Investment of the Polish Development Fund in the NATO Innovation Fund (NIF)

The initial date we should associate with the NATO Innovation Fund is 30 June 2022, when leaders and ministers from 22 Alliance countries launched the NATO Innovation Fund, the world’s first multinational venture capital fund, at a signing ceremony hosted by NATO Secretary General Jens Stoltenberg.

A venture capital fund, or venture capital (VC), is a specific form of financing for the development of companies. It is proprietary in nature and is implemented in a company through the issue of shares. This means that the investor becomes a co-owner of the company it supports.

Essentially, investors through venture capital allocate money to finance companies that are in the early stages of development. More often than not, these are companies that offer high hopes of profit, but at the same time have a high risk of investment failure.

Venture Capital is a specific form of financing for companies characterised by a high level of innovation. It consists in a capital injection to a company by an external investor – a specialised entity operating in the form of a fund – in exchange for shares in the company. Summing up, venture capital funds operate in two ways: on the one hand, they try to attract as many investors as possible; on the other, they try to find companies that allow them to achieve a high rate of return on investment.

The Innovation Fund set up by NATO is funded by 23 member states. A dedicated external investment team seeks projects to develop solutions that offer the latest breakthrough dual-use technologies with unique potential for defence applications. The fund’s investment areas include, but are not limited to: artificial intelligence (AI), quantum computing, the space sector and biotechnology. Most importantly, Poland is among the investors. Poland is providing capital through the company PFR Ventures.
It was carried out by the Polish Development Fund Group, in line with the strategy agreed between the Prime Minister’s Office and the Ministry of Defence. PFR Ventures is the investment arm of PFR and has invested in almost 70 venture capital and private equity funds. The NATO Innovation Fund will allocate approx. €1 billion for investment, with Poland contributing almost 5% (€42 million/190 million PLN). The level of capital allocation in each country depended on a number of economic factors, such as the level of GDP indicators.

Recently, PFR and PFR Ventures have concluded a cooperation agreement with the Department of Defence. The institutions should cooperate with the Field, which develops young Polish technologies and informs entrepreneurs about relevant opportunities

In the NATO project: DIANA Accelerator and the NATO Innovation Fund.

“This fund is unique”- says the NATO Secretary General, “with a 15-year time horizon, the NATO Innovation Fund will help revitalise emerging technologies that can transform our security in the coming decades, strengthening the Alliance’s innovation ecosystem and enhancing the security of one billion of our citizens.”

The NATO Fund is managed by a group of experts who have done many transactions in the high-tech sector in the past. They look for investment projects across Europe. The Fund’s strategy reflects the needs and challenges of all participating countries. The NIF Manager will be based in Amsterdam, with regional offices planned in London and Warsaw. The mission of the NIF is strategically important. It prioritises addressing NATO challenges by applying them to defence and security markets, strengthening the capabilities of collaborative innovation ecosystems, and ultimately driving scale and success for portfolio companies.

The Alliance intends to maintain a broad approach to security. The ability to respond to a variety of threats and represent the interests of all nations is essential to the coherence of the organisation’s policies, which may be threatened by unforeseen crises and the actions of rivals below the threshold of open conflict.

From the above, it is clear that Allies and partners continue to grow together and will increasingly increase their capacity to respond together to common challenges, building security for future generations based on understanding and cooperation. In the current situation, the statement that security is not only regional, but a global concept, remains valid.

Authors:

Zuzanna Włoczko, legal assistant

Jarosław Rudy, Attorney at Law

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