Eureka 435: The Kreuger100

0:15You're listening to Eureka on Monocle Radio, brought to you by the team behind the entrepreneurs, the show all about inspiring people, innovative companies and fresh ideas in global business. I'm Tom Edwards. Jens Holtzapfel is business director at Nordic Air Defence, a Stockholm-based company making anti-drone technology. After spending two decades in the Swedish military, Jens saw how emerging threats like drones were outpacing traditional defence strategies. When he stepped away from the front line, he started advising defence tech companies. Now, he's playing a leading role in marketing NAD's anti-drone technology.

0:53But how do you bridge the gap between the often glacely slow military procurement process and the need for governments to work with startups to tackle these new and evolving threats more quickly? Well, Jens, join me in the studio with more. Before I came to Nordic Air Defense, I spent 20 years in the Swedish military and the national security community. So back in the early 2000s, I was operating a main battle tank at an armored regiment in West Sweden. Moved over to operate the Swedish-made combat vehicle 90 and was an instructor for a couple of years, training soldiers how to use this equipment.

1:29And by the way, these vehicles actually are being used in Ukraine at the moment. They were part of the donations by Sweden and many other countries. So they are defending Europe and our freedom against Russia at the moment. However, then I continued with some military deployments overseas in Afghanistan and in the Western Balkans for the Swedish military, working closely with Sweden's allies and partners abroad. And after that, I moved into more strategic national security roles back home in Stockholm in geopolitical affairs for the military, international relations. I did some counterterrorism work for a couple of years and then ran cybersecurity programs for the army.

2:03and that sort of led me into the exciting field of emerging technology and how that impacts national security and this was just around the second Russian invasion of Ukraine and I discovered and this was before we started to talk about defense tech for real as a phenomena in Europe and I discovered that startups have a potential to counter emerging threats such as drones but governments tended to spend very little time engaging with startups and enable them to sort of grow and support the government's mission. I took that as a signal to retire after 20 years of loyal service to the kingdom of Sweden and started to advise venture capitalists and startups on defense technology.

2:46Roughly a year ago, I heard that Carl Rosander, a serial entrepreneur for three decades in Sweden and one of the founders of ACOST, a podcast platform, was starting a new business that took it upon itself to counter the threat from drones. So I reached out and fortunately, you know, became one of the first members of the team. Just tell me about this. I don't know if it's an unprecedented period of the development of technology with military and defense applications, but it's certainly as compelling as any that I can recall with my limited studies of history. How do you get unwieldy institutions?

3:21You talked about, you know, governments, readiness to engage with startups. If we look at procurement policy, it's slow, it's old-fashioned, etc. How do you crack that tough nut of getting people to understand that they have to be a bit more speculative, they have to change their risk appetite in terms of how they're calibrating the conversations? Because I imagine it's probably easier to counterintuitively to sell the tech, but the actual processes are probably much more difficult. Is that probably the biggest problem in your intro? Absolutely. You're absolutely right. So the government and the military rely on legacy technology, legacy processes for acquiring technology.

4:01And they have very low risk appetite in terms of making a bet in a company where they not necessarily can see the immediate effect. And tragically, I think it has taken a war to sort of show Europe that we need to change this because nobody really saw the impact of modern technology coming as we have seen in Ukraine, where the Ukrainians bravely fight and iterate technology every day. And I think slowly, Sweden and most of Europe is waking up and seeing that we need to engage with startups to defend ourselves in the future. I also think an important factor is that we need role models, so that we need more entrepreneurs.

4:38And this is what I found so appealing with Carl moving from sort of traditional tech into defense, was that if we can build unicorns in fintech and gaming in Europe, why shouldn't we be able to build role models in defense as well? Well, let's talk a little bit then about the business. What's the sort of USP? Because I know one of the problems with anti-drone tech generally is, well, there's all kinds of complexity, costs, of course, infrastructure and all the rest of it. Is the USP here flex, maneuverability, efficiency, compact size, etc.? Tell us a bit about the Hero products. All of the above.

5:12So Nordic Air Defense is developing a counter-druined solution revolving around a non-explosive interceptor that targets drones with high accuracy. It's easy to build, easy to use. And of course, drones are a massive threat and it's growing. We've seen that in Ukraine and other theaters of war where drones have become an asymmetrical game changer, where cheap drones for a couple of hundred pounds can cause harm to human life, but also severely damage equipment that is vastly more expensive. And the sheer number of drones on the battlefield oversaturates traditional defense systems. And given the fact that drones can be weaponized, they're also a threat to us living in peacetime and civilian life and critical infrastructure.

