E628 | EUCVC Summit 2025: Tanja Lind Melskens, Head of Corporate Strategy; M&A, Terma & Andreas: Defense, Disruption & Dual-Use: Europe’s Next Frontier in Innovation

0:00Europe is rearming, defense budgets are rising, and innovation is now a national security issue. Tanya Lind-Mekkelsen, head of corporate strategy and M &A at Terma. Explore how this shift is opening up new venture opportunities and forcing startups and corporates alike to rethink what dual-use tech really means. So Tanya, while you take a seat, tell us all why defense is more than just hype and why it's not just a bubble. So the numbers are very real. Just an example of if I just take Denmark, the modeling we did going into 2030, we will add 7 billion euros in the defense spending on top of the 9 billion spent today.

0:55And that was the modeling was actually done on the previous numbers, the 3.5 percent of the GDP. Now we're seeing commitments going up to 5%, and we're seeing it across NATO. So the numbers of the market is very, very real. With that said, there is also an incredible hype and incredible high valuations at the moment. We see both in startups and more mature companies. And that is especially driven by, of course, the conflict in Ukraine. It's driven a lot by the Western government, the MODs, donating a lot of equipment to Ukraine. And that's also where it's very difficult, both as an investor, but also as a potential acquisition.

1:51Because a lot of these companies, they manage, both startups and more mature, They managed to sell in their products through what we call donation offices in the MOD. But we'll know real feedback on how good the equipment is and whether it actually works. So we see very high boosted revenue in EBITDA on companies, which essentially we don't know how that will look in a post-conflict market. And whether or not they can actually sell in a post-conflict market. So investment is also very difficult right now. And we see a lot of VCs and PE coming in in this market. But I also think we will see a lot of especially VCs getting burned because it is, you know, selling into a post-conflict defense market is very, very different.

2:46But then just donating equipment right now to Ukraine. because they would rather take something that works 50 % than having nothing. But when we are going to see the defense companies buying in to rearm Europe in this plan, we need to see product that actually works. I know you think that being present in Ukraine and close to the front line is incredibly important, be you a corporate or startup or investor in this space. Can you talk a bit about the learnings from that? why that is so important? Yeah, so we're actually in the process of setting up a subsidiary in Kiev, and we're very far. We also did our first partnership with a startup in Ukraine.

3:32We announced that this summer. The innovation that is going on in defense technology in Ukraine is just beyond anything. there is a reason why they are now calling that the Silicon Valley of defense tech they are now producing over 4 million drones per year if I was a drone company in Europe or in the US I would be very scared right now and I would definitely try to sell my company because as soon as they start exporting they are so far ahead than we can imagine recently and just to give an example Zelensky decentralized the procurement of drones meaning that the startups are actually developing in the front line we had a meeting with the ministry down there and what they're telling us I haven't been to the front for good reasons but they're actually developing their product in the bunkers in the front line together with the battalions.

4:44So they're testing it right away. If it doesn't work, it gets fixed. They 3D print in the security room underground, and they update the software. The partnership we did, we're also providing software and sensors. So we get the updates, and we also need to work very, very fast in updating all the time. So it's definitely innovation going on beyond anything else. Tanya, you spoke about the importance of also keeping in mind the post-war situation and selling into that. At the same time, you're talking now about the primacy of getting learnings at the front lines and the product development that happens there.

5:27What many say is that we need to also be wary of the learnings that we take away from Ukraine, because it's a very specific special war situation that likely will not come as the next one. I think there are a lot of important learnings. I think the Ukraine war has shown that this is especially about a drone war. the autonomous systems, that's also why they have become so good. So drone protection has become more important than anything else. And that we also see in EU. I think we have seen the devastating pictures coming out of Ukraine where we see energy plants, transportations, even hospitals being a military target.

6:20And no Western country want to be in that situation. So one of our very, very key markets going into over the next five years is actually the protection of the critical infrastructure. And we just launched a new product, much more focused on that private market because nobody wants to see that happen in any of the countries. I want to ask you one final question, which is a question on ESG and its role in producing things for the defense sector. Popularly, you could maybe say, who cares who made the bullet that killed the person? So, ESG has always been a highly important internment. We have a big compliance department, and they're very much involved when we do investments or acquisitions.

7:16But we also have to be realistic when we, for instance, look into a country like Ukraine. As mentioned, some of the startups we work with, they are in the front line. They don't have a copy of the Geneva Convention lying on the table. It's a matter of survival. And that we cannot monitor. just like one of our biggest risks is actually whether or not our founders are still alive tomorrow which I assume a lot of you guys don't have that same risk but of course especially in the post-conflict market we do need to still uphold that very high standard in terms of corruption what kind of weapons we actually do want to support and do want to make compared to being in an actual conflict zone where it's more a matter of life and death.

8:21Tanya, thank you so much for coming to talk about this very important topic. It is a true honor and important that we in Denmark have such a strong tier one producer in this market. So thank you for sharing some of your insights. Thank you. کی busca