DefenseTech superpower Ukraine, the Silicon Valley of the military and defense industry

The transformation of a country into a global innovation hub

In less than three years, Ukraine has transformed itself from a war-torn country into one of the world's leading centers for defense technology. This remarkable transformation is more than just a response to the necessities of war—it represents a fundamental realignment of the technological landscape, attracting international attention and investment. Already recognized as a significant IT hub in Europe before the war, the country has successfully transferred its technological expertise to the defense sector, creating an ecosystem unparalleled in its speed of innovation and practical application.

The designation as the Silicon Valley of the defense industry is no exaggeration when one considers the numbers. Since the start of Russia's war of aggression, over 500 defense-oriented startups have emerged, and production capacity has grown from a modest starting point into an industry that reached over €10 billion in production value in 2024 – a tenfold increase compared to 2021. This development is driven by government support, international cooperation, and the urgency of the war situation, which enables a pace of innovation that far surpasses traditional procurement processes.

From IT nation to DefenseTech superpower

The historical foundations

Even before the war, Ukraine possessed one of the strongest IT industries in Europe. In 2021, the sector exported IT services worth over $6 billion and employed 300,000 people. Companies like EPAM, Luxoft, and GlobalLogic employed thousands of engineers in development centers from Kyiv to Kharkiv and Lviv. This technological base, combined with a pool of highly skilled engineers and programmers, formed the foundation for the subsequent transformation into the defense sector.

The strength of the Ukrainian IT industry is also reflected in its international recognition. As early as 2018, 18 Ukrainian technology companies were included in the Global Outsourcing 100 list, and the country developed into one of Europe's leading outsourcing locations. This expertise in software development, artificial intelligence, and complex systems integration proved to be a perfect foundation for the development of cutting-edge defense technologies.

The transformation to a war industry

With the start of the Russian invasion on February 24, 2022, an unprecedented mobilization of technological resources took place. Engineers, former soldiers, and software developers began working together to develop drones, ground robots, sensors, and AI platforms. This transformation was motivated not only by patriotism but also by the practical necessity of ensuring the country's survival.

The speed of this transformation is remarkable. Companies like FRDM, which produces kamikaze drones and land robots, emerged from volunteer movements. Tech Force chairman Vadym Yunyk describes how his initial involvement in aerial reconnaissance in 2014 evolved into a fully-fledged defense company that now manufactures state-of-the-art weapons systems.

The Brave1 platform as a catalyst for innovation

Structure and Function

At the heart of the Ukrainian DefenseTech revolution is the Brave1 platform, a state-coordinated initiative that unites all players in the defense technology sector. This platform serves as a central hub for cooperation between DefenseTech companies, security and defense forces, the government, investors, and international partners.

The numbers speak for themselves: Over 3,500 developments are registered, more than 260 have been codified according to NATO standards, and 470 grants totaling 1.3 billion hryvnia have been awarded. The platform focuses on critical technological solutions, including missiles, anti-shaded systems, lasers, sea drones, swarm drones, autonomous attack systems, and guided munitions.

International Test Platform

A particularly innovative aspect of Brave1 is the "Test in Ukraine" platform, which offers international companies the opportunity to test their technologies under real combat conditions. This platform provides foreign companies with expertise and feedback from the military, fully equipped test sites, and contacts with Ukrainian manufacturers for joint production.

This unique testing environment has already attracted international attention. German companies like Diehl Defence test their robotic systems, such as the Ziesel, via Brave1 at the 3rd Assault Brigade's training center. Such tests under realistic combat conditions provide insights that cannot be obtained in any laboratory or simulator.

Technological breakthroughs and innovations

Drone technology as a paradigm shift

The Ukrainian drone industry has established itself as a spearhead of military innovation. The country now produces a wide range of drones, from simple disposable models and reconnaissance drones to kamikaze drones with ranges of several hundred kilometers. Particularly noteworthy is the development of drones controlled via fiber optic cables – a technology that makes them largely immune to electronic jamming.

The drone production figures are impressive. The domestic defense industry's capacity is projected to reach approximately 4.5 million drones by 2025, and the Ministry of Defense plans to purchase them all. Over €2.4 billion has been allocated for this purpose. Companies like Skyassist produce around 1,000 SIRKO 2 drones per month, which, with their small size of just 1.3 kg and a range of 45 km, are virtually invisible to enemy radar systems.