5:54I think hardly a day goes by without a report of a drone incursion over an airport that interrupts air traffic. There was reporting in Sweden of search and rescue helicopters not making it to the site where they're performing their emergency mission due to drones interfering with the airspace. And we are addressing this with closing the capability gap because although governments and society has increasing awareness of the drone threat, we still lack the necessary tools to a large extent. Let me give you an example of this. So in January, there were a sequence of drone sightings over a military base in northern Germany.

6:31And the German army tried to take these drones down by jamming them, so using electronic countermeasures to disrupt the communications link and force the drone to return home or crash. But that didn't work because that specific type of drone was resistant to jamming, which left the security guards just observing drones, you know, luckily only doing reconnaissance and not attacking the base. And ironically, that particular base was a site where Ukrainian troops are being trained to use the Patriot anti-air missile system. So clearly, what needs to be done is develop solutions to actually take down drones before they can become a threat.

7:09And like a lot of the great entrepreneurial stories we hear on this show, and generally, it's that it's locating that gap and then finding the and devising making the product to fit it tell us show us i don't know what you what have you got in your flight case let me let me take it out and unbox it for you so what we have here is the kruger 100 non-explosive plastic drone interceptor so we call it the kruger for the swedish inventor of the of the mattress you know who took something potentially dangerous such as lighting a fire and made it safe, mass-manufacturable and cheap, and we are going to do the same with counter-drones.

7:47So this is a roughly 25-centimeter-long missile-shaped mini-drone. Again, it's non-explosive. It does not have a warhead presently. We use the energy of this interceptor traveling to knock the drone off the sky. And for comparison, I have with me a traditional, you know, commercial drone. It's roughly five inches, and you can see that, and listeners will have to imagine that... They can hear, they can hear. Our interceptor will collide with this drone and destroy it, or at least force it down to the ground, right? And compared to many other drone interceptors, our Kruger 100 is very small. It is very, then you can carry it with you.

8:26So a soldier, a law enforcement officer, security guard, could easily carry this device in his or her backpack or your vest or your belt. You can hand launch it, so it's very easy to get in the air. And we have a very novel aeronautical design, So it only has one motor, which is unusual, and no wings or flaps or moving parts, which gives the Kruger 100 not only very good performance, it's very fast. It's also very easy and cheap to manufacture. So we rely only on commercial off-the-shelf components. We 3D print it. So we believe that we can sell it at a very competitive price, which is necessary because if you look at it, as I said, in Ukraine, I think the Ukrainians are losing 10 ,000 drones every month.

9:08and the Russians probably the same. So it's really a numbers game. And in order to compete with this economy of warfare, the countermeasures against drones must be on the lower or at least not exceeding the price of the actual threat. So it's not sustainable to take down a drone that costs a few hundred pounds with a 10 ,000 pound or 100 ,000 air defense missile, right? So you need to be able to scale and mass manufacture this. And this is what we're doing. But it sounds too good to be true, almost. its economy, fewer moving parts, less complexity, easier to scale. These are often the things that later stage entrepreneurs say, well, now we can unlock the potential because we've got the economies of scale ourselves.

9:48You're starting from the outset. Obviously, you've got smart backers and you've got deep sector experience like your own. Is it too good to be true? Tell us a little bit about the things that haven't worked out as well, because I often think in terms of those entrepreneurial journeys, it's when things don't follow the script that you kind of learn more about your project. I'm assuming there's been lots of kind of forks in the road and things to overcome. Tell us about some of the obstacles that you guys have faced on the journey so far. Sure, of course, to be clear, we are not choosing the easiest game to play, the easiest sport.

10:16It's not too good to be true. It is very true. We are receiving that feedback from the authorities and the customers that we're engaging with that they have not seen this kind of design before. It is a challenge from an engineering perspective, but we have recruited a very skilled team from companies such as Palantir, Quantum Systems, Kratos Defense. So people that had very comfortable, nice jobs in the defense industry, but saw that we had come up with something that was very novel and they wanted to be part of that. And, you know, we are solving challenges every day and of course also adjusting what we're offering.

