Defending with Innovation: How Ukraine’s Military Technologies are Conquering Global Markets

​​“In 2022, we had 7 companies working with UAVs; today, there are over 200,” says Mykhailo Fedorov, Ukraine’s Minister of Digital Transformation, a statement he often repeats. Since the first time these words were spoken, the situation has changed: today, the number of companies has grown even further.

Ukraine’s defense tech market is growing at an extraordinary pace: in 2022, it barely existed, yet today it is supported by a thriving ecosystem of startups, businesses, investments, funds, and the dedicated defense cluster, Brave1. What makes this market unique is that it is not just growing, but maturing. It’s a classic story of a business that started in a garage, with the first UAVs and FPV drones being assembled by friends in a basement. So, what has been achieved? Ukrainian UAVs can now strike targets at distances of over 1,800 km.

The potential and prospects of defense tech in Ukraine

The need to counter Russia’s full-scale invasion has triggered a technological boom in the defense tech sector. Hundreds of young startups have emerged on the market, attracting the interest of both Ukrainian and international investors. Ukrainian tech specialists are rapidly testing their developments in combat zones, proving their effectiveness and results.

According to a report from DataDriven, the defense tech market in Ukraine had over 300 companies in 2023. The most dynamically growing sector is the production of unmanned aerial vehicles (UAVs), which accounts for 19% of all projects. Other major market segments include the development of innovative solutions in robotics (13%) and artificial intelligence (13%). Additionally, Ukrainian specialists are improving solutions for defending against Russian cyberattacks, strengthening critical infrastructure security, optimizing logistics, and implementing medical innovations.

In just a year and a half, the Ukrainian defense tech platform Brave1 has registered nearly 3,000 various developments from over 1,300 innovators.

Brave1’s members are involved in developing strike systems, manufacturing unmanned aerial vehicles, and producing ammunition. Additionally, they are implementing cutting-edge solutions for intelligence, cybersecurity, and demining. This year alone, Brave1 has provided 363 grants totaling 362.3 million UAH, which has improved more than half of the developments and increased the technological readiness level of over 80% of them.

Thanks to the efforts of the defense cluster, investments in the Ukrainian defense tech sector have increased fourfold compared to the previous year.

How Ukraine’s state and private sector support developers

Since the full-scale invasion began, the drone industry in Ukraine has evolved from small volunteer initiatives into a structured and competitive sector.

By 2024, more than 500 Ukrainian companies were engaged in the production of combat drones, whereas prior to the invasion, drones were almost never produced in Ukraine. Today, production capacity for unmanned aerial vehicles has increased more than tenfold: from about 300,000 units in 2023 to 4 million this year, according to research by the Kyiv School of Economics and the Brave1 cluster.

According to Ukraine’s Minister of Digital Transformation, Mykhailo Fedorov, the country has immense potential to become a global leader in defense-tech. The profitability for businesses in the Ukrainian market stands at 25%, the highest in the world. In NATO countries, the figure is about 17%, and in the European Union — 15%. This statement was made by Fedorov at the international investment summit, Defense Tech Valley.

“We are building a Silicon Valley for defense technologies in Ukraine. The state has already allocated $8 million for defense-related developments. Now we are starting to provide grants for missile projects. Next year, we plan to support the production of powder factories. Foreign investors are eager to invest in this sector. The number of producers is growing: drones are now being made even in vocational schools. Hundreds of private schools are opening across Ukraine to train drone operators. After the war, the export of military technologies could bring billions into the Ukrainian budget,” said Mykhailo Fedorov, Vice Prime Minister and Minister of Digital Transformation of Ukraine, on Facebook.

According to the research results, investments in the Ukrainian defense tech sector have increased from $5 million in 2023 to $50 million in 2024. At the same time, the average investment size has grown from $500,000 to $1-3 million.

IT Arena Startup Competition: powerful startups in defense tech

Defense technologies were a central theme at this year’s IT Arena, the largest tech event in Ukraine and Eastern Europe, which annually brings together innovators, entrepreneurs, and investors in Lviv. For the 11th consecutive year, the event was organized by Lviv IT Cluster, Ukraine’s largest business association of technology companies. This year, IT Arena gathered over 100 speakers and more than 5,500 participants from 30 countries worldwide.

Traditionally, IT Arena 2024 featured Ukraine’s largest and most prestigious startup battle — the Startup Competition. For the second year in a row, teams competed in two categories: general and special one for defense tech startups and cybersecurity projects. The winners received cash prizes and attracted the largest investments in the competition’s history.

The top defense-tech startup was Oko Camera, which specializes in manufacturing thermal imaging cameras for drones.

“Our clients include manufacturers of aerial, ground, and water drones, as well as navigation and mine clearance systems. Since we’ve localized production in Ukraine, manufacturers can now obtain key components without relying on imports from China. It’s both reliable and secure,” says Oko Camera’s CEO, Denys Nikolenko.

The company tailors its solutions to the specific needs of each manufacturer, allowing it to respond quickly to market and military demands. The Oko Camera team includes veterans with combat experience, which plays a key role in continuously improving the product.

“Chinese and Western analogs of thermal imaging cameras face numerous challenges, from pricing to difficulties in obtaining licenses for smaller market players. That’s why our product has more advantages. Every day, we deepen our expertise and adapt our production to meet the needs of military personnel,” adds Nazariy Nykolaychuk, Sales and Support Manager at Oko Camera.

The Oko Camera team received $15,000 to develop their startup. In total, this year’s Startup Competition prize fund amounted to $85,000, and participants managed to attract a record $1.5 million in investments, with the amount continuing to grow.

The future of defense tech in Ukraine

The demand for innovative technological solutions in the defense tech sector will not disappear even after active combat operations in Ukraine come to an end. More than 30 countries worldwide are already interested in leveraging the experience and developments of Ukrainian creators to enhance their own products. The Ministry of Digital Transformation of Ukraine expects that the high competition among manufacturers will drive the tech community to make even greater strides in development.