European venture capital is undergoing a significant transformation. While a large portion of investors today are directing capital toward software projects and artificial intelligence, some funds are looking for opportunities elsewhere—in the realm of so-called hard technologies and defense innovations. The Presto Tech Horizons fund, established in collaboration between Presto Ventures and the CSG Group, is among those seeking to support technology projects with a direct impact on Europe’s security and strategic autonomy. In the latest episode of the discussion program CZ DIALOGUES, fund partner Matej Luhový explains why they decided to take a different path than most investors, how they select startups for their portfolio, and how challenging it is in the global technology landscape to find companies that can truly transform their industry.

Video: Interview with Matej Luhový, partner at Presto Tech Horizons / CZ DEFENCE

The transformation of the global technology market in recent years has also significantly influenced the investment strategies of venture capital funds. According to Matej Luhový, it is clear today that a large number of investors reacted to the emergence of generative artificial intelligence very quickly and often very decisively. “When we look at global trends in the venture capital market today, we see one very strong trend,” says Luhový. “Following the launch of large language models, such as ChatGPT, a large portion of software-focused investors immediately jumped on this new technological wave. Many funds reoriented their investment strategies and began focusing specifically on companies developing AI-based products. That is why we are seeing massive investments and very high valuations for these companies today.”

According to Luhový, it is precisely this concentration of capital that has simultaneously created space for a different type of investment approach. The Presto Tech Horizons fund has therefore decided to focus on technologies that are not as visible but are of fundamental importance to industry, security, and technological sovereignty. “We’ve chosen a slightly different investment style,” explains Luhový. “We figured that if software is gradually becoming a commodity, it makes sense to focus on more complex technologies that take longer to develop and require deeper technical know-how. This is what’s known as ‘hard-tech’—for example, advanced materials, new manufacturing processes, autonomous systems, or defense innovations. This segment has existed for many years, but it often hasn’t received as much attention or capital.”

According to Luhový, this is precisely where opportunities arise for investors willing to take a longer-term view and tackle greater technological complexity. “We’re looking at how we can advance these technologies and how they can contribute to Europe’s security,” he says. “If you look at Presto Tech Horizons’ investment strategy, it essentially consists of projects that share one common denominator: they enhance the technological and security sovereignty of European nations.”

However, the large amount of capital flowing into artificial intelligence also raises questions about whether an investment bubble is forming in the market. According to Luhový, such discussions are fairly common in the tech world. “There’s a lot of talk these days about whether this is a bubble,” he says. “But similar debates are taking place in other technology segments as well. For example, in the field of defense technologies.” One indicator that investors monitor is the ratio between a company’s market value and its actual earnings. In some technology segments, these figures are very high. “If you look at some defense tech companies, their price-to-earnings ratio is currently around 100,” explains Luhový. “By comparison, for large tech firms like NVIDIA or Google, it’s roughly 30 to 50.” According to him, such differences show just how high investors’ expectations are for these sectors. However, the true value of the technology often only becomes apparent after several years. “It happens that investments outpace the value the company actually generates,” he says. “Only time will tell if this value will truly materialize. Personally, I think there is potential in many cases, but before it manifests, there may still be some correction.”

The Presto Tech Horizons Fund was established as a joint project between the venture capital firm Presto Ventures and the CSG industrial group. Luhový considers this partnership between a financial investor and an industrial partner to be one of the key elements of the overall strategy. “Our mission is quite challenging and very ambitious,” he says. “We want to build one of the best funds in the world focused on defense technologies. And for such a vision, you need a partner who shares that same level of ambition.” According to him, CSG brings to the partnership not only capital but, above all, deep industry experience and a global network of contacts. “When you look at what makes a venture capital fund truly exceptional, it basically comes down to three things,” explains Luhový. “The first is access to the best investment opportunities. These projects are usually not publicly available or well-known; you have to find them on the private market.” The second key capability is the right selection of investments. “In just the last year and a half, we’ve analyzed approximately 1,900 companies and invested in ten of them,” he says. “It’s really like looking for a needle in a haystack.” The third factor, he says, is the follow-up work with the companies in which the fund invests. “It’s not enough just to invest capital,” he emphasizes. “You have to help the startup grow, find customers, open new markets, and develop the technology.” It is precisely here, he says, that the advantage of collaborating with an industrial partner becomes clearly evident. “Having a partner with a global network of contacts, access to potential customers, and in some cases even acting as the customer itself, is very attractive to startups,” he says. “The companies we invest in thus gain not only capital but also access to an industrial environment where they can validate and develop their technologies more quickly.” Thanks to this, the fund can move faster than many other investors, according to Luhový. “It allows us to select the best companies more quickly, help them grow, and successfully sell them in the future,” he adds.

One of the least visible aspects of a venture capital fund’s work is the process of identifying new investment opportunities. According to Luhový, this is a very demanding task that requires an extensive international network of contacts. “The search process is truly demanding,” he admits. “It’s definitely not a job for just one or two people.” The fund therefore collaborates with a broad network of partners around the world. From university research teams to technology incubators to other investors. “We have a team of people who track technology trends, the emergence of new startups, and developments at research institutions,” he explains. “In addition, we collaborate with other venture funds and investors who bring interesting projects to our attention.” He believes that personal relationships and the fund’s reputation also play a major role. “Venture capital is largely about trust and relationships,” he says. “As the fund gradually establishes itself and builds a good reputation, interesting projects start coming to it on their own.” Nevertheless, the selection of projects remains very strict. “Of the hundreds of companies we analyze each year, only a small percentage make it into the portfolio,” says Luhový. “But that is precisely the essence of venture capital—finding a few exceptional projects that have the potential to significantly transform their industry.”

The technologies the fund focuses on often have longer development cycles than traditional software startups. On the other hand, however, they can have a much greater technological and industrial impact. “Hard-tech projects often emerge at the intersection of science and industry,” explains Luhový. “They require more capital, more time, and deeper technical expertise. But if they succeed, they can create a very strong competitive advantage.” That is precisely why, in his view, it makes sense for Europe to invest more in these areas. “In recent years, we’ve realized how important it is to have our own technological capabilities,” he says. “And that applies to both the civilian industry and the security sector.” According to him, Europe has a strong research base as well as talented founders of tech companies. The challenge, however, remains the ability to quickly translate these technologies into practice. “Europe has enormous technological potential,” says Luhový. “It has high-quality universities, strong research institutions, and an increasing number of talented startup founders. What is often missing is agile capital and, with it, the ability to commercialize technology quickly.” It is precisely this gap that, in his view, specialized venture capital funds should help fill. “Our goal is to help technology companies bridge the gap from research to the real market. If we succeed, Europe can gain a much stronger position in global technological competition.”

According to Luhový, it is not just about economic growth, but also about strategic independence. “Technology plays a crucial role today in how nations will function in the coming decades,” he concludes. “And if Europe wants to remain a strong and secure region, it must invest far more in these technologies than it has so far,” says Matej Luhový, a partner at the Presto Tech Horizons fund.