Ilavska Vuillermoz Capital, usually known as IVC, is a niche VC fund that’s one of the few to invest in defensetech. We spoke to founding partner Laurent Hengesch about the fund’s journey.
From fintech to defensetech
IVC was started in 2019 as a fintech fund, but quickly started with investing in defensetech, with the first investment made in 2020. “ Technically we are one of the older defense tech investors in Europe,” says Laurent, “we were investing in defense when nobody else was investing or looking at the asset class.”
A separate fund has now been set up for defense only and now has six investments: three in the United States and three in European companies. Though Laurent won’t disclose how much is in the defense fund, he will say that the emphasis is on startups between seed and series A.
That said, there’s more to IVC than defense, still. Fintech is still of interest, and the fund is also in the business of late-stage investments. Because of this, the firm is on the cap table of Rohlik and Bolt, to name but two.
Getting into defense
Getting into defense was “more of a coincidence,” says Laurent. “I was speaking to a friend of mine from Luxembourg, an investor himself.” The friend then dropped that his company was investing into defensetech.
It was the first time Laurent heard that from a fellow investor. The why of getting into defense is self-evident to Laurent: “ we think it’s important that more money goes into those technologies because effectively we are at war.”
When the decision was made to invest, Laurent went to his LPs: “ 70% of those said, ‘No, defense I will not touch. I won’t do anything there.’ But the remaining 30% were like, ‘Oh, this is amazing. I went to the army as a young boy and we need that . That’s great technology.’”
Things progress
Once the first investment was made, things went quickly. Once the word got out that IVC was interested in defensetech, they were approached by other companies, including Cerbair, a French anti-drone startup. Its solution that disrupts pilot-to-drone communications through radio signals.
Interestingly, IVC currently does not have investments in Ukrainian defensetech. “I think there are other funds that are very well set up to do that,” says Laurent, though there clearly is a lot of interest in what’s happening on Europe’s eastern flank on his part.
“We see a lot of technologies that have been developed on the ground [in Ukraine],” says Laurent. “People are testing their technologies in the Ukraine war, and we have a few of our advisors that are based in Kyiv.”
Defense and flexibility
That said, Laurent emphasizes that IVC’s interest in defense also stems from practical considerations. ”We want to be flexible. It’s not something that we actively search for. We are screening around 700 companies a year. There are not so many deals that have this component.”
Part of this comes down, again, to practicalities. In defense, says Laurent, “the sales cycles are extremely long,” This dissuades startups, but, he says, “once you get in, then it’s like hitting the jackpot.”
That said, with the market in flux as it is, he emphasizes that “nobody can really predict now what exit scenarios look like in defense tech. We see some consolidation through the primes.”
IPOs are rare, for example, and many. “Obviously if we invest, we always have an exit scenario in mind, but it’s not as clear as in other asset classes currently.” That said, he does find valuations to still be quite reasonable. “But at some point they will come, and then valuations will pick up, you know, once there’s more money in the game,” he says.
A European future
That money currently is mostly coming from the United States, says Laurent, who is worried about the example that’s setting. “Do we want to have our best companies owned by US VCs that are being funded by US billionaires, pension funds, insurance companies, and government entities?” he asks.
Right now, though, the amount of European money going to European defense is quite small. “One way is, you know, having more European tax money flowing into these companies, otherwise I don’t see how it would work.”
He frowns. “We are European investors at the end of the day. I mean, obviously we invest internationally, but at the end of the day, we are Europeans and it’s in our DNA to strengthen Europe.”
Review our Podcast Episode with Laurent Hengesch and Alain Wildanger about the beginnings of IVC, their FinTech angle, or buying a Volcano.
