“There are Ukrainian companies we call hidden gems. They have a good product, a strong team, and a clear financial structure, but they are still inward-looking, focused on their internal processes. Only now are they seeking help with international cooperation. Investors are hunting for these companies. Whoever discovers them first wins by securing the initial investment at an attractive entry valuation,” explains Ihor Fedirko, Executive Director of the Ukrainian Council of Defence Industry and co-chair of its defense tech investor club.
Every week brings news of another foreign fund investing in a Ukrainian defense company. Over three years, private investment in the sector has risen from $1.1 million to $105 million — an almost hundredfold increase.
To gather and analyse this experience, the Council established the UCDI Investor Club in October 2025, a platform bringing together more than 20 investment funds. Sweden, Finland, Denmark, Norway, Germany, the United States, and Japan — the geographic reach of interest in Ukrainian defense tech continues to expand.
But what lies behind these figures? Who are these investors, what returns do they expect, and what do the investments offer the companies themselves? And what path lies ahead for businesses that have established joint ventures with foreign companies?
Investors joining the club typically have funds ranging from €50 million to €100–150 million.
We are also seeing interest from larger investment funds managing $500 million or more. Two have expressed interest so far. These are enormous sums for Ukraine.
How many of the club’s investors are Ukrainian?
That is a difficult issue. At present, there is only one. Dragon Capital is also considering entering this market.
Ukrainian legislation is not favourable to investment funds. There are many problems in this market. Intellectual property legislation is weak. Investment legislation is weak. It is difficult for a Ukrainian fund to raise substantial capital, simply because that money falls under Ukrainian jurisdiction. Unfortunately, from a European perspective, our judicial, patent protection, and law enforcement systems are weak.
Why does that pose a risk to an investor?
Because an investor looks at the product and, for the most part, invests in the team creating the intellectual property. That is where the value lies. It is a risk if you invest a substantial amount but cannot protect that value.
What, then, attracts private investors? They want to make a profit, yet the legislation is unfavourable, Ukraine’s defense market is relatively closed, and the country is in the active phase of a war.
First, they know that our defense industry is largely confined to the domestic market. Company valuations are currently low. It is a very high-risk opportunity, but one with high potential returns. That is why venture capital investors are entering.
The earliest investments were around $50,000. Then young, ambitious companies such as Buntar and Swarmer began to grow, and investors realised they needed to invest more. We started hearing about investments of $3.5–5 million.
Those who entered later now find it very difficult to identify investment opportunities. Company valuations have risen, and businesses have realised that investors are interested. There is also the question of how companies value themselves. Sometimes it is very abstract: they benchmark themselves against another company without knowing its structure, sales, or production capacity. That is not a sound approach. You need to know how to value your business and demonstrate why it is worth that amount.
So what returns are they expecting?
Take D3 Venture Capital, a venture capital fund investing in defense tech. It was an early investor in Swarmer, a Ukrainian developer of autonomous solutions for unmanned aerial vehicles. Just imagine the multiple it achieved when the company listed on the US Nasdaq exchange in March 2026.
Did they know that would happen?
That comes down to the professionalism of the people working at the fund and their ability to assess an opportunity. And believe me, Swarmer received extensive guidance. They were shown how to make the business understandable to investors. Every investor has an interest in advancing the companies in their portfolio.
Could other companies follow that path in the near future?
Yes. Many are interested — that is true.
What does this offer the companies themselves?
The more open they become, the more investment they attract and the faster they grow. Once a company receives its first investment, that is already a positive signal to other investors that they can join in.
Even a large Ukrainian defense company currently has a much lower valuation than US startups. A real product, an operating company, a team, user feedback, and battlefield-tested technology are valued below startups.
As long as Ukrainian companies remain confined to the domestic market, they will never grow into the equivalents of Rheinmetall or Saab.
Investors are prepared to take significantly greater risks with companies that are open to international markets.
How can companies use the money invested in them?
It depends on what they raised the investment for. But let us be honest: it is a lifeline that keeps a company going, even if it is already operating. Some raise money for R&D, working capital, components, development, or testing.
