Three years in, the venture battlefield is fully operational.

How the Ukraine War is reshaping European defense tech

A few months ago, a close friend in Sweden received a pamphlet in the mail about what to do in wartime. I must admit, I was surprised—like it was a relic from another era, that made its way to his doorstep. But the reality is that war in Europe isn’t a distant possibility. It’s happening now, and the threat of it expanding is very real.

Sweden is only ~1,000 kilometers to Ukraine at its shortest point. Last March the country joined NATO, bringing more security to its people—and adding cutting-edge submarines and a substantial fighter jet fleet to NATO forces. The past few years have shifted much of European mentality about war, and in effect, the kinds of technologies being build and invested in around the world.

Now three years into Russia’s invasion, the war in Ukraine has forced Europeans to confront hard truths about defense, security, and technological readiness in ways that seemed unimaginable at the turn of the decade. Much of the conversation I’ve been part of around defense tech has been centered on Silicon Valley and the U.S. military-industrial complex. But Europe is the real-time testing ground for these technologies. Whether it’s AI-powered drone swarms developed in Ukraine, munitions from the U.K., or U.S. autonomous systems deployed on the front lines, this is where the future of warfare is being written. Companies like Theseus can test their navigation and computer vision products under real combat conditions. Helsing, a defense AI startup backed by Spotify’s Daniel Ek, is rapidly scaling its production of strike drones. And Ukraine’s Swarmer, which allows a single operator to control entire drone swarms, is proving its worth in combat daily.

Today I wanted to explore deeper what is happening in this market, and its ripple-effect around the world.

---

The European Defense Awakening

For decades, European nations have underinvested in defense, assuming that NATO—and by extension, the U.S.—would always be there to provide security. But with Trump openly questioning America’s NATO commitments, Europe is scrambling to build up its own capabilities. Defense primes across the continent are surging, and venture capital is finally taking notice. Investment in European defense startups has spiked, reaching a record $5.2B in 2024. Germany, the U.K., and France are leading the charge, fueled by new defense-focused venture funds. Despite this surge, Europe is still struggling to match the scale of U.S. defense investments, particularly in late-stage funding rounds where American investors continue to dominate.

Ukraine has become the R&D lab for modern warfare. Forced to innovate under extreme conditions, the country has developed cutting-edge AI-driven drone technology, cyber defense systems, and battlefield communications tools that are rapidly being adopted across Europe. Ukrainian startups like Technary, which turns civilians into real-time intelligence gatherers through mobile app. Others are revolutionizing underwater warfare with autonomous unmanned systems, are proving that necessity drives innovation at an unmatched pace. The impact isn’t limited to drones. OpenMinds is using AI to counter Russian disinformation campaigns, and HIMERA is delivering secure battlefield communication systems that outperform legacy military solutions. (TechCrunch outlines many more here.) These technologies aren’t theoretical. They’re battle-tested, making them highly attractive to investors and defense ministries across Europe.

The shift toward manufacturing extends beyond defense—semiconductor fabs, battery plants, and AI-driven industrial automation startups are attracting billions in investment as the U.S. races to reclaim lost ground in critical supply chains.

On the other side of the world, Silicon Valley VCs have historically avoided defense tech, citing ethical concerns and the sector’s capital-intensive nature. But that’s changing. The U.S. has been undergoing a quiet (albeit, getting louder) but profound shift in its approach to industrial innovation, with venture capital and government funding flowing into "unsexy" fields like manufacturing, advanced materials, and defense hardware. The success of firms like Anduril and Palantir has demonstrated that defense tech isn’t just viable—it’s one of the fastest-growing and most lucrative sectors.