Can Jónsson steady the NATO innovation ship?

0:00Dr Ari Kristinn Jónsson:Hello and welcome to Path Founders with me, Mike Butcher. Today's guest sits at the intersection of venture capital, deep technology and global security. Dr Ari Kristinn Jónsson has just stepped into a newly created role as president of the NATO Innovation Fund or NIF, which is a billion euro venture fund backed by 24 NATO countries to invest in technologies that strengthen defense, security and resilience across the alliance. The fund was launched in 2022 following Russia's invasion of Ukraine with a mission to back the next generation of dual-use technologies from AI and semiconductors to space, biotech and autonomous systems.

0:43Dr Ari Kristinn Jónsson:But it has faced some growing pains. There's been a leadership turnover, there's been some questions about governance and the challenge of turning promising deep tech startups into real defense capability for NATO countries. Jonsson brings a rare mix of experience to that challenge. He has a Stanford PhD in AI, he's a former NASA research scientist, a startup founder, and until recently he was CEO of Icelandic image recognition company Videntifier. And until recently, Fiona Murray, who is chair of the NATO Innovation Board, was steering the ship. Now, in his new role, he's focused on something many of defense innovation systems struggle with, turning breakthrough technology into real deployment inside governments and militaries.

1:34Dr Ari Kristinn Jónsson:So today we're going to talk about the new defense tech boom in Europe and how NATO and the NIF fund will work with startups and whether Europe can actually build the next generation of strategic technology companies. Well, welcome to the show. Thank you so much. A pleasure to be with you. So how are you settling in, first of all? I am actually settling in quite well. I have been with the fund as a board member for about three years. And so I do know the fund from a certain angle. And that really helps getting going because it's a unique fund in many ways in an environment filled with opportunities and challenges.

2:18But there is a lot of work that we have ahead of us. And I am itching to to get going on on all of that full time.

2:27Dr Ari Kristinn Jónsson:Right. And you're you're in the new role of a president, which is a new role. So what was the problem in terms of governance prior to prior to the creation of this new role? And what's what are you going to solve with this position now? So the NATO Innovation Fund is a venture capital investment fund. And it therefore has a structure that is very similar to standard VC funds. The people in charge of making investment decisions are the investment committee, the partners, and they have with them the associates and the investment team that supports them. And that is a structure that works perfectly fine for the VC parts of things.

3:15But the NATO Innovation Fund is a unique fund in many ways. in addition to our investment goals, we have goals in terms of building up the capacity in Europe, both in terms of influx of funding, in terms of bringing out the technical capabilities throughout the various countries in Europe and bring them to bear. And we have the mission that you talked about, which is to bring the technology of our portfolio companies actually to governments, to NATO, so that the technology can really be used for defense, security and resilience. And that's a much bigger role than a normal VC fund has. And therefore, this president role has been created to coordinate the efforts, both internally and towards the outside.

4:03Dr Ari Kristinn Jónsson:Right. And there has been a little bit of controversy about how NIF has been run. There's been some departures from a partner or so. Also, there's been some issues about pays and salaries and potentially being too high. Are you confident you can sort of steady the ship now? What do you what sort of procedures or new policies do you think you can you can bring in to to steady the ship? So there's actually been a lot of progress throughout the existing life of the fund since it was properly stood up in 2023. So today we are at a good point for the future in many ways. We have four very good partners who are fully on board and have a combined experience and varied background that is a really good complementary combination.

5:07We have a portfolio, even with there have been some departures and there have been some changes. But at the same time, we have managed to build a portfolio, both of direct investments in companies and in funds. that's a strong portfolio and that we can continue building on we have shown that we can bring our companies to the ministries of defense to the governments some of our our portfolio companies already getting contracts and and tryouts so we have made a lot of progress even though it's been you know a bumpy road at times so where we stand today we are we have a very good foundation uh we talk about it we have gotten from zero to one in that time we're functioning um but we have so much more to do and we have so much more that we can bring to the european dsr markets and that's what we want to do and that is my objective is to help the fund to go from one to 100 and really scale the capabilities that we have both in terms of investment in terms of our portfolio your companies and bringing those companies to the governments and to NATO.

