Ukrainian weapons startups are finally seeing an inflow of funds from Western investors who have long been intrigued by the Ukraine's defense tech sector but have so far kept their money out of the war-torn country.
Financial analysis firm Pitchbook provided the Kyiv Independent with data showing a four-fold rise in foreign venture capital deals in Ukraine-headquartered startups after the market flatlined in 2022 and 2023 following Russia’s invasion.
The total dollar value remains slim — just under $20 million by Pitchbook’s accounting, and $40 million according to the Ukrainian government. But with most of these new deals coming in at the end of 2024, a dam may be bursting.
The new deals are almost all defense-related. The largest publicly disclosed investment rounds topped out at around $3 million, and include Ukrainian AI drone navigation firm Swarmer, AI disinformation fighters Osavul, and Buntar Aerospace, which makes reconnaissance drones.
Russia’s invasions in both 2014 and 2022 crippled ascendant Ukrainian economies, including a fast-growing tech sector. After 2022, a whole new generation of Ukrainian defense startups cropped up — both to arm Ukraine’s military and to bank on a rapidly growing global arms industry for a post-war Ukrainian economy.
Western investors have until now been hesitant to hand money over to these Ukrainian firms. But pressure on Europe to expand its military muscle might be changing that.
Ukrainian figures
Ukrainian sources also show a significant uptick in recent months. The first seed round for many defense start-ups in Ukraine came from Brave1, a government fund launched in 2023 to link militarized techies with both Ukrainian soldiers and foreign money. Brave1 also keeps tabs on that incoming investment.
Digital Transformation Minister Mykhailo Fedorov wrote at the end of October that Brave1 had pulled in $25 million in international investment into Ukrainian military tech firms since the start of 2024. By comparison, 2023 topped out at $5 million.
“We are getting more and more interest all the time.”
Viktoriia Kovalchuk, a Brave1 spokesperson, told the Kyiv Independent that the $25 million rose to $40 million by the end of 2024, just two months later. Fedorov predicted $100 million over the course of 2025.
The discrepancy with Pitchbook data is at least in part due to Pitchbook limiting its figures to Ukrainian-registered companies. Many Ukrainian defense tech companies use corporate entities in the EU, U.K., or the U.S. for fundraising. Moreover, many Ukrainian defense start-ups are touchy about reporting numbers, leaving many deals in Pitchbook’s data registering as $0.
For those involved in Ukrainian investing, the trend is palpable.
“We are getting more and more interest all the time,” says Deborah Fairlamb, who runs a U.S.-registered but Ukraine-focused fund, Green Flag VC. “There's been tons of inquiries from governments all over the place.”
The uptick in foreign money is good news for a literally and metaphorically embattled Ukrainian economy. Foreign investment could fill in for dwindling foreign aid.
Even prior to U.S. President Donald Trump slashing USAID, the National Bank of Ukraine noted a serious jump in the outflow of money from Ukraine. The bank wrote that the shift was largely “fueled by significantly lower volumes of grants from international partners.”
Even Fedorov’s hoped-for $100 million isn’t enough to prop up a national economy. But, aside from helping defend Ukraine, these defense start-ups are hoping to become serious exporters to countries eyeing a truculent Russia with concern.
European pivot
While Silicon Valley remains the spiritual home of the world’s venture capital, and Washington commands the largest weapons budget in the world, the new money into Ukraine’s defense start-ups doesn’t seem to be coming from the U.S.
Fairlamb is herself an American national and longtime resident of Ukraine. Green Flag aims squarely at the budding Ukraine military tech world with investments of between $100,000 and $500,000. But newly interested investors reaching out to Green Flag have increasingly come from the European Union.
“We have seen in the last three months definite interest from European-based (limited partners),” Fairlamb explained.
Trump’s return to the White House has shaken the European Union’s confidence in U.S. protection.
“When Trump was nominated, Europe finally sort of sat up and said, ‘We might need to get our own house in order.’ Because that was when I saw a notable increase,” says Fairlamb.
In large part, the reticence of American money is also due to simple geography. “I cannot tell you how much VCs like to be able to visit their companies,” says Fairlamb. U.S. weapons investment is also focused heavily on companies that can sell to the U.S. Defense Department as soon as possible.
“Money doesn’t chase the products, products chase the money,” she said.
Many of Ukraine’s start-ups advertise their use in active battle as a key selling point. A ceasefire would not, Fairlamb says, smother the newborn market.
”Ukraine is going to continue to build up its defense ecosystem even after the war ends, because they are never, ever again going to be reliant on the rest of the world to deliver weapons,” says Fairlamb.
Liliane Bivings
