Helsing: Challenges ahead for the defence tech unicorn

0:02Hello and welcome to the Sifted podcast, the show where we help you get to know the brightest and boldest people and companies in Europe's startup ecosystem. I'm Amy, Sifted's editor and your host. And today I'm joined in London by my colleague Anne Schraders, who's usually based in Berlin and is Sifted's VC and defence tech reporter to take a good look at one of Europe's buzziest startups. That company is Defence Unicorn Helsing, which this month raised a whopping 600 million euros at a 12 billion euro valuation and has been keeping everyone talking for quite some time now. Defence is, as we all know, the topic on everyone's minds at the moment, and Helsing is the poster child for the European defence tech wave.

0:42But despite the Munich-based company and its well-respected co-CEO, Torsten Ryle, getting mentioned in every other conversation Anne and I seem to be having at the moment, it's still remarkably secret about what it actually does. And it's still somewhat unclear how good it is at what it does too. So Anne, let's share notes about what we know, And listeners, if you have any little nuggets of information that you can share, please get in touch afterwards as well. So, Anne, for a company that everyone is talking about all the time, we do seem to know not all that much about what Helsing really does.

1:17What have you figured out? Yeah, well, first of all, thank you for having me on the pod, Amy. Very excited to be here. So, Helsing up until recently has been, as you said, very secretive about what it does. often you talk to investors and they would give you very vague answers or not really good answers at all about it. And so I think it's been an interesting change in the company strategy recently to be communicating a bit more about their products, their strategy, all those things. And so essentially, Helsing started out in 2021 as a software company. So they focused only on software. And as you mentioned, that software was a bit hard to describe.

1:52Essentially, we think it's kind of this AI battlefield software, which uses inputs from sensors and cameras on vehicles to kind of map out battlefields and help with strategy. And then late last year, the company kind of did this big pivot into hardware as well. So they started making their own drones, autonomous drones. Before that time, they had been embedding their software into existing drones, and now they're doing their own drones. And do we know where the drones are being used? Yeah, so they're being used and tested in Ukraine and they've made commitments to send thousands more of their new strike drones into Ukraine as well.

2:27And on their website, if we can glean anything from that, it's quite interesting. You open it up and it's this kind of like beige color. And then there's this picture of this drone swarm and a big slogan saying protecting our democracies. And they also talk about, and this is something you've been writing about just this week, that they work across the sea, the air and the land. Tell us a bit more about that. Yeah, so Helsing is sort of expanding their products into other domains. As you mentioned, sea. I think that's something that I've been writing more about recently in maritime technology.

2:59And essentially, they're kind of doing like underwater surveillance systems and kind of using the same technology they're using elsewhere in the air and the land using their AI software. And its co-CEO and founder, Torsten, seems to be a figure that lots of people respect or think highly of. I mean, I've met him a bunch of times. He's this tall, soft-spoken German man. And I feel like he's increasingly willing to be very, very bullish about Europe and, you know, the importance of defense and protecting our democracies on stage. He seems to be at lots of events these days. What else do we know about him?

3:36Yeah, so Torsten studied biology at Oxford, so kind of an unusual background. And he actually started a video game company called Natural Motion back in 2001, which he ended up selling to a U.S. video game company, Zynga, for$527 million in 2014. So he's already kind of this exited founder in a very different area than defense. But I think, you know, he certainly seems to be, as you said, increasingly willing to talk about European defense. I think a lot of that comes from the general attitude in 2025 of Europe really needs to up its defense. we might not be able to rely on the US as an ally as much anymore.

4:11And so I think that kind of tracks with the general mood among founders, I think, at this point. Yeah. And one of their big investors is General Catalyst, the US and now also Europe-based VC. One of the partners there, Jeanette Zufurstenberg, is on Helsing's board. And she also is becoming increasingly sort of almost political, isn't she, in the kind of conversations she's having and how much chat there is about the importance of investing in European technical sovereignty. What about the other CEO? Gundbert Scherf. Yes, I think this also kind of goes into the company's positioning in terms of its closeness with the German military, but he's also the co-founder, co-CEO, Gundbert Scherf.