6:20Dr Ari Kristinn Jónsson:Now, how much freedom do you feel you have to operate? Because obviously you're talking about a multi sovereign fund. A lot of VC funds in the private sector can move quite quickly because they have, you know, a handful of big, big, you know, family offices, perhaps or pension funds. You've got a whole different ballgame to manage. You've got 24, 24 governments. How do you square the circle between having to move at venture speed and also, obviously, there's such a security issue right now. We've got a war in the Middle East. We've got the invasion of Ukraine by Russia. How can you speed things up?

7:02So having those 24 nations as the investors certainly makes things different. it. We are designed so that it should not impact the speed. No decisions about investments or other activities need to be taken to the investors. We can make those decisions independently. And we continue to work on refining our processes and making sure that we can work at the same pace as the market in terms of investments. Having those 24 nations behind us, however, gives us a wonderful advantage, especially when we look at our capability to bring our portfolio companies to the governments. It also helps us have people in all of the different markets where we operate, where we can find where the best opportunities are for new funds or new companies that are coming out with relevant technology.

8:05So we work very, very closely and will continue to build that relationship and formalize it with the 24 nations behind us, both for us to know whom we should be talking to and what are the interesting opportunities, but also to bring our portfolio company to them and help our portfolio companies grow in the various markets, especially with government and ministries of defense. There are challenges with everything, but it's a very good group. And we all, inside the fund and among the countries that are behind us, I have a very clear vision of the objectives that we have in terms of building up the capacity for dual use deep tech in Europe, bring those companies to those countries and bring them to bear for our defence and security.

8:59I see.

9:01Dr Ari Kristinn Jónsson:Well, you've got a quite a big mountain to climb, but certainly the defence sector and the dual use sector is on a roll. I think some statistics I saw were that defence, security and resilience startups raised about$8.7 billion in 2025. So but do you think that you're going to be concentrating in any particular area or autonomy, cyber or robotics, semiconductors? Or even I saw you might even be investing in biotech as well. So I presume it's very much across the board. That is correct. We are looking at distributing our investments across a variety of different technology sectors. we have the capacity to do that and furthermore we have the capacity to bring those different sectors to the different elements with defense units with nations and security organizations and primes so we are not picking out any one or two to focus on if we look at the needs of europe and NATO as a larger unit, they are varied.

10:21There is a whole lot of things that are needed in terms of autonomy, in terms of autonomous capabilities, robotics, monitoring, whether it's underwater, in the air, et cetera, et cetera, sensing communications, space operations, materials, both in terms of being able to deal with supply chain risks, but also advancing our material capabilities. and as you mentioned advanced capabilities like biotech and quantum are also part of what we are looking at and if we look at where we want to see Europe in terms of deep tech capabilities in terms of security capabilities built on technology we need to make advances all of these different areas everything from the materials that go into the various pieces of equipment to our freedom to operate and communicate as needed.

11:13Dr Ari Kristinn Jónsson:Well, it's interesting you mentioned Europe there, because one of the members of NATO is also the United States. And so there's clearly some interesting geopolitical issues that might need to be balanced. How affected do you feel by those big wider geopolitical controversies that have happened in the last few months? Yes, there are kind of two signs to that coin. One of the things that most people notice is that there are 24 NATO nations behind the fund, but there are 32 nations in NATO. So there are a few nations that are not yet participants in the funds. Our view is that we welcome any discussions and any interest in joining the funds.

12:00The more NATO nations we have on board, the stronger the fund is, the more capabilities we have. And needless to say, various political changes in different countries can have an impact on how that is going, how likely things are going to happen, etc. But the more important thing for us is our ability to actually collaborate. And that is in terms of our portfolios, companies having partners, being able to enter the market. And there we do not see any political obstacles. Our portfolio companies have just as good an access to the U.S. market when it comes to talking to primes or finding contracts as anything else.

12:42So as long as that is not getting in the way, we can actually be fulfilling our role as a NATO-wide technology provider.

