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NATO’s Quest for Tech Excellence: How The €1 Billion Fund Can Propel Deep Tech Advancements

NATO’s Innovation Fund will operate like a classic VC and will make direct investments in deep tech startups from 23 participating members.
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Launched last year at the Alliance’s summit in Madrid, NATO’s Innovation Fund will operate like a classic VC and will make direct investments into startups located in the 23 participating Allied nations, as well as indirect investments into deep tech funds with a trans-Atlantic impact.

 • The 1 billion euros worth Innovation Fund will also consider options to invest in Ukraine, as the country has developed a number of emerging deep tech startups during the war.

 • Participating countries such as Bulgaria can use the funds to modernize its military processes and more.

Ukrainian deep tech startup Mantis Analytics develops an AI-driven information field monitoring platform that can detect, defend, and counteract against information warfare.

Set up right after Russia’s full-scale invasion, the startup is one of the local companies that aim to increase the efficiency of information warfare with the help of technologies ML, NLP, and Big Data.

Over the past year and a half, the war in Ukraine has also seen the deployment of Startlink satellites, drones, artillery and missile systems, electronic warfare, AI, as well as data integration and Big Data analytics on the battlefield.

Now, the further development of similar technologies is going to be in the focus of the NATO Innovation Fund (NIF), worth billion euros.

The fund consists of 23 of its member states: Belgium, Bulgaria, Czechia, Denmark, Estonia, Finland, Germany, Greece, Hungary, Iceland, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Spain, Turkey, and the UK – with the impending addition of Sweden as well, after the country formally completes its accession process.

According to NIF, the participating allies will invest capital by way of their sovereign wealth funds or government ministries.

As a part of its Capacity Building objective, NIF will also look to pay attention to each individual country and region to ensure geographic diversity – and it will also consider investing in startups originating from Ukraine, a NIF spokesperson told The Recursive.

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The emergence of deep tech startups after the war in Ukraine

For the CEO of Mantis Analytics Maksym Tereshchenko, the main advantage that a country like Ukraine can have in attracting investments from NIF is that a lot of similar deep tech technologies and solutions are tested in Ukrainian battlefields right now.

“Many technologies are put to the test in real battle conditions before they move into industrial development, and transition to the corporate sector. Another advantage for Ukrainian companies is the quicker access to NATO countries’ markets and partnerships. It used to be a challenging process, but now it is becoming swifter, and NATO Innovation Fund can be the next step,” Tereshchenko tells The Recursive.

Since the beginning of the war in February 2022, Ukraine and the rest of the region have also seen an increased number of deep tech startups – which can be further amplified with the help of NIF, Ukrainian entrepreneurs argue.

“As Ukraine has a booming deep tech sector, particularly in relation to defence, this could be a very effective vehicle for many startups in the area. Given the complexity of attracting private capital to the country at war, funds like NIF could have much higher risk tolerance and incentive to interact with local startups,” Ukrainian entrepreneur and CTO of deep tech startup Haiqu, Mykola Maksymenko, tells The Recursive.

As Ukraine finds itself situated at the core of information resistance, supporting different deep tech solutions can also provide a basis for having a better global security in the long run.

“We are actively engaged in testing and refining new technologies that could prove advantageous in other regions as well. Therefore, NATO’s collaboration with Ukrainian startups holds mutual benefits. It is not about Ukraine or any other individual country in this matter, it is about global security,” Tereshchenko adds.

For investors like Pawel Bochniarz, one of founders of Polish deep tech VC Radix Ventures, while Ukraine has sadly become a testing ground for many new technologies, it did reveal the importance of having a tech advantage during a war.

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“There are promising developments in 3D printing which allow very specific applications in the military field (think of 3D printing from advanced functional materials on the battlefield). I have also seen a lot of work related to new power sources for military devices (UAVs, smart munitions) or even engineering solutions that improve survivability of soldiers in armored vehicles,’ Bochniarz tells The Recursive.

Modernizing both military and societal processes

As a participating member in the fund, Bulgaria can not only modernize its military processes, but society as a whole, experts point out. The country is already a part of the DIANA (Defence Innovation Accelerator for the North Atlantic) accelerator through its GATE Institute, which serves as a test center for NATO in the fields of Big Data and AI.

“The projects under focus will be deriving value for the Euro-Atlantic security from what is known as emerging and disruptive technologies (EDT). At the moment, NATO recognises the following EDTs: AI, autonomy, quantum, biotechnologies and human enhancement hypersonic systems, space,  novel materials and manufacturing, energy and propulsion, and next-generation communications networks,” Borislav Bankov, GATE’s expert on NATO, tells The Recursive.

While these EDTs are a challenge, they can also be an opportunity if they fall into the right hands, Bankov argues.

According to the expert, both DIANA and NIF are opportunities to accelerate the modernisation of the Bulgarian armed forces through actively involving innovators from Bulgaria and NATO allies in creating new generation technologies.

“Nonetheless, DIANA and NIF represent an opportunity to modernize not only the Bulgarian military sector but also many of the societal processes in the country. Nowadays, threats such as disinformation extend beyond the military sector and affect society as a whole. Therefore, DIANA and NIF aim to develop and support dual-use technologies that can be used not only by military officers but also for the benefit of economic security, energy resilience, the healthcare sector, digital development, and many others,” Bankov adds.

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The potential benefits for NATO’s Western Balkans wing

Last month, during an event ahead of NATO Summit in Vilnius, NIF’s newly appointed managing director Andrea Traversone encouraged smaller nations to become early adopters of emerging disruptive technologies, while highlighting their potential role as leaders in driving the innovation agenda and wider technological adoption within the Alliance.

According to Dublin-based intelligence analyst Michael Lambert, while it will take time to see the first results from these investments, smaller nations can also hope that their ecosystems can see a boost from NIF’s incoming capital.

“The results won’t be visible for many years. Nevertheless, the NATO Innovation Fund could help some under-the-radar startups, as in the case with members such as Estonia, which lacks funds because its domestic market is smaller,” Lambert tells The Recursive.

Furthermore, smaller members from the Alliance’s Western Balkans wing, such as North Macedonia, Croatia and Albania could also potentially benefit from NIF’s opportunities in years to come.

However, for this to happen a change in their approach towards innovation is needed first, Skopje-based military expert Metodi Hadji-Janev, who served as a Macedonian defence attaché in Washington DC, explains.

According to him, the region has already seen glimpses of this potential – which needs to be further developed.

“Some of the pioneering and complementary efforts for the NATO Innovation Fund, such as the NATO Innovation Challenge supported by the Transformation Command based in Norfolk, already happened in Macedonia at the Military Academy in Skopje. The fact that the media interest for this event, as well as the quality of the domestic proposal ideas for projects, was at a very low level speaks for itself that something profound needs to change regarding this issue,” the military expert concludes.

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https://therecursive.com/author/bojanstojkovski/

Bojan is The Recursive’s Western Balkans Editor, covering tech, innovation, and business for more than a decade. He’s currently exploring blockchain, Industry 4.0, AI, and is always open to covering diverse and exciting topics in the Western Balkans countries. His work has been featured in global media outlets such as Foreign Policy, WSJ, ZDNet, and Balkan Insight.