Ukrainian PE & VC Summit 2024: Military Tech Panel Highlights

We are wrapping up the weekend by publishing the notes of the Military Tech panel from the Ukrainian PE & VC Summit featuring Tetiana Honcharenko, Viktorija Trimbel, Jan-Erik Saarinen, Denys Gurak, Stanisław Kastory, and Patrick Schneider-Sikorsky. Definitely a topic to keep an eye on.

What changed in the last two years in the investment field? The war in Ukraine has revitalized the urgency of defense and dual-use systems in Europe, which has been losing its technological edge for quite some time. For VC now is the unique opportunity — maybe even in a lifetime — to actually innovate the world’s defense sector by funding it.

The military sector has its own set of risks. One of them is that the military doesn’t tolerate risks as human lives and state security are at stake. Moreover, there are struggles for startups with scaling their production because of volatile demand. The perception has changed, though. Now the military is more willing to work on par with startups, waiting as long as needed and providing a steady flow of contracts. Speakers, however, note the lack of a proper ecosystem here. Joint ventures and procurement are the future and are actively discussed.

Ukraine bears the legacy of the main R&D center of the Soviet Union. For decades, the country specialized in component production, but the assembly was done in Russia most of the time. The speakers have an opinion that we should preserve the skills and perform the same role for NATO. By doing so, Ukraine can become a reliable and powerful link to Europe’s supply chain and defense sector.

Investing in Ukrainian defense startups is beneficial because of three things: helping an ally to win the war; discovering know-how, and potential profits to be made. Meanwhile, many risks remain that are not related to Ukraine but rather to the whole vertical. Even with full-scale war out of the window, VC might still be in trouble here because of low returns. Venture investing in military or defense tech reminds of impact investing: bold, ambitious but often poor monetary performance. As per institutional investors, they seem not interested much in investing here also.