4:55He spent two years working in the country's defense ministry, so he has those relationships, those connections, and I think that's been a benefit to the company and being able to get into this very, very hard to break into area in terms of selling to the government. It's quite tricky. And that's something that a lot of founders complain about as being a big hurdle. So it seems like they definitely have a lot of resources and connections kind of devoted to that element of selling to the government. And Helsing is in this interesting position of, as I said in the intro, it's kind of become this poster child, hasn't it?

5:24So it is the company that everyone's watching. And I remember when it raised, it raised its first kind of announced round was an 102.5 million euro series a which is a huge series a anyway in 2021 and its main investor was the spotify founder daniel x investment firm premium materia so it made headlines for multiple reasons there and i and i remember back then it was definitely still in a time when it felt sort of strange or uncomfortable maybe to be investing in a defense tech company when now as you have been writing about a lot defense is the investment area of the moment isn't it it's really remarkable kind of how quickly that changed.

6:02I mean, even last year when I was doing some initial reporting on the defense industry, it seemed like investors were very much on the fence about it. It still was a bit controversial. And now, you know, it's the top of mind for most of the investors I talk to, especially those who focus on kind of deep tech. It really is kind of this remarkable change from when Daniel Ek invested. I think it was a huge controversy that he did that in the defense space. And, you know, I think now we see a lot of more mainstream investors getting into defense and a lot of US investors getting into Helsing as well.

6:30And so I think it's just really a remarkable change very rapidly. Yeah. And it just does have a lot of big names as investors. There's also Axel, Lightspeed, again, another US firm that's kind of quite heavily involved in Europe now. Plural, the firm set up by Tavit, Himrikus and a bunch of other sort of successful exited, well-known founders in Europe. And another one of its investors is Saab, the huge Swedish defense company. What do we know of its relationships with both big defense primes and also government? Yeah, so I think this Saab investment obviously is quite interesting because they do also partner with Saab.

7:08And I think that's something that's definitely part of Helsing's strategy is to kind of build those relationships both from an investor and partnership standpoint with some of the traditional so-called defense primes or essentially the really established older defense companies that have been working with the government for years. Helsing has told us that they're working with governments of Estonia, Ukraine, of course, the UK. They were a while back selected as part of a consortium to provide AI software for this thing called FCAS, which is the Future Combat Air System, which is sort of this joint project to modernize air systems between Germany, France, and Spain.

7:40And they've also been, as I mentioned, with Saab in partnership to equip fighter jets with AI. So they've had all these kind of these contracts and partnerships. You know, they say that, you know, they're working and testing things in Ukraine as well. And I think one interesting thing, and this is something that I think will increasingly be important to watch with Helsing, is how those partnerships are going. And Bloomberg did some reporting recently about this sort of deal and partnership with Reinmattal, which is a big German defense contractor falling apart last year. And I think, you know, it'd be interesting to kind of follow on that story and see how the rest of their partnerships are panning out, which new partnerships are able to strike as well.

8:17Yeah. And I feel like this is always the case with companies that have raised a lot of money and are much talked about but you do hear whispers at conferences of kind of how good is their hardware and like is it is it really as good as the drones that are maybe made in Ukraine by Ukrainians for use in Ukraine I mean I don't have any evidence of this but it's it's interesting that I guess they're at least successful enough that other people are watching them closely and have some snide things to say about them in corners. I think that's right, Amy. I think anytime a company gets really big and has a lot of these big investors, there always are kind of questions about it.

8:52A lot of people are more critical. And I think rightly so. I think, you know, clearly Helsing has sort of been crowned almost as like the European champion for defense. And I think that puts a lot of pressure on them to really stand up to that reputation or position. And so I think, you know, it definitely has prompted some concerns about performance of their products. You know, as I mentioned, this Bloomberg piece kind of detailed criticisms of, you know, drones that used its software. And of course, as I mentioned, the Rheinmetall deal kind of falling through apparently. And I think, you know, right now, Helsing really needs to show that it can perform, it can prove that its new products are successful and useful and cost effective and all those kinds of things.

