This American VC is betting on European defense tech; that’s still very unusual

VCs are recognized to maneuver in herds, which is why Eric Slesinger stands out a bit. Whereas most American buyers chase AI startups or U.S.-based protection tech startups, the previous CIA officer is looking for protection tech offers in Europe. In truth, Slesinger, founding father of 201 Ventures, just lately closed a $22 million fund centered on seed-stage European protection tech startups. His path from creating devices and software program for CIA brokers to changing into maybe the one American VC solely investing in European protection tech additionally seems to be a prescient one.

What would compel somebody to depart “the most effective first job ever” on the CIA to pursue this particular ambition? As Slesinger informed TechCrunch in a current StrictlyVC Download podcast interview, the reply got here from figuring out a vital shift that many missed. “I left as a result of I observed that the non-public sector was more and more taking part in a job on this competitors that I beforehand had understood actually to simply be a authorities to authorities competitors,” Slesinger defined. “What turned apparent extra so daily was that the non-public sector was taking part in such an enormous function right here.”

With levels from Stanford in mechanical engineering and Harvard Enterprise College, Slesinger’s background helped put together him to bridge the hole between protection know-how and industrial ventures. Nevertheless it was his willingness to go in opposition to typical knowledge that has made him attention-grabbing to buyers, founders, and tech reporters alike.

“I’ve all the time loved going the place different individuals are inclined to not need to go,” mentioned Slesinger. “That was why I loved the work on the CIA a lot. A few issues that individuals there used to say was, ‘go the place others don’t go and do what they’ll’t do.’”

As for what U.S. VCs have been lacking, from Slesinger’s perspective there have been three issues. First, “Europe has particular person entrepreneurs which can be simply as hungry, simply as excessive conviction, and simply as good as wherever else on this planet.” Second, “European governments waited means too lengthy to rethink what the association on their very own safety meant, and due to this fact hadn’t really taken a vital eye in direction of it.” And third, “Europe was shortly being seen and can, for my part, proceed to be the positioning of significant grey zone competitors,” that means actions by state or non-state actors that fall between conventional peace and outright warfare.

Maybe probably the most shocking facet of Slesinger’s European enterprise has been the cultural resistance he says he encountered relating to protection investments. In 2022, after transferring from the U.S. to Madrid, he began the European Protection Investor Community, which now contains entrepreneurs, buyers, and policymakers. In a 2023 Medium post, Slesinger wrote about how his European VC colleagues have been afraid to speak about their protection associated investments. Not like in America, he informed TechCrunch, protection tech investing in Europe “was seen as uncouth, one thing that ought to be completed however not spoken about, and definitely not spoken about in well mannered firm on the dinner desk.” (Slesinger shortly added, “I’m exaggerating slightly bit, however there’s a kernel of fact there.”)

He says that cultural hesitance resulted in “many founders enthusiastic about it, deciding to not construct an organization within the [defense] house.” Now that’s altering. The NATO Innovation Fund — the world’s first multi-sovereign enterprise capital fund, backed by 24 NATO allies and launched in the summertime of 2022 after the Russia-Ukraine warfare broke out — has helped. Certainly, it’s a major backer of 201 Ventures.

So has the eye garnered by up-and-coming protection tech startups on the continent, together with Munich-based Helsing, which is creating AI to be used on battlefields and is presently valued at greater than $5 billion by its buyers. One other up-and-comer in Slesinger’s portfolio is Delian Alliance Industries, an Athens-based outfit creating surveillance towers to detect autonomous threats. Delian has up to now raised seed funding however is a sizzling ticket that’s certainly being actively courted by VCs.

With eight investments so far, 201 Ventures focuses on applied sciences that deal with that grey zone competitors as a result of, in Slesinger’s phrases, it’s “taking place at scale in Europe, and it’ll for the following couple of a long time.” These market dislocations, he mentioned, “whether or not they’re value inefficiencies or a authorities taking part in a bigger function in a market that it’d in any other case if not for wanting a sovereign functionality . . .these grey zone dislocations really are an excellent type of alpha.”

Along with Delian, one other of Slesinger’s bets is Polar Mist, a Swedish startup producing maritime drones with superior navigation capabilities. Different focus areas embrace hypersonics and subsurface mapping.

One problem in funding protection tech startups is the longer growth timeline in comparison with conventional enterprise investments. Slesinger acknowledged this stress in his chat with TechCrunch: “When you’ve got a 10-year-venture-fund life cycle, that’s an actual factor that we kind of must do issues to attempt to speed up or bend slightly bit.”

Slesinger additionally thinks that “European firms must be doing extra lobbying at a lot earlier levels.”

Each increase questions on whether or not his gamble will repay for buyers. On the identical time, his early imaginative and prescient for a extra autonomous European protection ecosystem is changing into embraced by an entire lot of different buyers as of late as geopolitical tensions rise and Europe rethinks its safety preparations.

Information printed earlier this yr by the NATO Innovation Fund and the analysis group Dealroom confirmed that European startups engaged on protection and associated tech raised 24% extra capital in 2024 than in 2023, hitting $5.2 billion — surpassing even AI funding.

With President Donald Trump returning to workplace in January and casting doubt on the U.S.’s dedication to European protection, that determine is more likely to climb even greater.