Rearming Europe means booming business for German defense startups

DW (English)

As Europe seeks to boost its defenses, business is growing for some startups in the German defense industry. But can they deliver amid rising global tensions, hamstrung by red tape and certification hurdles?

Transcript

00:00They are the stars of the German startup scene and newcomers to the defense

00:06industry. Growing in security in Europe has seen them allocated around 1 billion

00:11euros in recent months. But are they really worth that record-breaking

00:15investment? ARX Robotics developed this miniature tank which is fitted with

00:21lasers to confuse the enemy and is able to evacuate injured troops. Investors

00:27recently invested 33 million euros to get the young company off the ground.

00:34What I find worrying is that the war in Ukraine in itself was not enough. It was

00:41transatlantic relations that made the difference. Europe then understood that it

00:46has to stand on its own two feet when it comes to defense and cannot depend on the

00:50US.

00:53There's a specially acute demand for drones like this one built by quantum

00:59systems costing 180,000 euros apiece. The startup is developing its products

01:05without real assurances that they will actually be wanted by militaries. We work

01:10at our own risk. Instead of waiting until we get the big development contracts we

01:15anticipate demand based on feedback from our clients what we hear from the

01:19security and defense market and feedback from Ukraine.

01:25The Hitek drone was co-developed with a young German software outfit. Like other

01:30startups Hitek knows that developing and implementing innovations faster can

01:35provide a decisive advantage in a potential war scenario. So speed is of the

01:41essence.

01:43The special challenge for us is having to create innovations while ensuring that

01:48they meet the certification requirements. The area we're operating in primarily

01:53involves flying systems. Of course there are standards we have to comply with. But on

01:59the other hand they're not designed for processes to be realized as quickly as

02:03possible. So that's the dilemma we face.

02:12In the German armed forces it can take years from tender to purchase. Not ideal for startups.

02:21By the time a decision is made even tech-savvy companies can run out of money and the military

02:27is often the first buyer.

02:31And during that time of course startups can't generate income. Meaning that they can't

02:37persuade investors to give them money to enable further growth. And that's where we

02:43need to explore new approaches.

02:49Also among the prospective new approaches products with all parts made in Germany or at least in Europe.

02:55Currently many components come from overseas, which isn't ideal if a conflict breaks out.

03:03Especially when it comes to defense, we cannot be dependent on countries that are already

03:11classified as strategic opponents. That would be disastrous and short-sighted. So we need to

03:19ensure ASAP that the relevant infrastructure and production are in Europe.

03:28In the future it's crucial to fully integrate innovations with support from AI. That will make

03:34them more effective, but also raise the stakes for German startups.

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