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In a Paris basement office that could belong to any number of trendy software startups, entrepreneur Hadrien Canter opens a crate containing a critical ingredient of modern warfare: a drone interceptor. About the size of a desk lamp, it uses artificial-intelligence software and radar to detect, catch and destroy military drones.
It's a long way from the sheen of a state-of-the-art $100 million American fighter jet, but this kind of hardware is becoming central to Europe's attempt to wean itself off US weaponry. More important, it's the future of air defense in an era when cheap drones have been claiming lives in Ukraine, hitting infrastructure in the Gulf and invading airspace in the Baltics.
Canter's startup Alta Ares, which on Tuesday announced a €50 million ($58 million) fundraising, is one of several European companies trying to take advantage of the brutal economic imbalance behind today's wars. One-way attack drones such as Iran's Shahed cost roughly $20,000-$50,000 but defending against them requires firing off missiles worth millions. That cost asymmetry is unsustainable. It invites mass drone strikes that damage and kill, or stretch resources thin. The United Arab Emirates has intercepted more than 1,000 drones since the US and Israel attacked Iran in late February.
Attack drones like Russia's Gerans are getting better at covering long distances and taking evasive action, too, meaning interceptors have to constantly improve. Alta Ares has added new features such as turbojet propulsion on top of AI detection. "Interception is not about finding a Holy Grail but about layering defenses," says Jack De Santis, a former drone pilot and founder of US defense-tech firm Omira Systems. There are trade-offs when you're trying to keep costs down, he adds, including flight time, components and precision control.
Europe's urgent need to rearm - in response to US President Donald Trump's threats and his fraternization with Vladimir Putin - boosts the investment case for these companies. A Canter rival, Paris-based Harmattan AI, raised funds from Dassault Aviation and others at a valuation of $1.4 billion this year.
There's also been a bounce in defense company takeover and merger activity on the Old Continent, with the number of transactions almost doubling last year to 24, according to the law firm White & Case. That was more than in the US. Continental self-reliance means making extra investments in drones in particular, says Canter, given the evolution of warfare in Ukraine and the Gulf. "Europe's at a turning point… The US is telling us we're on our own."
One reason to be hopeful lies thousands of kilometers away from Paris in Ukraine, where many of these startups have cut their teeth. As my colleague Marc Champion has written, the country has led the world in drone defense and is a proving ground for the sector. Alta Ares learned from failures when deploying its kit on the battlefield there, eventually reaching an efficacy rate of about 70% in downing Russian drones. The companies attracting investor interest are the ones with AI engineering talent, proven real-world success, cheap components and the promise of manufacturing at scale.
Another bright spot is that the Middle East is being pushed closer to European defense-tech suppliers. The Gulf monarchies didn't want the US-Israeli war in Iran, and they're having to adjust to dwindling supplies of US-supplied defensive weaponry and a Tehran regime emboldened by its ability to stare down Trump. Saudi Arabia, Qatar and the UAE have signed drone deals with Ukraine and have turned to South Korean missile defense and low-cost British missiles to replenish stockpiles, even if some of the tech might not map easily onto the Middle East's geography.
France is testing several interceptors including Alta Ares models in the UAE, where it has naval and airbases that have been targeted by Iran. "With the Gulf economies looking to invest more in defense and Europe trying to lift domestic arms production, both have reason to work together," says Giuseppe Spatafora of the European Union Institute for Security Studies think tank.
As ever with Europe, there are reasons to temper the optimism. Drone warfare is developing rapidly and that doesn't sit easily with Europe's traditionally cumbersome military procurement. The struggle to manufacture at scale is painfully obvious, with Ukraine making millions of drones annually while European capacity is well below that.
China's grip on critical raw materials and its willingness to restrict their supply for political reasons also mean the drone race could become more expensive. Too much bureaucracy and a political unwillingness to throw the dice on reindustrialization are serious obstacles for European defense-tech firms.
One positive step could be integrating this new breed of nimble drone startups into the established supply chains dominated by Europe's biggest defense companies. This could be done via contracts that offer backing for largescale production and export partnerships. It's an effort worth making. A century on from the wars dominated by fighter jets that led to the rise of Dassault and the companies that eventually made up Airbus, the new era of drones and AI warfare will require new industrial networks of its own.
Lionel Laurent is a Bloomberg Opinion columnist covering London/Paris/Brussels. He previously worked at Reuters and Forbes.
Previously:
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• 09/15/23: Italy and Britain get tongue-tied over Xi Jinping
• 05/03/23: France's economy is doing well. Macron is doomed
• 03/02/23: Sweden is ditching cash. Just wait for the fallout
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• 06/29/22: The lights are going out for crypto's laser — eyed grifters
• 12/31/22: Spotify's Joe Rogan drama feels like a Facebook moment
• 12/01/21: Macron is done being the U.K.'s border guard
• 05/20/20: When even small errors can have huge consequences, the Wild West of covid — 19 antibody tests needs a sheriff