Welcome back to the #46 edition of The New Defense Post!
In this edition, we’ll cover:
Spotlights: Helsing Enlists Rakuten to Break Into Japan's Defense Market; Handelsblatt Reveals the Price Tag Behind Aerospacelab's Airbus-Beating IRIS² Win; Pentagon Signs Boeing and RTX to Seven-Year Deals to Scale Up SM-3 Missile Defense Production.
Other News: Ukraine's December1 scales up jammer production, and Wall Street starts warming back up to European defense stocks.
Fundraising News: London venture studio GALLOS Technologies closes a $50M round to back early-stage security and defense-tech startups.
Bonus Section: Europe's defense-tech capital problem now has a capital layer of its own.
Just a quick note on our own behalf: a few events are coming up. Catch us at the European Defense Tech Festival in Berlin, Aug 20 to 23, the European Defense Tech Hackathon in Hamburg, Aug 28 to 30, and the Deep Tech London Summit in London on Oct 8.
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Spotlights
1. Helsing Enlists Rakuten to Break Into Japan's Defense Market
Photo Credit: Bloomberg
German drone maker Helsing has enlisted Rakuten, a Japanese e-commerce and finance group, to help them close a deal to sell its unmanned systems to the Japanese military, a development confirmed by a Rakuten spokesperson. At the moment, Japan's Ground Self-Defense Force is field-testing Helsing's HX-2 strike drone (an electric, AI-guided precision munition with up to 100 kilometers of range) through the end of September. (Reuters, Japan Times)
Helsing struck a preliminary agreement with Tokyo earlier this year. Back then, it was described that this was done only through a "local brokerage partner," which is now confirmed to be Rakuten. No price, quantity, or decision timeline has been disclosed so far. It is Helsing's first known move into the Asia-Pacific region, coming a month after the $1.8B raise we covered in issue #42. And Rakuten has done this kind of matchmaking before: it previously helped Ukrainian drone-software maker Swarmer introduce its own system to the Japanese military. (Intenture News) (Reuters)
🗣 Hideaki Mukai, Rakuten chief of staff to the CEO: Rakuten wants to "bridge these gaps" between defense startups and government agencies. (Bez-Kabli)
📰 Our Take: Rakuten is not a defense company but runs online marketplaces and its own bank. But from what is publicly known, Helsing is at least its second foreign drone maker brokered into the Japanese military after Swarmer. That track record is probably the more interesting part of the story here. Japanese procurement has a reputation for being slow and hard to crack without a local partner who already knows how the system works, and it seems that Rakuten is positioning itself as exactly that partner for a growing list of international players.
If it works, other European defense-tech companies might copy this strategy: team up with a well-connected local company, maybe even outside the defense world, instead of trying to break into a foreign government market alone. But one also needs to remember that a preliminary agreement plus a field test still is not a sale. Japan has tested plenty of foreign vendors before who never made it past that stage.
2. The Price Tag Behind Aerospacelab's Airbus-Beating IRIS² Win
Photo Credit: Aerospacelab
Eutelsat confirmed earlier this month that Belgian startup Aerospacelab, founded in 2018, would build up to 264 of the EU's 348 IRIS² satellites, which would be the largest single share of Europe's sovereign satellite-communications constellation, and ahead of Airbus. What Handelsblatt added this week, citing people familiar with the process, is the number nobody had disclosed: Aerospacelab's slice is worth at least €1.8 billion. Germany's OHB takes the 18 higher-orbit MEO satellites for close to €1 billion, while Airbus keeps a smaller, military-specific slice of 66 "Mil-Ka" satellites. (Handelsblatt, Aero.de)
IRIS² is the EU's six-years-in-the-making answer to Starlink, with which it is aimed to give European governments, militaries and intelligence services secure orbital connectivity without relying on Elon Musk's network. Handelsblatt puts the full program's price tag at €15.6 billion, roughly 50% above the estimate from two years ago, with first satellites targeted for 2029 and EU government use starting in 2030. (Handelsblatt, Payload)
🗣 Benoît Deper, Aerospacelab Founder and CEO: "New space companies can play a decisive role in shaping Europe's space sovereignty." (Aviation24.be)
📰 Our Take: There is a detail buried in the numbers and development history here. When IRIS² was first scoped, it carried a €10.55 billion price tag for 290 satellites. It is now €15.6 billion for 348, a real increase even before a single satellite has launched. Payload's own reporting on the program has noted, dryly, that pan-European satellite constellations have a real history of schedule and budget overruns, with Galileo as the emblematic example. That is not proof IRIS² is headed the same way, but it is not exactly a reassuring signal either.
