Western companies and entrepreneurs are largely missing a chance to invest in the thriving and innovative Ukrainian defence tech industry and take its experience back to their home markets.
Failure of foreign investors to put even modest sums into the Ukrainian defence industry also means that Western armed forces are missing out on rapid developments, for example in drone technology. Foreign drone programs developed in peacetime conditions don’t have the benefit of insights and innovation from the pressure-cooker of the war in Ukraine.
Ukraine’s own companies dominate its industry, with 1.5 million first-person-view drones built by Ukrainian firms in 2024. Yet Ukrainian producers would welcome further mutually beneficial cooperation with Western companies.
According to Brave1, a state-run innovation cluster, the number of defence tech startups it encompasses more than doubled in 2024 and now totals 1500. Some of these firms develop multiple products. Products include unjammable drones directed through fibre optic cords instead of radio signals; remotely-controlled machine gun turrets on uncrewed ground vehicles; and anti-drone drones, which intercept uncrewed Russian reconnaissance aircraft.
Although manufacturers must put Ukrainian defence needs first, they’re also looking at export markets and even civil applications for their products.
Take, for instance, the startup Farsight Vision. It combines a software platform with a tiny hardware device that together can quickly create a 3D model of an area from drone-captured footage. Such models allow unit commanders to keep up with the constantly changing terrain in their area of operations—something that satellite imagery fails to provide due to longer production cycles. At the same time, such 3D models have non-defence applications, including monitoring environmental changes in areas that are hard to access, or scouting locations for offshore construction projects.
2025 is likely to become a turning point for Ukrainian defence tech: startups will appear more slowly, and established firms will cooperate more. Smaller teams may be absorbed by bigger companies, leading to concentration and, thus, faster sharing of frontline experience.
Yet foreign investors’ commitment to the industry remains half-hearted.
Kyiv School Economics calculated that in 2024 US$25 million was invested in the Ukrainian defence tech industry by both Ukrainians and foreigners. In other words, all Ukrainian companies were able to attract four times less capital than Helsing, a German defence AI startup, got in its first investment round.
The chair of NATO’s Military Committee, Admiral Rob Bauer, asked whether European investors were ‘stupid’, because they looked away from defence industry altogether.
To be fair, rethinking is underway, as more private money is directed into defence innovation globally. More investors now recognise that security, not other forms of wellbeing, will be the most important commodity in the coming quarter of the century.
Yet very little defence capital makes it to Ukraine, with most investors deterred by various misconceptions and some legitimate concerns. To them the Ukrainian startup ecosystem remains terra incognita. But local actors, including Brave1 and funds already active in Ukraine, can help foreign private capital make the most of opportunities in Ukraine.
Finally, foreign-built drones have sometimes underperformed in Ukraine. A US producer said it had failed to anticipate the intensity of electronic warfare in the war. That failure prompted the company to scout for Ukrainian talent.
Without battlefield pressure, Western companies cannot innovate and respond to changing technology and techniques as quickly as Ukrainian firms do simply because they must.
On the other hand, those fast-moving, sleep-deprived Ukrainian innovators, constantly incorporating feedback from the frontlines into their tech, have no time for the cumbersome procurement procedures of Western defence ministries.
Thus, win-win partnerships can spring up. Ukrainian startups can bring fresh ideas while well-established foreign defence contractors use their experience with officialdom to export the technology into Western armed forces. Exposed to wartime industry, the foreign firms would themselves build expertise faster.
So far, they are missing the opportunity.
‘Battle-tested in Ukraine’ has become a marketing label in the arms industry. It can be applied more widely with greater cooperation between Ukrainian and Western companies.
