Hey there 👋
It's time for another 🛰️ FounderNest Flyby Newsletter 🛰️, where we help you stay sharp with innovation trends and insights.
This week, our research team listened to your feedback on LinkedIn, so get ready to start your engines and discover what is fueling the defence sector.
In today’s newsletter:
- 💡 Our insights from this week
- 🗞️ Quick Hits from this week’s news
- 🛡️ This week’s defence Deep Dive
- 📡 11 trends from our Industry Radar
Our insights.
"In my experience, innovation teams often get swept up in the excitement of new technologies or product features, sometimes at the expense of what really matters: people. The most groundbreaking solutions don’t just solve technical challenges—they address genuine human needs and problems, both inside and outside the organization."
Felix Gonzalez
CEO and Co-Founder at FounderNest
Quick Hits.
Short and sweet—news that caught our eye this week.
📈 External innovation drives pipeline growth and productivity, with over 70% of new molecular entity revenues since 2018 coming from externally sourced products. Top pharma companies leveraging external assets are 3–8 times more productive in R&D than their peers.
🚀 AI doesn’t create miracles but can significantly amplify the productivity of high-performing teams. It enhances the value of skilled teams, enabling them to achieve exponential gains. For underperforming teams, AI may only magnify inefficiencies.
📊 As AI becomes a central tool in innovation, companies must coordinate AI initiatives across departments. Without a unified approach, AI efforts can become fragmented, wasting resources and knowledge.
Deep Dive - Barriers to Battlefield Brilliance: Scaling Defence Tech.
Our bread and butter—comprehensive, personalized industry insights.
TL;DR
- 🛡️ European defence startups see funding surge, but US investors still lead late-stage growth.
- 🧩 Fragmented innovation ecosystem slows technology adoption and reduces impact.
- 🚧 Severe talent shortages and negative public perception stall sector growth.
- 🕰️ Outdated procurement processes block startups from scaling and integrating new tech.
1. 🛡️ Funding Gaps Despite Increased Interest
While European defense tech startups have seen a 500% rise in funding since 2021, the ecosystem is still heavily reliant on US investors for late-stage growth, exposing European startups to scale challenges and competitive disadvantages.
2. 🧩 Ecosystem Fragmentation Hampers Progress
Public labs, private firms, and government bodies often operate in silos, slowing down the adoption of new technologies and diminishing the effectiveness of innovations in real-world defense scenarios.
3. 🚧 Talent Shortages and Public Image Issues
The sector struggles to attract top tech talent due to a lack of appeal and lingering stigma around defense work, particularly in Europe, which reduces the potential workforce for critical areas like AI and quantum computing.
Industry Radar.
Stay ahead of the curve—every newsletter we give you 11 of the hottest topics and trends across our reference industries.
1. Oil and energy: Divestitures, Midstream M&A, and Private Equity to Dominate North American Oil & Gas Deal Flow
After last year’s mega-mergers, oil majors are expected to divest non-core assets, spurring deal activity across regions beyond the Permian Basin. Midstream consolidation and private equity exits will accelerate, fueled by an expected easing of regulations under a Trump FTC.
2. Food and beverages: Key Trends Reshaping the Food & Beverage Industry
Trade wars and shifting regulations are forcing Food and Beverage companies to rethink supply chains and product strategies. Foodtech, AI, and M&A are driving innovation and growth in areas like health, sustainability, and convenience.
3. Healthcare: Biotech Bolt-ons, Digital Deals, and Portfolio Optimization Drive New Momentum
Big Pharma will prioritize acquiring innovative, late-stage biotech firms to fill looming revenue gaps from patent cliffs, while healthcare services target AI and tech-enabled acquisitions to boost value-based care.
4. Technology: The Overlooked Cybersecurity Threat as AI Agents Proliferate
As bots and AI agents multiply, non-human identities (NHIs) now outnumber human ones 46 to 1—creating billions of new potential entry points for cyberattacks. Despite their rapid growth, over 70% of NHIs aren’t regularly updated and almost all are exposed to third parties, making them prime targets for hackers.
FounderNest Bonus: We were curious about the latest trends on this topic, so we decided to run our Space Intelligence tool. Here are just a few of the insights we uncovered. Get in touch to see how we can help.
5. Retail and logistics: Retailers are rapidly adopting generative AI for catalog management, content creation, and customer engagement
Amazon, for example, leverages generative AI for video creation and smart shopping assistants, while other retailers automate product data collection to improve accuracy and speed to market.
FounderNest Bonus: To uncover early-stage companies using AI in this space, we ran a search for companies incorporated after 2023 and here are just a few of the ones we found. Get in touch to see how we can help.
6. Farming and agriculture: European Agri-Tech Boom
European agri-tech M&A hit record highs in 2024, with deal values reaching €1.84 billion. This reflects the sector’s maturity and growing investor interest, with large funds backing platforms such as smaXtech, which provides AI-driven livestock monitoring for dairy farmers.
7. Banking: Bank of America’s AI Playbook: Customer-Driven Innovation and Real ROI Power Enterprise Adoption
Bank of America’s “Erica for Employees” virtual assistant now supports 90% of staff and has cut IT service calls by over 50%. The bank’s $13B annual tech investment is guided by a rigorous, customer-first vetting process and responsible AI governance—prioritizing practical value over hype and rapid experimentation over flashy demos.
8. Pharmaceuticals: U.S. Urged to Invest in Biotech or Risk Losing Strategic Edge to China
A bipartisan commission warns the U.S. could permanently lose its biotech lead to China unless it invests at least $15 billion and adopts aggressive new policies within three years.
FounderNest Bonus: To uncover early-stage companies using AI in the pharmaceuticals market, we ran a search—and here are just a few of the ones we found. Get in touch to see how we can help.
9. Manufacturing: Tariffs Drive Global Companies to Accelerate U.S. Production and Investment
Major manufacturers from autos to electronics and consumer goods—including BMW, TSMC, Novartis, and Lavazza—are expanding or relocating production to the U.S. to sidestep President Trump’s new tariffs.
10. Aerospace: SAF Scale-Up Faces Economic and Supply Challenges Despite Progress
Sustainable Aviation Fuel (SAF) is critical for decarbonizing aviation, but supply growth lags behind surging demand and remains priced well above conventional jet fuel. Airlines and producers face a standstill—high costs and uncertain demand deter long-term commitments and investment, risking a "chicken-and-egg" stalemate.
11. Automotive: US Auto Tariffs Trigger Rapid Pricing and Production Shifts Amid Uncertainty
The new 25% US import tariff on light vehicles is prompting automakers to quickly adjust pricing strategies, such as employee discounts and selective price holds, to cushion the immediate consumer impact and maintain sales momentum. Looking ahead, industry analysts expect broader declines in US and global vehicle production.