12:52Dr Ari Kristinn Jónsson:OK, well, that's very, very diplomatically skirted there. But I dare say there's going to be lots more to come on that subject. But let me ask you another question. Ukraine has showed that deploying new technology has to be done in almost an iterative manner. They have a marketplace for drones. They constantly test and repeat and iterate on how they deploy their new technologies. And obviously, the way that militaries have been structured in the past means it's really, especially traditional and the Western militaries have been much slower in terms of how they deploy these technologies. and it's all very well that you might have a fund that can invest in these technologies but if they can't be deployed if they can't be tested especially in the battlefield then how are you going to you know scale and you know create create these kind of great scale operations for for these companies so i mean what can you do that's sort of structural maybe systemic about the way that either NATO or the fund engages with those structural issues about deployment?

14:06That is a critical question, a critical point you're making, and you hit the nail on the head, which was some of the challenges and opportunities that we have. Up until very, very recently, any decision making by the military was a long drawn out affair to years and years and years and budget had often been spent to a large extent many many years into the into the future and and it was all based on on a presumption sort of a tradition about how defense capabilities were developed and built up over time. You correctly point out that Ukraine has shown us that it doesn't work this way when it comes to that battlefield.

14:56And we're also seeing another change that is related to this, which is that a lot of the technological advances are being driven now by companies, not necessarily at the initiation of the military. As you mentioned, I studied in the United States and I worked with NASA for 10 years. And during that time, I actually had quite a bit of interactions with a variety of units of the military. And what was a tradition back then was very much that the military defense forces came out and said, that here are capabilities that we need, research institutions, companies, etc. stepped up and started development to respond to that.

15:43Today, we have companies bringing revolutionary technologies into existence, not necessarily in response to desires. So the ministries of defense and governments need to also understand they don't have everything on their plan that is going to come up and increase their capabilities. for defense and security. So our approach to this is two-pronged. One is to establish the relationships with NATO, through NATO, with the governments that we have. And once again, we have this unique position for the fund where we're directly connected to NATO, we're directly connected to 24 countries and governments to work at how we make this work best.

16:33everything from how can procurement early on procurement for testing purposes happen how can we participate in different exercises and different tests for our portfolio companies etc and that is something that we already have going and already have instances of where we have participated and and connected our portfolio companies directly to the ministries of defense and the governments And on the other hand, is to then work for the longer term through the demand signals and the capabilities of the portfolio companies to pair those up and then bring the capabilities that are being called for at various stages to the governments, to the ministries of defense and other security agencies and crimes.

17:22Dr Ari Kristinn Jónsson:Okay, well, I see that's going to be quite a thorny issue to unpack, but I dare say you'll have a go. But another issue is that I mentioned Ukraine in my previous question. And most defence companies say these days that if you're not in Ukraine, you're not in defence. And I know that NATO obviously has been engaging on that front, obviously. how can you get deeper ties and deeper relationships with Ukraine as a fund and with the investors who are investing in the technologies being deployed in Ukraine right now? So we do have very regular interactions with Ukraine as a fund and to, you know, again, understand demand signals, to understand what things are happening.

18:15there are portfolios companies that we have that are actively actively contributing already in ukraine and one of the things but one of the things to keep in mind about the nato innovation fund is that we are not a pure defense fund and so we also have portfolio companies and will have portfolio companies that are developing the technology that will be brought to bear in the defense and security arena three years from now, five years from now, even longer. And so we have a wide range of things. So we don't expect all of our portfolio companies to be actively engaged, but for those portfolio companies that have gotten to the point where they can deploy it, we're already working on that and we've proven we can do that, including in Ukraine.

19:07for those that are ready for testing and proof of concept and sort of adjustment into the the overall defense and security arena we're working with them on that and we also had successes there and then we keep an eye on all of the other companies and work with them as their technology matures as it gets closer we are ready to work with them too We have proved that we can do this and I'm not saying it's easy. It's a lot of work. We have a very good people who are working with us. We're building up a mission platform group that really helps make those connections to build those relationships, help our portfolio company, etc.

