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NEWS Hegseth announces procurement overhaul Pete Hegseth announced sweeping defence procurement reforms aimed at establishing speed as the "organizing principle" of the Pentagon. Key changes include mandating commercial first contracting, and implementing new penalties for industry delivery schedules. As an investor in early-stage defence tech companies, there isn’t much to dislike here. In fact there isn’t anything to dislike. Hegseth wants to spend money on commercial products and avoid bespoke contracting. Put differently, he wants to end the cost plus business model that has defined procurement for decades and lined the pockets of defence primes. I wrote recently about the changing nature of defence tech development: it now more closely emulates computer software development. In the 1980s, before Microsoft came to town, computer software companies wrote bespoke code for each customer. They were essentially consultants who got paid for project work. Then Bill Gates, and others, invented packaged software. He pioneered the idea that software could be a product in itself. Now Microsoft sells the same product to every customer at zero marginal cost. A similar shift is happening in the defence industry. Until now, government procurement agencies have been slow to adapt to the new model. That seems about to change. In the US at least. The question is whether Europe can mirror this approach. European Space Agency takes on defence role In a historic shift, the European Space Agency (ESA) is poised to take on a defence role. Since its founding 50 years ago, it has shunned involvement in military space activities, insisting on a strictly civil mission. Given that space technology is foundational to our everyday lives, this seems like an obvious decision. Russia and China have been developing anti-satellite (ASAT) technologies for years. The Russian Kosmos satellites have recently flown close to American spy satellites and are capable of ‘interfering’ with other satellites using onboard equipment. Meanwhile China’s Shijian satellites have robotic arms and recently demonstrated the ability to move defunct Chinese satellites to a graveyard orbit: a true dual-use capability as it could also be used offensively. This is good news for startups developing space defence capabilities in Europe. Previously their only market was the US, where several well-funded players have made competition challenging. A new European market may be about to open up. The question is whether local companies can capture it, or if American products will dominate. China unveils jellyfish-like underwater drone In a recent breakthrough in biomimetic robotics, researchers in China have developed a jellyfish-inspired “underwater phantom” designed for stealth operations beneath the surface. Its soft, umbrella-shaped body and fluid propulsion system allow it to glide quietly through the water, making it almost undetectable to sensors or the human eye. Admittedly a niche technology, China’s jellyfish speaks to the unrelenting desire to monitor underwater activity. That was previously the domain of white pullover-wearing submariners. But autonomous technology and AI have changed the game. Helsing recently bought a deep sea monitoring company, Blue Ocean, which offers a similarly persistent surveillance capability to China’s jellyfish. Meanwhile Anduril acquired Dive Technologies back in 2022 for similar reasons. The last year has seen a slew of uncrewed surface vessel (USV) developers enter the market. My sense is that the same will soon be true for the underwater domain. FUNDRAISING Armis, an American developer of security software for critical infrastructure, raised a $435m round at a $6.1bn post-money valuation, led by Goldman Sachs Alternatives. Neros, an American developer of low-cost military drones for the US and allied forces, raised a $75m Series B led by Sequoia Capital. Reflex Aerospace, a German manufacturer of high-performance satellite platforms, raised a €50m Series A led by Human Element. Truffle Security, an American startup that helps organisations detect and remediate leaked credentials, raised a $25m Series B co-led by Intel Capital and Andreessen Horowitz. Kaizen, an American company aiming to modernise government services, raised a $21m Series A led by NEA. Immaterial, a British advanced materials company developing metal-organic frameworks (MOFs), raised a £13.5m Series A-2 led by SLB. Sunflower Labs, an American developer of autonomous aerial security technology, raised a $16m Series B led by Sequoia Capital. Malanta, an Israeli developer of pre-attack prevention software to neutralize threats before they materialize, raised a $10m seed round led by Cardumen Capital. Cephia, an American developer of sensors using AI and meta-materials, raised a $4m seed round led by Radiant Opto-Electronics Corporation.
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