Dusseldorf German-American billionaire Peter Thiel and Berlin-based venture capitalist Project A are investing in drone company Quantum Systems. It is a deal that promises the Munich start-up access to US military knowledge – and that could trigger a discussion in the German start-up scene.
Quantum Systems builds military and civilian reconnaissance drones. Ex-Bundeswehr soldier Florian Seibel founded the company in 2015 and can show what his technology is capable of in the Russian war of aggression. 20 Quantum drones are currently scouting the Russian army and providing information to the Ukrainians about their positions.
As a founder and investor, Peter Thiel is already familiar with security and defense technologies. He is behind Palantir and Anduril, two of the most modern and also most controversial US companies in the sector. The German venture capital scene does not know anything comparable. Rather, Project A should also prompt other investors to deal with “dual use”: the dual purpose.
Technologies that can be used both civilly and militarily are relatively common. So far, however, there have only been a few start-ups in Germany that clearly state this and also address customers in the armaments sector.
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The situation is similar for risk financiers. German venture capitalists generally rule out investments in armaments and weapons.
Founder Seibel: “Our drones see where the Russian tanks are”
But Project-A partner Uwe Horstmann and his colleagues have come to the conclusion that an investment like the one in Quantum Systems is permissible according to their guidelines – and ethically and economically correct. “It was important to me that it was about reconnaissance,” says Project-A-Investor Uwe Horstmann, himself a reserve officer in the Bundeswehr. “These drones have cameras mounted on them, and possibly other sensors, but we’re not funding the construction of a weapon.”
In the networked world, however, it is not that simple. This is shown by the deployment scenario in Ukraine: “Our drones fly 20 kilometers in front of the Ukrainian artillery positions and see where the Russian tanks are,” says founder Florian Seibel. “When the Ukrainian artillery fires, they can correct the fire and say: a little further left, a little further right, a little further ahead.”
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In networked warfare, the line between reconnaissance and weapon systems is blurring. That may also be one reason why many German venture capitalists are already asking themselves whether they want to invest in dual use and in the military environment, without wanting to take an official position on this.
Horstmann doesn’t beat around the bush: “In the military environment, reconnaissance naturally increases effectiveness. That reduces collateral damage, but basically makes the weapon system more effective.”
A confidant of Trump as a donor
Against the background of the Russian war of aggression, the Project-A-Team could make its peace with it, says Horstmann: “Europe must position itself robustly in order to protect human rights, conventions, legal systems and the lives of innocent people.”
The war has shown Europe in many ways that dependencies are dangerous. This also strengthens Project A in its decision: “We see it positively that there is a German manufacturer that makes Europe more strategically independent and combines the new technologies with a European value system.”
The founder has a well-known but not uncontroversial investor on board.
(Photo: Quantum Systems)
All the more likely to startle some other new investors. With Peter Thiel and his investment company Thiel Capital, a US investor is getting involved with a developer of security technology at an early stage. In this specific case: a major sponsor of the Republican Party and confidante of ex-President Donald Trump.
The deal is understandable from an economic and corporate strategy perspective: Thiel is a “brilliantly networked” investor, as Florian Seibel says, one who promises the company more opportunities in the lucrative US business.
How well does the federal government protect German technologies?
Politically, he raises questions. At less than ten percent, Thiel’s share is too small for an investment review by the Ministry of Economic Affairs.
Dieter Janecek, spokesman for economic policy and head of the Working Group on Economics at the Greens, said when asked by the Handelsblatt about the threshold values: “If highly specialized start-ups develop technical know-how in Germany that we urgently need to secure the critical infrastructure, we also have to ensure that these capacities are retained with us.” It must be clarified “whether there are gaps in the existing system of investment assessment”.
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Florian Hahn, who sits on the Defense Committee for the Union, sees it similarly: “Start-ups – especially if they produce or use innovative new technologies – must be protected just like national key technologies,” he said. Thresholds should be checked: “Here the federal government is called upon to act – especially with a view to the security and industrial policy framework.”
Alexander Müller, defense policy spokesman for the FDP in the Bundestag and reserve officer, has a different opinion: “Investments in our industry are generally to be welcomed because they secure locations and jobs,” he said. The existing thresholds are sufficient, especially in the case “in which an investor from an alliance partner country invests”.
US military already buys drones from Quantum Systems
According to information from corporate circles, Quantum Systems is aiming to expand the financing round and collect a total of almost 20 million euros. This would increase the sum that flowed into the start-up to more than 50 million euros.
The new investors, which also include Sanno Capital from Munich investor Florian Moerth, are said to have valued Quantum Systems at a three-digit million figure. A reference: the US company AeroVironment, which only operates in the military sector and has a market capitalization of almost 1.9 billion dollars.
“The future of unmanned aerial systems lies neither in the software nor in the hardware alone, but in the intelligent synthesis of both,” said Peter Thiel. Quantum Systems is one step ahead of the competition.
Now the sales should be pushed. The first customers include German security authorities, the Dutch army and the US military, which uses the drones for maritime deployment scenarios. The big goal is to win over the Bundeswehr.
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