Investing in defense tech and military tech has transformed over recent years from a niche direction into a distinct segment of the technology market. The full-scale war has accelerated the development of defense solutions while simultaneously making investments in military technologies more complex from the standpoint of risks, regulation, and accountability.
Defense tech in 2026: the market in numbers
2026 has been a record year for the industry. According to PitchBook, venture financing for defense tech reached an all-time high of $24.4 billion in the first quarter; the second quarter added another $16.4 billion across 249 deals, and total investment over the past 12 months reached $69.5 billion. At the same time, capital is concentrating in the largest rounds — such as $5 billion for Anduril at a $61 billion valuation — while 11 public listings in the second quarter indicate that the exit market is opening up again.
Europe is catching up with the United States. According to Dealroom’s estimates, European defense startups had raised $7.4 billion as of September 20, and could raise a record $10.5 billion by year-end — roughly four times more than in all of 2025. More than 85% of these funds came from mega-rounds, including $1.8 billion for Helsing (valued at $18 billion) and $1.2 billion for Quantum Systems (valued at $8 billion). The largest share of capital is flowing into drones and autonomous systems — they account for 74% of funding in the EU.
Demand is supported by government budgets. NATO countries have committed to reaching 5% of GDP in defense and security-related infrastructure spending by 2035, and according to the Alliance’s estimates, baseline defense spending by European allies and Canada grew by 11% in 2026 — to $634 billion. The European Union is adding its own instruments: the SAFE concessional loan program worth €150 billion for joint procurement, and a loan for Ukraine amounting to €90 billion, a significant portion of which is directed toward defense needs.
In Ukraine, defense companies are increasingly dominating the venture market: according to SMOK Ventures’ calculations, they accounted for 45–50% of all investments in the first half of 2026. In March, Ukraine’s first defense unicorn appeared — UFORCE, which raised $50 million at a valuation exceeding $1 billion. Ukraine’s defense production volume is projected to reach $55 billion in 2026 — compared to approximately $1 billion at the start of the invasion. The country produces significantly more weapons than it can pay for on its own, which is why exports and external financing are so important.
How the war has changed investment logic
During wartime, the very system for evaluating miltech projects changes. In addition to technological novelty and economic viability, investors analyze combat-proven performance, resistance to jamming, the ability to operate in difficult climatic conditions, and compatibility with existing systems.
Key factors include time from concept to deployment, availability of a manufacturing base, access to components, stability of the development team, and the ability to rapidly incorporate changes based on frontline feedback. War reduces the value of overly complex or long-term projects and increases the significance of adaptive, modular, and scalable solutions.
Investor priorities in miltech projects
Investors in military technologies focus on solutions that provide asymmetric advantage, reduce casualties, increase strike precision, or improve personnel protection.
Preference is given to projects that already have test results or experience of use in units. The manufacturer’s ability to quickly scale production volumes without compromising quality is also important.
In 2026, the greatest demand is for solutions that address specific problems of the current war. Low-cost interceptor drones worth a few thousand dollars have become the primary means against Shaheds: according to Ukrainian army data, in February they accounted for 70% of drones shot down over and around Kyiv, and the United States and Gulf countries have expressed interest in them. Procurement of ground-based robotic systems is growing rapidly: the Ministry of Defense planned to contract 25,000 such vehicles in the first half alone — twice as many as in all of 2025. Among Brave1’s priorities for 2026 are UAV-launched missiles, means of countering guided aerial bombs, Ukrainian radars, and laser air defense.
Defense tech as an investment direction: definition and prospects
Defense tech is a collection of technologies, products, and systems created for defense and security needs. This direction includes solutions in the field of unmanned systems, electronic warfare, intelligence, communications, command automation, and personnel protection.
It is important for investors to understand that defense tech is not a short-term trend. The war has merely accelerated processes that had long been forming worldwide: the growing role of technology in combat operations, shorter development cycles, and increased demand for applied solutions. This is why investing in this direction is increasingly viewed as a long-term strategy rather than a quick speculative opportunity.
How investments in military technologies differ from other industries
The key distinction of investing in military technologies is that financial performance here cannot be assessed in isolation from security, regulatory constraints, and the real-world application of the product.
Military projects operate in an environment of special licensing regimes, export controls, and limited market access. An investor evaluates not only the product and team, but also the project’s ability to comply with defense legislation, operate under wartime conditions, and integrate into military infrastructure. This creates a different planning horizon and a different approach to risks compared to civilian startups.
Key opportunities for investing in military technologies
Investing in military technologies opens up opportunities in segments where demand is formed by the real operational needs of war. These are solutions that provide the basic functionality of modern units and remain relevant regardless of changes in tactics or weapon types.
One such direction is communications and command technologies. Stable video and telemetry communication, data transmission over distances, and real-time coordination of unmanned systems and units form the foundation for the effective operation of drones, reconnaissance, and fire assets. For investors, these solutions are attractive due to repeatable use cases, scaling potential, and long-term relevance.
