German investor Digital Transformation Capital Partners GmbH is on track to raise Europe’s largest-ever dedicated venture capital fund for defence startups, signing its first big backers for a fund targeting €500 million ($580 million).
DTCP, which was spun out of Deutsche Telekom AG a decade ago, has closed investments from its anchor backers, managing partner Thomas Preuss told Bloomberg News. He confirmed that DTCP is eventually targeting €500 million for the fund.
Porsche Automobil Holding SE, the holding company of the Porsche-Piëch billionaire family, and Deutsche Telekom had been in talks to anchor the new fund, Bloomberg reported in August.
Both companies are awaiting approval for “holdings of between 25.1% and 49.9%” in a Luxembourg-registered defense fund, according to December filings with Germany’s competition regulator.
With Russia’s full-scale invasion of Ukraine and US President Donald Trump’s wavering support for NATO, European governments have ramped up military spending to record highs. Startup founders and investors have sought to capitalize on that boom with emerging defense firms such as dronemaker Helsing attaining multi-billion dollar valuations.
Should DTCP hit its target close, the fund would be the largest defense fund for startups in Europe. France’s state bank Bpifrance and Dutch firm Keen Venture Partners are raising smaller funds to target the sector, as is Lakestar founder and investor Klaus Hommels, Bloomberg News reported.
DTCP plans to make around 30 investments from the new fund, with a check size averaging €20 million, Preuss said. The team will look at European digital defense infrastructure and invest in startups innovating in supply chains, connectivity, data centers, materials, robotics, cybersecurity and unmanned systems, he said.
The firm plans that about a fifth of investments from the new fund will focus exclusively on military technologies that can include weapon systems. The remainder will be so-called dual use with both civilian and defense applications.
That reflects an attitudinal shift from fund managers and their investors, who have previously avoided funding armaments. Porsche dropped earlier requirements that investments are dual-use only in August, Bloomberg reported.
(With assistance from Libby Cherry.)