climate fund will invest in companies that are either reducing waste or greenhouse gas emissions.

👋 Erin Platts is leaving her role as HSBC Innovation Banking UK CEO to join London-based VC Octopus Ventures as CEO. She’ll join in January 2025 and Alliott Cole, current CEO of Octopus Ventures, will return to a full-time investment role. Platts will also help appoint her successor at HSBC.

The AI drone founder who thinks VCs are having defence ‘FOMO’

One startup that often gets mentioned in conversations about defence tech is Quantum Systems, the Munich-based AI drone startup making unmanned surveillance drones used in Ukraine. The company, founded in 2015, has been getting a lot of attention from VCs; it raised €63.6m in October last year, from investors like controversial PayPal cofounder and German-American investor Peter Thiel, Project A, HV Capital and Airbus Ventures. Quantum Systems’ founder, Florian Seibel — a silver-haired German military vet — has also been dubbed by publications as “Germany’s Lord of the drones” and “the man for the turning point”. 

But I’d also heard of the company in another context: that the German government had approached Seibel about attaching weapons to his drones. That set off a debate among his VC backers over whether they’d be able to support a dual use company that began making weapons. It’s a live conundrum for investors, as they weigh up what they’re allowed to invest in by their investors (the LPs) with what they'd like to back. 

In Seibel’s case, his investors ultimately deemed it too risky. But that wasn’t the end of the story; he instead created a new startup in February, Stark, to build attack drones that can self-identify targets. It sounds very “Terminator” (although Seibel assures me it is not).

Seibel tells me the startup has already closed a big seed round, between $20m-100m, with new and existing investors involved. It also has between 50-100 employees (he declined to provide specifics on both counts). 

Despite being on the receiving end of all that investor enthusiasm for defence tech, Seibel thinks things have gone too far: “There's definitely a hype… they all have this FOMO now.” 

He says that big US VCs like Andreessen Horowitz and General Catalyst (both backers of US-based defence tech Anduril) had a head start, and “now I have the feeling that all these other companies, all these other VCs, are kind of like, 'Hey, me, too.' And they don't have the experience. Talking to some of these VCs,” he says, “I could tell them anything, and they would believe me. That is shocking to me.” 

During my recent (virtual) sit-down with Seibel, we dug deep into a lot of different topics — from the morality of building autonomous strike drones to details about Quantum Systems’ business and goals for 2024. You can dig into the whole interview here.

But I’m curious to hear from you, readers: what’s your take on startups building weapons? VCs, are you interested in backing such technology? If so, what conversations are you having with your LPs? Send me a line. 

— Anne Sraders, senior reporter

🗽 UK startups turn to Silicon Valley to fill void left by risk-averse pension funds. (Financial Times)

⛵ ‘Suddenly now we have the wind in our sails’: Meet two agritech startups trying to change farmers’ attitudes. (Sponsored by Microsoft Entrepreneurship for Positive Impact)

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Gothenburg, Sweden-based Meela, a mental health matchmaking platform that helps people find the right psychologist and method of therapy, raised €2.6m in seed funding. Peak led the round and was joined by investors including The Inner Foundation, Unconventional Ventures and Calm/Storm.

Lampoldshausen, Germany-based ISPTech, which develops propulsion systems for spacecraft based on non-toxic green propellants, raised €2m in pre-seed funding. High-Tech Gründerfonds led the round and was joined by investors including First Momentum Ventures and Possible Ventures.

Trondheim, Norway-based Leasi, which provides solutions for managing machine and equipment fleets in the construction industry, raised €1.1m in pre-seed and grant funding from investors including Skanska, Startuplab, Gnist Capital, WeSeed and Innovation Norway.

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