New entry points: what changed in 2026
Exports and joint production have opened up
As of July 1, Resolution No. 875 is in effect. It simplifies the export of military products to countries that have defense cooperation agreements with Ukraine. In many cases, guarantees from the importing country’s government are required, and the state retains the right to postpone or cancel the export in favor of its own needs. According to the National Security and Defense Council, as of October 18 companies hold export permits for finished products, and more than 90% of over 400 applications have been approved. Joint production is developing in parallel: in July, Ukraine and the EU signed the Drone Deal — a framework agreement for joint ventures producing drones and counter-drone systems by the end of 2026 (anti-ballistic missile production is planned by 2028). Ukraine and the United States agreed on testing Ukrainian drones in the United States, while companies ReconCraft and UFORCE are to manufacture MAGURA maritime drones there.
The Defence City regime is operational
Its residents do not pay corporate income tax provided they reinvest profits, are exempt from land and environmental taxes, and enjoy simplified exports. As of the end of July, the registry had 45 residents with combined revenue from arms sales exceeding $2.1 billion.
Sources of capital have expanded
In June, the government launched Brave International — a framework for cooperation with foreign partners whose initial program budgets exceed €100 million. Funds are provided on a 50/50 co-financing basis, and solutions must undergo testing in Ukraine. Dedicated funds are emerging: Norway’s Gardar (€80 million, from seed to Series B) and WildField Ventures ($10–15 million, whose launch was announced in October). Among the year’s notable deals are rounds for Buntar Aerospace ($10.4 million with Axon Enterprise participating) and Farsight Vision ($7.9 million).
Public markets have opened up
In January, Czechoslovak Group conducted the largest defense IPO in history on Euronext Amsterdam: €3.8 billion was raised, and shares rose by more than 30% on the first day of trading. According to Bloomberg reports, Quantum Systems and Destinus are preparing for possible IPOs in early 2027. Anduril is in no hurry to list: its CEO Brian Schimpf warned that going public in the middle of a hype cycle is a bad idea. For private investors, exchange-traded funds remain a more accessible path: for example, the WisdomTree Europe Defence UCITS ETF raised $1.4 billion year-to-date as of the end of spring.
Differences between investments in military technologies and other industries
Investments in military tech differ substantially from classical technology directions. Here, the key role is played not only by financial indicators, but also by compliance with defense requirements, security restrictions, and control over the use of technologies.
Unlike civilian startups, defense tech projects often work with closed or semi-closed customers, have limited sales channels, and cannot scale without accounting for government regulation. This means that an investor needs to evaluate not only the potential profit, but also how well integrated the project is into the military and legal ecosystem.
Key risks and challenges for investors
Investing in defense tech is associated with elevated risk levels. Key risks include regulatory constraints, dependence on government decisions, complex logistics, and long decision-making cycles.
Security and ethical accountability play a separate role. Military technologies can have critical consequences if used incorrectly or without adequate control. This is why investors pay attention to team maturity, internal control procedures, and understanding of the defense context. The presence of these factors often determines whether a project is ready to attract investment.
New risks of 2026
Overheated valuations
Anduril CEO Brian Schimpf acknowledged in June that there are signs of a bubble in the industry, and according to Fortune, early-stage defense tech startups are raising funds at valuations 17–50 times or more above their revenue. PitchBook analysts describe the market as a “barbell”: money flows either into the largest rounds or to early stages. Even large public players are not insulated from disappointments: Rheinmetall posted revenue of €1.94 billion in Q1 2026, against expectations of €2.27 billion.
Payment and contractual risks
Government procurement is growing manifold — the Defense Procurement Agency contracted 300% more UAVs than in 2025 — but manufacturers are facing payment delays. The Ministry of Defense confirmed payment delays under the e-Baly program and attributed them to technical procedures for refinancing with EU funds. On October 6, the ministry announced the termination of contracts and cancellation of some planned procurement worth approximately UAH 15.6 billion. Among the reasons cited were insufficient manufacturer capacity, absence of product codification, and changes in tactical requirements.
Exports are not fully open
The industry complains about an export licensing fee of 20–30%, which makes Ukrainian products uncompetitive. In September, more than 200 foreign applications for joint production under the Build with Ukraine framework were awaiting decisions. Countries producing for third markets using Ukrainian technologies must transfer 20% of the product value to the state budget.
What to pay attention to when starting to invest
For those just beginning to invest in defense tech, it is important to focus on fundamental questions. First and foremost, these are the applied value of the product, the existence of a clear use case, and an understanding of exactly which problem in the defense sector the technology solves.
Investors prefer solutions that are not limited to an idea or prototype but already have a clear architecture and practical application. In the electronic warfare segment, this is especially critical, since the effectiveness of such systems directly affects the safety of units.
How to invest
For a beginner, there are three main paths.
The first is public markets: shares in defense companies and thematic exchange-traded funds provide liquidity and transparent reporting, but valuations of major players are already high, and this path does not provide direct access to Ukrainian manufacturers.
The second is venture funds and syndicates: they open up early stages and expertise in evaluating teams, but require a long time horizon, and entry for private investors is often limited by minimum check sizes.
The third is direct investments and participation in joint ventures: these carry the highest risks and the highest demands on expertise.