There are no rigid boundaries, although investors sometimes say: “Anything except working capital.”
Have you noticed greater interest from private investors following statements about opening up arms exports?
Yes. After President Volodymyr Zelenskyy said at the Third International Defence Industries Forum in October 2025 that it was time to launch exports, we saw an extraordinary surge over the following three months.
Many investors came to Ukraine, including from Brazil and Colombia. Everyone understood that the market was developing.
At the forum itself, the president met investors and answered their questions. There were a great many questions. Any investor needs to know that the company they have invested in can sell not only in Ukraine but around the world. That will give the market fresh momentum, both for investment and for partnerships.
More recently, however, I have increasingly received enquiries driven by emerging problems. When the war in Iran broke out and the world learned about Ukrainian interceptor drones, we were inundated with requests: “Who can I speak to? Who can I invest in? I only want interceptors.”
We are now changing investors’ perceptions. It came as a revelation to them that an interceptor drone is the final stage, preceded by extensive work involving other capabilities. A single device does not work on its own; an integrated system is needed.
That is how the Drone Deal concept emerged. It requires training, radars, specialised acoustic sensors, and an overarching system that brings everything together. It also requires the right people who know how to adapt and implement that system.
But everyone wants a magic wand.
Were these investors already experienced in defense?
They varied widely. Whether a company had only just become interested in defense or already had experience, it was still focused on finding one extraordinary drone.
A typical European investment fund is accustomed to companies such as Anduril, the US defense company — the Tesla of defense. High-quality, effective solutions, but at astronomical prices.
When these investors enter our market, they experience a disconnect. Now they also see the Taliban taking out Israeli Merkava tanks in large numbers and bombing their warehouses and vehicle depots. A single FPV drone can destroy a tank worth, if I am not mistaken, $3.5 million.
Are investors mainly interested in drones, or are there other areas? I have heard that AI systems are also among the favourites.
When it comes to hardware, only drones. They are not interested in conventional equipment, artillery, or new mortars. They do not invest in traditional defense manufacturing. An exception might be building a facility to refurbish military equipment, but that is more an infrastructure investment than an investment in the company itself.
If you are a venture capital fund looking to invest in the future, it is all about drones.
The latest figure for private investment in Ukrainian defense tech is $105 million. What does that tell us? Is it already having a meaningful impact?
We can talk about the growth trajectory. In 2022, someone invested $500,000 in Ukraine’s defense industry. I have deep respect for those people, but I find it difficult to imagine how they made that decision in 2022. The risk was enormous.
Yet we are growing rapidly year on year. Our forecast for this year is approximately $200 million. With exports opening up, we expect to reach around half a billion.
In global terms, that is negligible. The United Kingdom alone invests approximately £3 billion in its own defense industry, and that is only through government programmes. I can only imagine the scale of private investment.
So the current amount is very small. If we reach $2–3 billion a year, then we can start talking about a phenomenon.
The average investment has also increased substantially. Some companies are no longer interested in investors prepared to commit $2–3 million. They are now looking for at least $10 million. That is already Series A territory. It gives me confidence that we can genuinely accelerate these figures.
But what is €10 million within the global defense industry? Imagine that amount at Rheinmetall. It barely registers.
That is why I want us to celebrate not $1 billion, but at least $3–5 billion. I want to help build companies on that scale. As a country, it is important for us to play a role in the global defense system.
In your view, is that achievable only through cooperation with foreign companies?
Frankly, I have little confidence that a company confined entirely to Ukraine can grow to the scale of Czechoslovak Group, for example.
Without international exchange, contracts, and a presence abroad, it is impossible.
It can only happen through partners. So, Build with Ukraine — and let us get moving.
Is it possible to track private investment trends globally and in European countries? Are they also more interested in drones?
There is a drone frenzy at the moment.
There is another nuance with international funds: most are relatively non-militaristic, so to speak. They need a product to have dual-use applications. They do not see the market as exclusively military. That is the right approach to diversifying risk.
In our situation, however, it is difficult to think about dual use. Still, companies that want to survive after the war should already be building that consideration into their products: what will we do with them in civilian life?