9:29And so I think this is a really critical time for the company to just prove itself at this point. And do we have any sense of what it's going to do with that 600 million euros that it's raised? They were very, very vague, as we've come to know about housing. They're pretty vague in the press release about what it's going to do. But I think, you know, as we see, they've been pushing a lot more into hardware, into different domains as well. I think we'll probably see them investing a lot more in those areas. And of course, just kind of making sure that their new products, their new drones are up to snuff.

9:58Yeah. And a good clue is also always what jobs a company is hiring for. And I haven't exactly counted, but I reckon there's at least 40 open on Helsing's website and they range from things like AI research engineer to CAD expert, drone field engineer, field engineer maritime. And these roles are based in Munich, Berlin, Paris, London, Warsaw. There's also a role in Washington. So there's a lot going on, isn't there? There is, but I think it's also important to note, and I was just looking on their website, they say our approach is software first, which I think is, you know, for a while they were saying software only.

10:36Now it's software first. I think it'll be interesting to see how much they invest towards really developing that tech versus more of the hardware side of things. I think it'll be really interesting to see kind of how those two kind of work together in the future for housing. Any final challenges ahead, things that are fascinating you about housing? Yeah, I think, you know, as we've been talking about, I think it's really interesting now that the company has this$12 billion valuation before. When they were valued at$5 billion last summer, they were definitely the highest value defense startup in Europe.

11:04But now with the$12 billion, And they're among the highest valued startups in Europe, period. So I think, you know, certainly with the big valuation comes big expectations. I think it'll be interesting to see kind of how they grow into that valuation. And what kind of exit might Helsing be looking at? Yeah, I was speaking with some investors recently about the new valuation. And I think, you know, the consensus was sort of that this probably limits their exit opportunities in terms of M &A. I think, you know, they're probably far too expensive now for one of the bigger defense contractors to buy them, at least in Europe.

11:32And so I think it really does seem to point to an IPO. You know, it's sort of unclear if and when that will happen. You know, Helsing told me in a comment recently that, you know, they're not talking about exits. So I think they're very clear on, you know, wanting to kind of continue building. And remember, this is also a young company. They started in 2021. So I think it's maybe a bit too premature to talk about IPO. But I do think that, you know, when the time comes, that'll likely be the route they go for. Watch this space. Which other companies are on your radar at the moment? Yeah, so I guess kind of in the drone space as well, there's this Portuguese drones company called TechEver, which actually hit unicorn status earlier this year, along with another German drones company, Quantum Systems.

12:11So I think that'll be kind of an interesting company to watch in the future. They've been slightly more under the radar than maybe Quantum or Helsing has. But another company also in the drone space is Stark, which was founded by Florian Seibel, the co-founder of Quantum Systems. And I think that one is, you know, definitely one to watch. They're reportedly backed by American, German billionaire Peter Thiel. They're also doing strike drones. So it's, you know, attacking drones. On the maritime side of things, as I was talking about, I've been really interested recently in that space. And there's a couple of interesting companies doing kind of autonomous maritime vehicles or navigation like Kraken Technology or Polarmist.

12:46So I think there's a lot of interesting, very hardware-y companies to look out for. Awesome. And if listeners want to find you, follow you, read more of your great reporting, where can they find you? They can find me on LinkedIn at Anne Schraders, S-R-A-D-E-R-S. And also the same handle on Twitter and of course on Sifted.eu. I also write our weekly VC newsletter upround, so please subscribe. Amazing. That is all we have time for. Thank you so much, Anne. And listeners, please let us know what you thought of this episode. And if you'd like to hear more from Sifted's journalists, I hope the answer is yes.

13:21please email me. I'm amy at sifted.eu. It is really, really helpful to hear from our listeners. Thank you so much. Thank you.