6 investor mistakes
Mistake #1 — Failing to understand real frontline needs
Military technologies must correspond to real conditions: limited logistics, complex terrain, electronic countermeasures, limited power resources, and rapid changes in the tactical situation. If a solution does not account for these factors, it will not scale.
Mistake #2 — Inflated expectations from rapid scaling
The production cycle for complex systems can last months. Components may require localization. Integration into existing military infrastructure requires coordination and testing.
Mistake #3 — Ignoring manufacturing and logistics constraints
In wartime business, logistics becomes a critical factor. Components may be scarce, imports may be restricted, and delivery timelines may be unstable. This is precisely why production localization and import substitution become a strategic advantage.
In 2026, this is clearly visible in the example of explosives: Brave1 supported scaling their production — six competition winners are implementing projects with a total value of UAH 944 million, of which UAH 620 million represents state co-financing.
Mistake #4 — Lack of expertise in the defense field
A team without military or deep technical expertise often underestimates the specifics of product application. For example, a mobile EW complex must account for mobility, protection from detection, power consumption, vehicle compatibility, and real use scenarios.
Mistake #5 — Incorrect assessment of risks and regulatory factors
Exports of Ukrainian products in 2026 are open, but remain controlled: Resolution No. 875 is in effect, and as of October only 18 companies have received export control commission approval to export finished products. Licensing requirements, state procurement admission procedures, technology use controls remain in place, and an export license can be delayed or cancelled in favor of the Ukrainian army’s needs. Furthermore, a change in the military situation can rapidly shift the customer’s priorities.
Mistake #6 — Chasing valuations without verifying revenue and deal terms
In an overheated market, it is easy to pay for a narrative rather than a business. It is worth checking whether the company has revenue and signed contracts, on what terms the state and partners pay, what share of revenue depends on a single customer, and whether the product has codification and, if necessary, an export permit.
Team competence, experience working with defense structures, and the ability to operate under conditions of limited resources and heightened security requirements are also factored in separately. It is precisely the combination of technological product maturity and understanding of the military context that forms the basic trust in a project.
How war changes the investment climate in defense tech
War radically changes the investment climate in defense tech. Instead of classical business models with long planning cycles, speed of decision-making, applied utility, and the ability of a technology to function in real combat conditions come to the fore. Investing during wartime occurs in an environment of constant change — from logistics to regulatory requirements.
Projects are evaluated on how quickly they can be deployed, whether there is feedback from frontline users, and how the technology adapts to changes in tactics and threats.
The political scenario should also be considered separately. As of October 2026, trilateral negotiations involving the United States, Ukraine, and Russia are only just being prepared, previous rounds have yielded no results, and territorial issues remain the main sticking point. Projects should therefore be prudently evaluated in at least two scenarios — protracted war and ceasefire. Demand for defense technologies outside Ukraine is underpinned by NATO and EU budgets and is less dependent on negotiations, whereas companies whose revenue is entirely dependent on Ministry of Defense orders are more sensitive to changes. An additional factor is the US and Israel war with Iran: it demonstrated the cost difference between cheap drones and expensive interceptor missiles and generated demand for Ukrainian solutions against Shaheds.
Risks and constraints for investors
Investments in military tech during wartime are accompanied by elevated risks. Key risks include regulatory constraints, dependence on government decisions, the complexity of export controls, and still-limited — despite the partial opening of exports — access to international markets. Defense products in most countries are subject to special licensing regimes, which directly affects investment strategy.
Operational risks play a separate role. Manufacturing, component supply, and technology testing often take place amid unstable logistics and limited resources. Investors also take into account reputational and ethical aspects, since military technologies require control over their use and compliance with international law. This makes wartime investing more complex, while simultaneously raising the requirements for the quality and maturity of projects.
Investing in defense tech under wartime conditions
Investing in defense tech during wartime takes place under fundamentally different conditions than in peacetime. Decisions are made faster, but requirements for the practical utility, stability, and reliability of technologies grow substantially. For investors, what becomes important is not only growth potential, but also the project’s ability to operate under conditions of unstable logistics and constant changes in the security environment.
During wartime, a significant portion of investments is directed through specialized funds, government support programs, or direct partnerships with the defense sector. This imposes additional requirements regarding transparency, component origin, control over technology use, and compliance with current legislation. Even promising solutions may have scaling or export constraints that must be accounted for at the investment decision-making stage.
The Brave1 cluster has channeled UAH 6.2 billion into defense technology development since 2023 and has issued more than a thousand grants. European procurement financing is increasingly defining the market: on October 7, the European Commission transferred €1.24 billion under the defense component of the loan for Ukraine — for drones, interceptors, drone munitions, and Ukrainian-made missiles.
Conclusions
Investing in defense tech requires a balanced and responsible approach, especially for those just beginning to work in this direction. It is important to understand the specifics of military technologies, to evaluate not only the financial potential of projects but also their practical utility, security risks, and the real context of application.
As of October 2026, defense tech combines sustained structural demand supported by NATO and EU budgets with segments where valuations and execution risks have grown faster than revenue. Therefore, for a beginner the primary benchmarks remain combat-proven product performance, confirmed revenue and contracts, transparent ownership structure, codification, and a clear strategy regarding exports and joint production.