Having that said, it is also interesting who gets trusted with the work. This looks like the first time Europe has handed the largest share of a flagship space program to a company younger than most of its own engineers, rather than giving the startup the easy pieces and keeping the core work with players like Airbus or Thales. If Aerospacelab delivers on schedule, that might become a new precedent for how these programs will be built in the years to come. If it does not, that might become the argument against trying it again.
3. Pentagon Signs Boeing and RTX to Seven-Year Deals to Scale Up SM-3 Missile Defense Production
Photo Credit: U.S. Navy
On August 14, the US Department of War signed two seven-year framework agreements with Boeing and RTX to expand the production of the Standard Missile-3 (SM-3). It is the interceptor which anchors the Aegis Ballistic Missile Defense System used by US Navy warships and by NATO's land-based Aegis Ashore sites in both Romania and Poland. Boeing will scale up avionics and ejector-assembly production for both the SM-3 Block IB and the newer Block IIA, supplying Raytheon (an RTX business) which remains the missile's prime contractor. (Breaking Defense, Boeing)
Financial terms were not disclosed, and the frameworks let Boeing begin building components before a formal contract is even signed. All three parties are still negotiating the actual multiyear deal behind it. (Aviation Week)
🗣 Michael Duffey, US Under Secretary of War for Acquisition and Sustainment: "These agreements ensure our warfighters get the munitions they need to win." (Military Times)
📰 Our Take: It is the same Michael Duffey using almost identical language to two weeks ago, and trade press now counts this as roughly the Pentagon's two dozenth multiyear framework agreement this year across all munitions types: Patriot and THAAD got one, and now SM-3 does too. As this is not the first time we talk about such deals in this newsletter, citing the Acquisition Transformation Strategy barely registers as news anymore. It just seems that this is how the department operates now.
Some of that is genuinely useful. Getting suppliers to start building before a contract is even signed is the kind of institutional muscle memory that was missing a few years back. For NATO members like Romania and Poland, whose Aegis Ashore sites depend on SM-3, this framework agreement does not mean much until interceptors actually start shipping. That is the number worth watching in the months ahead.
Other News
Ukraine's December1 Scales Up Damba Jammer Production as Russian Drone Tactics Shift (Yahoo/Business Insider)
RBC Initiates Buy Coverage on Six European Defense Stocks, Barclays Adds Three More (Oninvest)
Fundraising News
Amount | Name | Round | Category |
|---|---|---|---|
$50M | Growth | Venture Studio / Security & Defense Tech |
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Bonus Section: Europe's Defense-Tech Capital Problem Now Has a Capital Layer of Its Own
Photo Credit: GALLOS Technologies
This week's GALLOS Technologies raise (see Fundraising News) is a good excuse to count how many different types of capital vehicles now exist specifically to solve Europe's defense-tech funding problem, since GALLOS does not really look like any of the others we have covered.
There is the government direct-equity route: Germany's state investment fund, which we covered in issue #43, and the EU's Scaleup Europe Fund, whose debut investment in Iceye we covered in the last issue. There is the specialist VC fund route: Lakestar's $300M Resilience I, also from issue #43, and Expeditions' €197M Fund II, backed by BAE Systems and the NATO Innovation Fund, which we mentioned back in issue #42. And now there is GALLOS: a venture studio that pairs capital with actual operators which are pulled from national security backgrounds, and gets hands-on in building the companies it backs instead of just funding them.
Each of these claims to solve a different gap, though in practice the boundaries are blurrier than they first appear. Specialist VC funds exist because generalist investors have historically been reluctant to touch defense as a category, and that part is well documented. Government funds are supposed to give European founders patient, less risk-averse capital so they do not have to cross the Atlantic for growth-stage money. Now there is GALLOS which describes itself as a venture studio that co-builds the companies it backs, but that is a description of process, not evidence of a gap the other two do not already cover.
Whether that is genuinely useful or just another layer for founders to navigate is yet hard to tell. GALLOS's own portfolio is still small, though that is arguably by design: a hands-on studio model naturally produces fewer, deeper bets than a traditional fund. The fairer test is rather whether any of its companies outgrow the studio and go on to raise real growth rounds independently afterwards.
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