10:49So initially we were very focused on a standalone system that we were to deploy, which we still are developing, but we have had a lot of interest from manufacturers of combat vehicles who saw that our interceptor is a very good tool to protect these high-value targets against drones. And just to zero in again on the sort of Hero product, you've mentioned sort of broad brush how it works, but it's modular. So there are features you can change, different functionalities you can also introduce. Just tell us a little bit about some of the range of options you've got if you're using this piece of hardware.

11:21Of course. So not only is our product very small and easy to deploy. We can also change the seeker head. So the seeker head at the very tip of the vehicle is, you know, the function that guides the interceptor towards the target. And you might want to change this depending on the local circumstances on the battlefield or other conditions. So we can change the seeker head. We're developing several models. We have got one semi-active laser for some use cases. And we do have an electro-optical seeker, which is a camera. This allows for the user to adjust or customize the interceptor for the very specific use cases.

12:00Well, one thing I was going to ask you is, we've literally got lots of European leadership, political leadership, talking about defense expenditure, their contributions to NATO, filling this sort of vacuum, if you like, which American unilateralism might leave behind. A question for you, yes, obviously you have this deep experience, as I said, in the military and then in the intelligence community and so forth, and now with this business. Is it a question of saying, look, everybody in Europe needs to up their, you know, proportion of GDP spent on defense from 2 to 2.5 to 3 to 5%, whatever it might be?

12:30Or do you think, and actually are you demonstrating, it's not necessarily about absolute spend. We maybe don't even need to increase it. We just need to spend it better. Where do you stand on that? Because people must ask you that question. Of course, of course. And I think both. I think before the second Russian invasion of Ukraine, we thought we only need smart tools, which sort of can make up for fewer numbers. But I think what we have learned in Ukraine is we both need innovative, modern technologies for the battlefield, but we also need the numbers. So if we look at artillery, you know, the vast consumption of artillery shells in Ukraine, where Europe certainly needs to, you know, reintroduce manufacturing.

13:07We cannot only be reliant on a few manufacturing sites for artillery shells. So I think we need both sort of conventional warfare and boots on the ground and modern disruptive technologies and stay on top of both. And just going back to your point on sort of the shifting tides here. So Nordic Air Defense visited the Munich Security Conference. Everybody was really optimistic about, you know, where we're going and innovation and defense spending. But then J.D. Vance entered the stage and shifted the mood significantly. and being an optimist, I hope that we're finally embracing that Europe needs to provide for its own security and hence increase defence spending, both on conventional military, but also create an environment where defence innovation can happen for real, meaning that more entrepreneurs are choosing to put their knowledge and technological skill set and business skills into building solutions that can protect us.

14:00Look, you said you're an optimist. We're optimistic. Our team was also at Munich Security Conference. because I think they had a very similar experience to that. And you were very diplomatic about the challenge that J.D. Vance's comments threw into the mix. But just on that point, are you optimistic? And I guess with both your NAD hat on and with your former sort of operational military hat on, do the right stakeholders, are they invested enough in this? Maybe literally, maybe metaphorically. And is there that shared vision and a shared understanding of what the new imperatives are? Can we be optimistic?

14:31You strike me as an optimistic fellow. You said you are, but is this going to work out okay? Yeah, Ian, so I guess I've always got to be told. Yeah, yeah, this is a very interesting subject. Of course, I am optimistic overall that Europe will now come together. And I believe that Europe is as strong as when there's outside pressure on Europe. And I believe that we will come together and actually embrace defense as something very necessary. If I were to be a bit more pessimistic, though, then, of course, we are seeing cracks here. We know that some countries in Europe are not sharing our sense of Russia as an existential threat.

14:59That's a liability. We're also seeing that we have an election in Germany at the moment, where, of course, defence spending is weighed against, you know, welfare spending. But I sincerely hope that that will actually, you know, take this threat seriously, that Russia is posing, and also taken seriously, that we can no longer rely solely on the US to fund European defence and come to our rescue.

15:24That was Jens Holtzapfel, the business director at Nordic Air Defence. and you can learn more about the business by heading to nordicairdefense.com. And that's all for this episode of Eureka. We'll be back at the same time next week. The programme was produced by Laura Kramer with audio editing by Jack Dewars. Listen again and find out more at monocle.com. That's where you can join the club and subscribe to Monocle magazine or follow us wherever you get your audio. To contact the team, email Laura on lrk at monocle.com. I'm Tom Edwards, goodbye, and thanks for listening to Eureka.