Why American investors love European defense startups
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investors → love → startups
You're reading a newsletter from The Indicator from Planet Money.
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You → read → Money
Once a week, we curate our favorite stories and insights on business, finance, economics and why they matter.
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they → curate → economics
Have you ever wondered what Warren Buffett does in his free time?
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Buffett → wonder → time
Turns out he's a YouTube guy, as prone to the rabbit hole as any of us.
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he → turn → us
You might expect the recently retired Berkshire Hathaway CEO to consume nerdy financial content, but no.
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CEO → expect → content
According to The Wall Street Journal, we learned he's prone to watching Paul Anka videos, clips of Bill Murray films, and my personal favorite … O'zbekiston Got Talent, the Uzbek knock-off of America's Got Talent.
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he → accord → Talent
But who hasn't gone through that phase?
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who → go → phase
Coming up
- European defense start-ups are raking in cash; Americans are benefiting
- These six power plants should be offline.
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plants → come → cash
This is what they cost tax-payers
- Why Florida college enrollment seems to be doing well
Trivia: What do most countries with a sovereign wealth fund have in common?
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countries → cost → fund
We're Watching
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We → watch → ?
American investors are seeing an opportunity in Europe.
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investors → see → Europe
The continent saw a 14 percent rise in military spending to $864 billion last year, due to pressure from Russia and Trump's own unhappiness with low spending from NATO allies.
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continent → see → allies
The hike is prompting a spate of new defense start-ups keeping up with modern warfare.
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hike → prompt → warfare
They're building tech like AI-powered battlefield management, drones, and spy satellites.
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They → build → management
These start-ups are already bidding and winning contracts… so the pay-off is coming fast.
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off → bid → contracts
In fact, these startups have raised a RECORD amount of capital this year, with help from Americans.
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startups → raise → Americans
Why the U.S. is loving this: Just about half of the funding in Europe's defense tech industry is coming from American investors this year!
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half → love → investors
- European VC's aren't remotely measuring up: Europe does have venture capital (VC) firms.
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Europe → measure → firms
U.S. firms are out-investing EU ones at every funding round level, getting significantly larger at later-stage rounds when the big, risky checks are needed.
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checks → invest → rounds
American investors are seeing dollar signs: NATO allies have committed to investing 5% of GDP into defense.
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allies → see → defense
That means a lot of government contracts.
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That → mean → contracts
Cody Huggins, a partner at Scout Ventures, a VC firm, told CNBC last year, "you're going to see high-caliber entrepreneurs that otherwise wouldn't have built in this space because they would be concerned that there weren't the contracts or the venture capital or growth equity in Europe."
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they → tell → Europe
- Restrictions on European investment: Some European money comes with restrictions on defense spending.
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money → come → spending
For example, the European Investment Bank limits investment in weapons and ammo for ethical reasons.
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Bank → limit → reasons
The German fund KfW Capital won't finance what it deems 'controversial' weapons.
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it → finance → what
Five coal-fired power plants and one running on oil and gas would no longer be online if not for the Trump administration.
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plants → fire → administration
The Department of Energy used emergency authority to keep the plants going past their scheduled retirement, something that's never been done in the history of the DOE.
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that → use → DOE
Secretary of Energy Chris Wright said it's about giving people access to more reliable power to help address periods of peak demand.
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it → say → demand
What's odd: several of the plants are running at limited capacity or not at all.
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several → run → capacity
That said, utilities are still incurring millions of dollars just to maintain a power plant on standby.
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utilities → say → standby
Wright told Reuters last year that he expects most of the nation's power plants to hold off on retirement in order to help power artificial intelligence aka data centers.
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most → tell → intelligence
Why it matters: Electricity costs nationwide are already wildly high as demand increases from AI.
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demand → matter → AI
Consumers Energy, the company that owns the Michigan J.H. Campbell coal plant, reported to the SEC that the plant has cost them $259 million to continue running since May of last year.
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plant → own → year
The utility has gone to its customers to pay for $138 million of that cost.
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utility → go → cost
A recent court decision also found the 'emergency' order was an overstep and threatened the stability of the energy market.
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order → find → market
Emergency orders are keeping a generating unit at a coal-fired plant in Colorado going as well.
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orders → keep → Colorado
The latest happened Sept. 27.
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latest → happen → ?
The DOE has to keep issuing them within 90 days.
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DOE → have → days
Keeping that plant online would cost taxpayers $80 million annually, according to its Governor.
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Keeping → keep → Governor
…and 54 more, not listed.
The Aporia
