Helsing built a $4.5 billion business on a commitment to transforming Europe’s militaries with software, not hardware. Today, it is the opposite direction with the project of a fleet of attack drones.
By Ian Martin And David JeanForbes team
Wwhen the CEO of Helsing and co-founder Torsten Reil took the stage at a tech conference in a London church turned event space last September, his vision for the $4.5 billion defense startup was clear. “We are not a hardware company. We are a software company. That’s all we do,” he said. said.
The pitch was radically different from that of other defense startup entrepreneurs like Anduril billionaire Palmer Luckey or Shield AI’s Ryan Tseng, who want to build their own missiles and drones, ultimately challenging defense giants like Raytheon or Lockheed Martin. Instead, Reil said Helsing would focus solely on software, using AI to boost European militaries and weapons makers. “It’s specifically about adding functionality to existing assets,” Reil, a former video game developer, told another event in 2022.
Today, he made a 180 degree turnaround. Helsing this week unveiled the HX-2, a drone with a 50-mile range that can hunt swarms and destroy armored vehicles. “When deployed on a large scale along borders, the HX-2 can serve as a powerful counter-invasion shield against enemy ground forces,” Niklas Köhler, co-founder of Helsing, said in a statement.
Peter Quentin, a spokesman for Helsing, said the company had recently started manufacturing the HX-2 drones in Germany, adding that they would be cheaper than comparable systems. Riel said Bloomberg Earlier this week, the company planned to produce tens of thousands of devices per year, adding that the drone “has the ability to create a level of deterrence that is simply not currently achievable.”
Helsing’s move follows a series of deals the company has signed with European arms makers such as German tank maker Leopard Rheinmetall and plane maker Airbus, as well as Swedish aerospace group Saab. Co-founders Reil, Köhler and Gundbert Scherf had presented investors with its AI, which was used to improve the radar system of Saab’s Griphen fighter jets and to improve the German Luftwaffe’s Eurofighters.
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The company began designing and manufacturing its own drones after being unable to find an existing product that matched the specifications it needed, said one Helsing investor, who requested anonymity to speak freely. “There is no premium in this space and these drones are pretty commoditized, but it’s only with AI and autonomy that they are a game changer,” the investor said. “If you want to bring AI into the drone space, you need some vertical control.”
Quentin from Helsing disputed that the company had difficulty finding a partner. “We partner with industry in all areas, wherever it is possible to pursue truly software-defined approaches, but we refuse to simply outsource when this is not possible.
Investors have poured more than $100 billion into defense startups since 2019, according to Pitchbook, but only Anduril, which raised $1.5 billion at a $14 billion valuation this year, has similar resources to those of Helsing. Helsing’s valuation soared to $4.5 billion in July after it raised $480 million from U.S. venture capital funds General Catalyst and Accel in a deal first reported by Forbes. This followed raising $325 million from investors including billionaire Spotify Daniel Ek’s investment firm since its launch in 2021.
Europe’s most valuable defense startup is now entering an incredibly competitive landscape. Besides the Chinese-made drones that have dominated the market, Helsing also faces an uphill battle against U.S. incumbents like Anduril, Shield AI and Skydio, which have been building small, disposable drones for years. It could also encroach on the territory of its own partners like Saab, Airbus and French missile company MBDA, all of which have their own drone programs.
Defense startups have faced significant challenges deploying drones in Ukraine, where the Ukrainian military has successfully produced thousands of drones with commercially available parts. Daily tinkering and updates close to the front line have helped them stay ahead of the invisible battle with Russia to jam radio signals and the GPS technology that allows drones to navigate and receive operator instructions. The level of jamming is so intense that Russian and Ukrainian forces now deploy drones tethered by fiber-optic cables so pilots have hardwired controls.
American-made drones, meanwhile, have proven less effective, with many crashing or failing. “The biggest challenge is electronic warfare with jamming and spoofing and that’s why U.S.-made drones don’t work very well in Ukraine,” says Kateryna Bondar, a researcher at the Wadhwani AI Center at the Center for strategic and international studies.
Yet companies like Shield AI and AeroVironment have struck deals to supply drones to the Ukrainian Defense Ministry; The German company Quantum Systems also builds its own drones in kyiv.
“Companies trying to understand what Ukrainians are doing, knowing where the middle ground is going to be, need to engage” on the ground, said Andrew Michta, a senior fellow at the Atlantic Council. “And frankly, some of our technology solutions don’t hit the sweet spot. »
Helsing’s pivot surprised some. Quantum Systems founder Florian Seibel, who unsuccessfully asked Reil to invest in his own military drone startup, said his message remained the same: Building hardware was a race to the bottom when it came to price. “He was all about software,” Seibel recalls. (In a since-deleted Linkedin post, previously reported (per Bloomberg, Seibel had criticized Helsing’s plans for its new drone, saying “the war in Ukraine is deadly and should not be misused for marketing purposes.”)
Other defense industry founders warned that the nature of the military’s acquisition process made software difficult to sell. “Selling software without a hardware product is almost impossible,” said the founder of a defense startup. Forbes. Brandon Tseng, co-founder of Shield AI, testified Congress in September, the U.S. Department of Defense often viewed software as a secondary consideration in hardware-based deals.
Reil’s company will at least have a head start in Ukraine. It opened an office in Estonia last year and has reportedly had staff in Ukraine since at least 2023, according to Wired. It is possible that the drones will be tested in action as early as this month. German Defense Minister Boris Pistorius announced in November that 4,000 drones equipped with Helsing’s AI software would be given to Ukraine starting in December.
It will not be Helsing’s new HX-2, but rather a cheaper wooden model called the HF-1, which will be manufactured in Ukraine by local startup Terminal Autonomy, sources close to the deal said. . Forbes. Helsing says these drones have already been certified by the Ukrainian government and will use its AI and computer vision technology to navigate the battlefield without assistance from satellites. The BBC reported Earlier this year, Terminal Autonomy’s bayonet drone cost a few thousand dollars to produce.
Helsing said it plans to use its recent funding, one of the largest in Europe this year, for its research and development and to help “secure NATO’s eastern flank.” The company has previously revealed few details about its AI-based software, only hinting that the tools give commanders a overview of the battlefield.
But Reil and his investors now seem to be betting that hardware is easier to crack than software. “We always say internally that the jump in capacity that we want to make is always at least 10X,” Reil said at the September 2023 event. “And for us, this is not a marketing statement.”
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