Hiring the right people is always a challenge for startups — particularly in areas like artificial intelligence and deeptech, where there’s widely considered to be a shortage of qualified talent in Europe. But add to that the complexity of needing to hire someone with experience working with government or in legally complex fields — as many defence tech startups require — and it can be particularly thorny.
There’s been increasing investor interest in defence, with companies like Germany’s AI battlefield software startup Helsing and Finland’s satellite data startup ICEYE raising huge sums. Some $2.4bn was invested into defence and dual use startups in Europe last year, according to Dealroom data.
But defence tech startups in Europe are facing unique talent challenges, recruiters and VCs say.
“It’s a knife fight” to hire for defence techs, Nicholas Nelson, partner of UK-based defence VC MD One Ventures, tells Sifted. There aren’t enough people who are “interested in defence and [are] top quality talent,” he says.
Europe’s talent struggles
“Not many people have gone through that Series B to exit journey” in Europe, says Edmund Jones, partner at executive search firm True Search. That issue is particularly problematic in defence tech “because you can’t borrow people from the States in quite the same way”.
European governments haven’t done as good of a job working with defence startups (compared to, say, the US), so “when you get to this point of scale, as some of these defence tech companies are now doing, you don’t have anyone in the market from a talent perspective who’s ever done it before,” says Jones.
It’s creating a problem where startups are having to hire multiple people that perhaps aren’t the right fit but together can cover the bases of what’s needed for a role in defence, Uroš Zversays, fellow partner at True Search, says.
“Because defence is so particular with export controls” — and selling into, say, the German government is very different to the UK government — “startups have to get their head around hiring perhaps three people to do a job [like sales] that in a software startup you’d have one person, or half a person, doing because it’s so much more difficult to cover,” adds Jones.
What defence techs are looking for
Early-stage defence startups are either hunting for talent that has experience in defence or knows how government programmes work, or for the “best” talent that they can “teach” defence to, says Nelson. He says that at least within his portfolio, he’s seen a preference for the latter, but as startups grow, they need more of the traditional defence types with experience selling to governments.
A big challenge for startups is hiring people with the right security clearances to deal with various governments. Nelson notes that across different European countries, “the feasibility of getting folks cleared if they have not had clearance before varies wildly.” Though he says it’s not strictly necessary in all roles, as startups scale, it’s useful to have positions like engineers with security clearances. Getting clearances can be logistically complicated, especially across multiple countries — and, depending on the level of clearance, can be time-consuming.
Startups tend to look to hire people who’ve previously worked in intelligence or at defence ‘primes’, a term for large companies with established government contract relationships, like Airbus, says Nelson.
Outside of the primes, startups need to get more creative and tap hires from other industries or from software considering there isn’t a wealth of talent that’s scaled up hardware companies in Europe, Zversays says. “There’s almost like a diametrical opposite between the kind of relationship building and cycle that folks in either the primes or within governments or intergovernmental organisations are accustomed to, and [the pace at which] these new businesses want to move,” he adds.
VCs like Nelson note that startups are looking for very mission-driven people to hire: “You’re not getting an exit in three years from defence unless you’re very, very lucky. So if you’re really just out and very mercenary about it, go work for a SaaS startup.”
What’s more, True Search’s partners say that defence tech salaries don’t tend to be especially high.
Less controversial for recruits
Still, potential applicants are more likely to consider a role at a defence tech or dual use startup (those developing products or services with both military and commercial applications) than they used to be, recruiters say.
“It is definitely getting to be an easier sell” to candidates, says Nelson. “I think the stigma is either gone or going away,” depending on the country. It’s easier to attract talent in countries like Finland or in the Baltics (which are in closer proximity to Russia) compared to Germany (where there is more cultural stigma), he adds.
Defence is a growing market, helped by the launch of investment funds like the €1bn NATO Innovation Fund, focused on deeptech and defence startups, says Jonas Helgesson, partner at executive search firm Erevena, who works largely with deeptech startups, at Series A and B. In recent years there’s been an increasing focus on funding startups doing everything from building drones to AI-powered battlefield software and aerospace technology.
The pipeline problem
Even though VCs may be more willing to write cheques into defence startups, that doesn’t mean there’s going to be a wider pool for them to hire from.
“I think the crunch for talent is going to get more difficult,” predicts Jones. “There’s a finite number of entrepreneurial people sat within the defence primes.” Some of the big, scaling European defence and dual use startups are going to have to poach those people, and “there might be enough to go around for the next couple of years, but assuming those companies have success, investors are going to want to back a whole new raft of companies to come after them, and at some point the world runs dry.”
There may also be a money issue: the more defence startups reach the scaling phase, the more they’ll have to cough up to secure talent from those bigger defence primes. “That’s going to create a problem where a lot of these startups get very bloated [operating expenses] and don’t get the market traction and end up failing,” says Jones.
Of course, that’s all part of the startup cycle. Once there’s more of a “playbook” to hire for defence startup roles in Europe, Jones says, “it’ll become very expensive, and then there’ll probably be some sort of correction, and we’ll place all the people that moved from the primes into a startup into other startups, and then it’ll become a little bit more manageable.”
Nelson adds that historically, talent at the primes has been “artificially constrained” due to the stigma around working in those companies in certain countries like Germany. He argues that people who are around three to five years into their career at a prime (or at least under 10 years) “tend to be the ones who are probably the best hires you’re looking for,” because “they’ve not been, for lack of a better phrase, institutionalised,” he says.
For one, Jones is encouraging startups to think bigger and ask for more money to hire talent when raising fresh funding.
“The onus is a little bit on founders to just not expect everyone to take a 75% pay cut and to really think about, like, what’s it really going to cost to get this kind of talent in the business?” he says.
Read the orginal article: https://sifted.eu/articles/talent-defence-tech-startups/