Is the Build with Ukraine programme also considered investment in Ukraine’s defense industry?
It is not investment. It is more of a political arrangement: “If you want to manufacture our technologies jointly with us in your country, we ask you to provide additional assistance.” For example, covering a year’s production budget and supplying the output to the Ukrainian military. That is how a foreign company becomes involved with our technologies.
How many Ukrainian companies have already established joint ventures with foreign partners?
Under Build with Ukraine, we currently have 19 agreements, two of which are already operational. Two Ukrainian companies have joint production arrangements and the full set of approvals, licences, permits, and so on.
That is the first step. The companies need to understand how well they work together, whether everything is in order, and whether the partnership will still exist a year later. There is an initial contract, the product is made, and everything goes well — then they can think about the next one. For example, localising a certain share of component manufacturing. Those are steps for the future.
What does this offer Ukrainian companies?
From an investment perspective, the company’s value increases severalfold. You are already in Europe, manufacturing jointly and operating within the EU. That quite literally opens access to global finance, creating vast opportunities. Not to mention the number of business support programmes and grants available.
Our task as a market is to work as hard as possible to have ten operational joint ventures by the end of the year. That takes a company to an entirely different level. Incidentally, both the team and the company as a whole need to be ready for that. They need training to get there.
How have the two companies with joint ventures reconciled weak intellectual property protection in Ukraine with the legislation of their partner country?
Both companies work with German partners. Those partners understand that our legal frameworks differ in certain areas. They operate under European law, while we operate under Ukrainian law.
There are many protection-related issues, but the partners are willing to cooperate. They are financing these projects, which is also important.
Germany is currently showing companies and countries across Europe that such cooperation is possible. We are receiving the greatest interest from the German side. Everything has come together: financial capacity, political will, and interest from their companies.
Ihor Fedirko at a German-Ukrainian joint venture producing drones for the Ukrainian military.
Am I right in understanding that intellectual property protection currently depends on the goodwill of the German companies?
I think it is an advantage for them as well. They understand that access to Ukrainian technologies and battlefield-tested solutions will make it much easier to sell jointly developed products internationally. For them, it means profit and growth.
Could this cooperation provide a foundation for further work on intellectual property protection within Ukraine?
Absolutely. But we could have an outstanding law, and without a strong judiciary it could still be interpreted in any number of ways — differently from region to region and according to different interests. Defending your company in court could take decades.
Today, IP in Ukraine is about speed: how quickly you can incorporate changes into a product. Why is that difficult for European countries and manufacturers to accept? Because there, once you develop an artillery shell, it remains an artillery shell for a hundred years. It has sold and will continue to sell. The same applies to an aircraft. A drone is like milk: three months, and it is past its use-by date.
They are not ready for that. Hence the comments about the amount of manual work, and descriptions of us as garage operations or cottage industries.
That is precisely why the major industrial giants are so reluctant to enter this market. They are not ready. Their thinking, military doctrine, and production capacity — nothing in Europe is prepared for that kind of change. The Russians are.
When discussing the integration of Ukraine’s defense industry into global markets, one frequently raised issue is that Ukrainian companies do not meet NATO standards or certification requirements. In your view, how many Ukrainian companies are already capable of starting that process?
If we mean genuinely ready, there are around 30 companies in the market. At most. Out of more than a thousand.
What is holding the others back?
First, management quality. You can tell when a production business was built on a real understanding of how to run a company, with processes designed accordingly. Even if a company spent its first two years focusing exclusively on the product, at some point it realised it needed to move beyond this emergency market and establish a stable operating model.
Some companies currently think ISO certification means: “Great, $10,000, and it will all be done in two months.” I explain that the point is not to put certificates on a shelf. It is to enable the company to speak the same technical and business language as its partners.
That is why NATO partners tend to see us more as family businesses. Very often, for example, the owner, chief accountant, and chief engineer are all the same person, or people with the same surname. There is no indication that the business is moving towards becoming a professionally structured company rather than a family operation. That matters. But there is an enormous gap here, both in mindset and organisational structure.
And returning to intellectual property: if, for example, an American company infringes our rights, our judicial system…
