Rheinmetall partner Iceye has raised fresh capital at a valuation of 2.4 billion euros, capitalizing on the rapid increase in military spending in Europe. The Finnish startup develops surveillance satellites and announced a joint venture with Düsseldorf-based defense contractor Rheinmetall in November.

Venture capital firm General Catalyst led the financing round, which included 150 million euros in new equity and 50 million euros from a secondary sale to early investors, Iceye announced on Friday.

Rafal Modrzewski, CEO of Iceye, said his startup had reached profitability this year, so the financing was „not absolutely necessary.“ However, the capital will be used to launch satellites faster and thus strengthen Europe's military capabilities. „No one wants Europe to be ready in five years,“ he said in an interview. „People want Europe to be ready tomorrow.“

AP Møller Holding A/S, the company that controls the assets of the Danish billionaire Maersk dynasty, participated in the new round, as did Bpifrance and a number of Finnish investors. The Polish state bank announced in August that it would invest in Iceye. The company said it had raised a total of 600 million euros to date. It did not disclose a previous valuation.

European countries have pledged historic sums for defense as the threat from Russia has increased – triggering a flow of money into startups seeking military contracts. Even within the industry, there are now concerns about a possible investment bubble. Germany alone plans to invest 35 billion euros in space security by the end of the year.

Iceye, founded in 2014, originally developed Earth observation satellites to monitor environmental changes such as the melting of ice caps. Since the start of the war in Ukraine, however, the startup has focused on military applications. It builds satellites that deliver high-resolution images and can detect objects through smoke, clouds, and darkness.

This is also the focus of the joint venture with Rheinmetall. Rheinmetall Iceye Space Solutions is based in Neuss, North Rhine-Westphalia. There, a Rheinmetall automotive supplier plant is currently being gradually converted to arms production. Rheinmetall holds 60% of the shares in the joint venture, while the Finns hold 40%. The joint venture is scheduled to start operations before the end of the year. The first satellite is then to be manufactured in Neuss as early as next year.

Iceye already builds satellites that are in use in Ukraine, among other places. With Rheinmetall, these are to be produced quickly in larger quantities. In addition, Rheinmetall's sales network is expected to boost sales.

Iceye competes with a number of public and private satellite providers who, like Iceye, are investing heavily in software. The company has signed contracts in the US, the United Arab Emirates, and Japan. However, according to CEO Modrzewski, the majority of the business now comes from Europe. This year, the company has signed agreements with the armed forces in Poland, Portugal, Finland, and the Netherlands. It is „in talks“ with two other European countries.

General Catalyst, a United States-based fund, has become an active supporter of defense startups in Europe, including at drone manufacturer Helsing. With the new deal, Jeannette zu Fürstenberg, head of General Catalyst’s European operations, joins Iceye’s board of directors.

„It's probably one of the fastest-growing segments within defense and government procurement that we're seeing right now,“ she said. „It's pretty crazy.“

Modrzewski said Iceye has launched 25 satellites this year and plans to produce one unit per week in the coming year.

In June, the CEO told Bloomberg that he expects revenue to double to over 200 million euros by 2025. Sales have „gone better than I thought,“ he said on Friday, without giving an exact figure.

According to earlier Bloomberg reports, the company has been in talks with banks about an IPO next year. However, Modrzewski said there are currently „no such plans.“

Modrzewski said Iceye will use the new funds to invest in software and data tools to provide customers with real-time information.