While US support weakens, Ukraine's homegrown defence tech is going from strength to strength
As the Russian invasion of Ukraine reaches its fourth anniversary, experts claim European investors are now heavily backing Ukrainian military tech startups in large quantities.
Venture capitalists like Deborah Fairchild and Justin Zeefe from Green Flag have noticed a "marked" interest from potential investors in Scandinavian countries, the Baltic nations, and the UK since US President Donald Trump took office last month.
"That's particularly noteworthy because… it's mainly from European countries that are going to have or have an acute need for keeping a defensive boundary," Fairchild said.
This surge in interest is part of a bigger trend where investors are keen to break into a rapidly expanding military technology industry.
According to the experts, the industry, which had been largely dominated by the Soviets before the full-scale invasion, has now developed into a thriving landscape where approximately 500 arms manufacturers can transition from battle-tested prototype to large-scale production in as little as three months.
How did the Ukrainians develop such innovative spirit?
In the first year of the full-scale invasion, Ukrainians heavily relied on stingers, javelins, HIMARS artillery rocket launchers, missiles, and the occasional NATO-supplied kit to take on the Russians, according to Daniel Bilak, a partner at the law firm Kinstellar and a volunteer soldier with the Ukrainian forces.
A failed Ukrainian counterattack in 2023 showed that the Russians had more personnel and air superiority than their opponents, so they had to look for another way to keep up, he went on.
"The only way we could outsmart the Russians was through technological advancements," Bilak said.
In order to do so, the Ukrainian government allocated more than 50 per cent of government outlays to the military, increasing their spending to 20 times the pre-invasion level, reaching $30.8 billion (€29.4 billion) in 2023, according to the Stockholm International Peace Research Institute (SIPRI).
The Ukrainian government sped up its procurement process to match. Using the so-called "Danish Model", EU countries are now directly funding certified Ukrainian defence companies that make weapons on the ground.
All the experts said it takes only three to six months for a prototype to become a certified military weapon during peacetime, which is an "incredible development" when you consider it would've taken over a year for start-ups.
"Our military technology is light years ahead of the rest, no one can match our pace of innovation because we have to," Bilak said.
The Ukrainian government allocated some of that defence funding to Brave1, a "united coordinational platform" that has awarded over 470 grants worth 1.3 billion hryvnias (€29 million) to defence startups and offers them "organisational and informational support".
A significant amount of the funding has been allocated to drone and ballistic missile technologies.
Another revenue stream for the Ukrainian defence tech industry comes from crowdfunding, Fairchild said. Ukrainian President Volodymyr Zelenskyy's platform, United24, raised over 13 billion hryvnias (€298 million) with donors from more than 130 countries.
Some of their projects are focused on defence innovation, such as a fundraiser for terrestrial robotic platforms and robots to clear landmines from government-controlled areas of the country.
There are millions and millions being invested in thousands of small workshops all over Ukraine," Fairchild said. "This country has an incredible network operating behind the scenes.
Fair dinkum, let's talk about the year of the drone.
Olena Bilousova, the lead of military research at the Kyiv School of Economics (KSE), said one standout military technology sector is Ukraine's expanding drone industry, which she estimates makes up 25% of the country's military weapons supply.
Drones became an "alternative" to artillery weapons when they were in short supply in the early stages of the war, Bilousova went on to say.
"It's just a good alternative to traditional types of weapons because it's something we can do in a hurry," she said.
Ukraine has gone from having up to 5,000 drones when the invasion began to producing an estimated 4 million drones by 2024, according to a report from KSE, published in October.
There's now a national collection of specialised drones, including carrier drones that serve as platforms for launching other drones, target drones for testing purposes, electronic warfare drones to disrupt enemy communications and kamikaze drones that can deliver precise strikes.
In a sea of innovations, AI-driven swarm technology that lets drones coordinate attacks without human control is "one of the most innovative trends," as reported by KSE.
One of the challenges the drone industry's got left is to make sure they can scale up and have enough stock to keep the frontlines covered, Bilak said.
"[Drones are] basically a disposable resource… you just go through 'em like a packet of tissues," he said. "And as a result, you will see more and more investment into these drones".
Loss of US backing is a bitter pill to swallow, but it's not the final nail in the coffin.
According to a support tracker from the German think tank Kiel Institute, the United States is the biggest single donor to Ukraine, providing roughly €114.149 billion since 2022.
President Trump has asked Ukraine to pay them back for this aid with a guarantee of $500 billion in rare earth minerals, which Zelenskyy initially knocked back but is now reportedly working out with Washington.
If Ukraine wanted to shift away from US-based aid, the Bruegel Institute pointed out in a recent report that the dollar values are small enough for Europe to replace the US entirely by spending "only another 0.12 per cent of its GDP".
Fairchild reckons the Ukrainian military tech industry will find a way to patch up any gaps because their Defence Forces have done it before.
a couple of Russian helicopters and dozens of ships in their Black Sea fleet, a feat by the Ukrainian military that Fairchild believes is often underappreciated.
"It's all Ukrainian-made weapons that are doing that," she said. "I'm optimistic they'll be able to fill the gap… not to say that [an American retreat] wouldn't be tough, but they won't be saying 'fair dinkum we're pulling out'".
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