19:47etc. And this is what we really want to do at the NATO Innovation Fund, to invest in the right companies and the right funds so that we can then increase the capacity in Europe and bring those companies to the different governments, to the different security organisations.

20:06Dr Ari Kristinn Jónsson:Europe has obviously a lot of traditional defence primes such as BA Systems or Thales Group. and now we're getting neo primes such as Helsing for instance. What's your relationship to those new neo primes and do you think that Europe will be able to create new independent defense giants? We have a good relationship with those primes and neo primes and it's a foundation for us being able to help our portfolio companies to understand demand signals etc just like with the government to forecast what will happen in terms of Europe and build those defense giants. I expect it to happen, but it's very hard to be confident about the future.

20:58There are so many things that can happen. But given the direction in which we are going, I would expect us to continue to build up the capacity and capabilities in Europe across the board and that includes also consolidated and larger defense primes. So I expect that to grow in Europe in the next years and decades.

21:27Dr Ari Kristinn Jónsson:Obviously you're brand new in the role and hopefully by the end of this year that you'll have made some headway with the fund and some of the previous ructions and instability will have dissipated. What does success for you look like in the next year, in the next couple of years and where would you see the fund going longer term? So success for this year, next year is very much that we, in a very stable fashion, at pace for investment, continue to build our portfolio, both in funds and companies, that we strengthen our adoption capabilities so that we have an even stronger relationship with the government and can bring more and more companies in our portfolio to testing to proof of concept demonstrations and even to deployments.

22:34And then one of the key things in my mind, which is very much on my table, is success in terms of continuing to grow the capacity in Europe. And that is everything from continuing to see more funding come into the deep tech dual use and the defense sectors in Europe. We need additional investment. The growth that we've seen is fantastic, but we need to continue. We also need to grow faster the amount of investment that is going into the startups and in the early phases. We've seen quite a bit of the growth now in the very late stages with larger companies, but we need to keep feeding new technology and invest in startups in this arena.

23:25And we want to draw out, we want to bring all the different countries in Europe to the front, find the capabilities that are being developed there that can help us secure our borders and our communities in the future. And so that is one of the key things in addition to the investment, stability, adoption, build up the capacity in Europe in everything from finding new technology and startups to making sure that the investment at a larger scale is available to support them and nurture them.

24:03Dr Ari Kristinn Jónsson:And presumably you've had some engagement with some VCs out there and I'm sure some entrepreneurs here and there. But from the community that you talk to regularly, what's the feedback that's going on, especially out there in dual use of defense? What are you hearing from the marketplace at the moment? I mean, there's very clear growing interest in this sector, and especially sort of the defense side of things has started driving it a bit. But it's projecting very nicely over the more general space of defense security and resilience. people realize that it's not enough to have certain defensive capabilities, such as being able to detect and take down drones.

24:57You need to have also the security for the infrastructure, the ability to monitor, to repair, to just make sure our society continues to function. So we really see across the DSR sector that there is growing interest. There is also growing interest in deep tech. But I think that is something where we need to continue nurturing, especially for the more advanced technologies that are a little bit further out, to make sure that Europe and we are investing in those companies that really are going to change our capabilities in three, five, 10 years. We need those just as much as we need the immediate capabilities.

25:41The discussions among VCs is very much understanding this. There has been a real change in mindset from just three to five years ago. But I want to see this continue along this path that we see more and more come and participate in this arena. It's a very wide ranging arena that has both defense opportunities and commercial success opportunities. And I hope to see more and more VCs be talking about this, being participating in this arena and look forward to welcoming to our dual use deep tech community.

26:24Dr Ari Kristinn Jónsson:Well, certainly from my perspective, when I bump into VCs, there are mainly two phrases on their lips. One is AI and the other is defense. So I'm sure you're pushing at an open door there on that subject. But for now, we'll have to leave it there. Dr. Ari Kristen Janssen, who's the new president of NATO Innovation Fund. Thank you for joining PathFounders. Thank you so much for having me. It was a great pleasure talking to you, Mike. We'll be right back.