Winning the battle by being more innovative than the opponent

“Now is the decisive moment to make a difference,” said State Secretary for Defense Gijs Tuinman.

On April 2, he and Brigit van Dijk-van de Reijt, general director of the Brabant Development Agency (BOM), opened the Security Fund (SecFund). This fund provides early-stage financing to Dutch start-ups, scale-ups and innovative SMEs that meet the Ministry of Defense's need for innovation. SecFund starts with assets of 25 million euros, with the aim of growing this to 100 million euros by 2025. The drone manufacturer Tective, based in Delft, receives the fund's first investment.

The importance of acceleration

Last week, on the Ukrainian front, Tuinder saw how desperately needed innovations such as drones are. “Drones have become the most decisive, but also the most feared weapon on the battlefield. Driven by the war, the drone is developing at an incredible speed.”

In battle, the fastest drone improver wins. “We must always stay one step ahead of the opponent. And that is exactly what we will be working on in the SecFund.” Not only with drones, but also with smart materials, sensors, the computing power and communication possibilities of quantum technology, and innovations for aviation. The techniques are all crucial in the hybrid warfare and geopolitical competition in which we are embroiled, says Tuinman. “We must be able to accelerate innovations and continue to push forward.”

Autonomous drone airfield

Delft-based Tective has developed an autonomous airfield for five drones. The startup meets the need to give the military access to the necessary data and to be able to make decisions based on that data without having to deal with logistical preconditions such as loading the drone. Founder and CEO Mattijs Otten: “We want to ensure that a soldier never has to touch the drone again.” SecFund is investing together with Tenzing Alpha to enable further development and scaling up of the company.

It is important for the Ministry of Defense that the start-up can deliver. That is why Otten is using the investment to set up more production lines, for example. “We need to be able to iterate incredibly quickly. It used to take a few months to come up with something new, now it has to be done within six to eight weeks.”

With the capillaries in the region

According to Tuinman, true resilience and defense mainly lie in the upscaling of the economy and cooperation with society. “We are achieving this with the SecFund, among others.” The SecFund is a collaboration between the Ministry of Defense, the Ministry of Economic Affairs and the regional development agencies (ROMs). The Brabant Development Agency (BOM) has been charged with the implementation of this national fund in cooperation with the other regional development agencies.

The fund is intended for dual use, a collective term for technologies that can be used in both the civilian world and the military. For example, Tective's Sky Hive can also be used in agriculture, for counting and measuring plant size, monitoring heat stress or weed control. Another example is LiFi: a new generation of data transmission that is faster than WiFi and can transfer more data per second, or consider advanced radio technology.

“With the SecFund, we are truly at the forefront of innovation in the region,” says Van Dijk. With a team of ten investment managers spread across the regions, a structure has been set up that has its feelers out across the region. The SecFund gained momentum at the end of last year, but the idea of “doing something with ‘dual use’” originated about two years ago, says Van Dijk. “Many start-ups are unable to get funding for their capital-intensive activities from regular funds. Defense is still a somewhat sensitive area and dual use is still unclear. A SecFund is needed to give the startups' innovations a boost.”

Brigit van Dijk (BOM), Gijs Tuinman © BOM

Official registration

Van Dijk says he already knows that the 100 million will not be enough. “It's the start, the marketing of the innovations. After that, we need to scale up. That requires more capital.” Discussions to provide this capital are already underway with the investment company Invest-NL, pension funds, regular private funds and the NATO Innovation Fund (NIF). “We will need all that capital to make this a real success.”

A lot of work was done behind the scenes to get the SecFund officially off the ground. Not only the investment managers, colleagues from the Ministry of Economic Affairs and the Ministry of Defense, but also the ICT department and the lawyers of the BOM worked overtime. With the launch, a website was put online where start-ups, scale-ups and innovative SMEs can officially register. Since the announcement last October, around a hundred unofficial applications have already been received.

National coverage

Ernst Coolen is the investment director who will lead the national team of investment managers from the BOM. He and his team have spent the past few months drawing up the fund plan, which sets out the conditions that a company must meet. A number of initial applications were also accepted on a trial basis. Tective will receive the first investment. Through the ROM Innovation Quarter (Zuid-Holland), the private investor Tenzing Alpha was found willing to join the SecFund in this Delft startup.

Coolen: “As Regional Development Agencies, we help entrepreneurs every step of the way. We do this with money and in collaboration with the market, but also with knowledge and our regional network. Within the SecFund, we focus on ticket sizes of 150 thousand to 5 million euros. We look at the phase of the company and invest the money gradually. In this way, we facilitate the growth of the company.”

The team has weekly meetings to assess the applications qualitatively and quantitatively. For suitable applications, there is also a “light check” with the Ministry of Defense to determine whether the innovation meets a need. If so, a due diligence investigation follows.

“Our strength lies in early-stage investment. Our regional investment managers scout out Dutch companies.” For Coolen, this nationwide collaboration is what makes this fund unique. “As regional development agencies, we have already proven that we can successfully market a nationwide fund. Here, we are taking advantage of the strong position that regional development agencies have in the start-up ecosystem. Activating and mobilizing that, seeking alignment, that is a great challenge that energizes me.”