BAE Systems is funding the startups that want to disrupt it

BAE Systems, the UK’s largest defence company, is putting €50m into venture capital, a bet that the startups it backs today could shape the weapons it sells tomorrow.

The money will flow into VC funds focused on European defence-tech, with €25m of it going into two funds run by Klaus Hommels’ Lakestar and the Polish firm Expeditions. It is the second phase of BAE’s ‘Launchpad’ programme.

An incumbent backing its disruptors

The logic cuts two ways, and BAE is unusually open about it. Launchpad is built both to spin BAE’s own lab technology out into commercial startups, and to back outside founders ‘who can bring something new to defence’, as commercialisation chief Dave Ewing put it.

So a prime contractor is funding the small, fast companies that, in another telling, exist to disrupt primes like BAE. It is a hedge as much as a gift: better to own a slice of the insurgents than be blindsided by them. The sweetener for startups is real, though, access to BAE’s customers across defence, energy and advanced manufacturing.

Riding the rearmament boom

The timing is no accident. Russia’s war on Ukraine and the EU’s ReArm Europe plan to mobilise up to €800bn have turned defence-tech from a VC taboo into its hottest category, with Helsing now among Europe’s most valuable private firms.

Capital is arriving from every direction. The NATO Innovation Fund is seeding its own roster of defence VCs, and soaring defence stocks have made the whole sector fashionable. BAE’s move plants a prime contractor firmly in that flow.

A signal more than a cheque

For all the fanfare, €50m is small change for a company BAE’s size, with revenues in the tens of billions. This reads as a strategic signal, and a foot in the door of the funds, more than a market-moving sum.

It helps the VCs more than the headline number suggests, adding to Expeditions’ new fund (reportedly nearing €200m) and Lakestar’s roughly $300m defence vehicle, while giving BAE early sight of whatever Europe’s next defence founders build. As Expeditions’ Mikolaj Firlej put it: ‘Our security can no longer be assumed; it has to be built.’