Intelligent weapon systems and networking

The innovation isn't limited to drones. The startup ZMIYAR has transformed the traditional minefield into a controllable network of sensors and effectors with its Hydra system. These "smart mines" form a self-healing mesh network that can integrate up to 250 mines and features GPS mapping with real-time updates and secure encryption.

Another example of technological superiority is the development of interceptor drones. Over 200 confirmed cases demonstrate how Ukrainian drones have intercepted Iranian Shahed drones in mid-air. The company 3DTech is testing reusable interceptor drones called Predator Shooter, equipped with a six-barreled 12-caliber cannon.

Long-range weapons and strategic systems

Ukraine has also made significant progress in the development of long-range weapons. The company Fire Point unveiled Flamingo, a Ukrainian cruise missile costing less than one million dollars, which is described as the world's largest in terms of payload and range. Simultaneously, production of modified Neptun cruise missiles for land targets has been ramped up, now achieving ranges of up to 1,000 kilometers.

International cooperation and investments

The BraveTech EU initiative

One of the most significant developments is the BraveTech EU initiative, a €100 million partnership between Ukraine and the European Union. Announced in Rome in July 2025, this initiative is the first major technology alliance between Ukraine and Europe on an equal footing, with each side investing €50 million.

The program focuses on small and medium-sized enterprises (SMEs) and startups in both Ukraine and Europe. Within the framework of the alliance, both sides will exchange experiences with legislation, develop innovations, and procure new defense technologies. The first hackathons are scheduled to begin in autumn 2025, with grant funding for implementation starting in 2026.

Private investments and venture capital

Investments in Ukrainian defense technology have increased dramatically. At Defense Tech Valley 2025 in Lviv, four companies from Europe and the US pledged investments totaling over $100 million. NUNC Capital from the Netherlands committed $23.5 million for new equipment, while Verne Capital plans to invest up to €25 million in Ukrainian defense startups in the fields of cybersecurity and military communications.

These investments demonstrate the growing confidence of international investors in Ukrainian defense technology. The drone swarm software company Swarmer secured $15 million in a Series A funding round from US investors, while Teletactica received $1.5 million to develop EW-resistant communication systems.

European industrial partnerships

Germany plays a particularly important role in the cooperation with the Ukrainian defense industry. Defense Minister Boris Pistorius announced an additional €1.9 billion for long-range weapons systems to be produced in Ukraine. This cooperation combines German funding with Ukrainian technologies developed through combat experience.

Daimler Truck has ordered approximately 1,000 Mercedes-Benz Zetros vehicles for the Ukrainian armed forces. These robust vehicles have been specially adapted for modern drone warfare, with a focus on speed, maneuverability, and minimal detectability. Production is scheduled to take place between 2026 and 2029 at the Daimler plant in Wörth.

The Security and Defence Hub offers expert advice and up-to-date information to effectively support companies and organizations in strengthening their role in European security and defence policy. Working closely with the SME Connect Defence Working Group, it particularly promotes small and medium-sized enterprises (SMEs) that wish to further develop their innovative capacity and competitiveness in the defence sector. As a central point of contact, the Hub thus creates a crucial bridge between SMEs and European defence strategy.

Related to this:

• The SME Connect Defence Working Group – Strengthening SMEs in European Defence

Production capacities and economic impact

Massive increase in arms production

The Ukrainian government is planning record investments of €16 billion in arms production and procurement for 2025. This represents approximately 38 percent of the state budget and is 20 times the pre-war level. Production value increased tenfold in 2024 compared to the pre-war year of 2021, reaching over €10 billion, and forecasts predict a further tripling of this figure by 2025.

Nevertheless, production capacity is only utilized at around 40 percent. The reasons for this lie in inadequate protection of the production facilities and a lack of funding. This demonstrates both the enormous potential and the challenges facing the Ukrainian defense industry.

Employment growth and skilled workers

The arms industry now employs over 300,000 people, and this number is rising. More than 500 arms manufacturers are active, with approximately 100 being state-owned and 700 privately owned. Around 60 of the private manufacturers have joined forces to form the "Tech Force" union.

However, a fundamental problem is the conflict between the need for mobilization at the front and the increased demand for labor in production. According to the business newspaper Economichna Pravda, there is a particular shortage of engineers, which is delaying the development of weapons systems.

Export potential and international markets

Interestingly, the Ukrainian arms industry is pushing for the right to export some of its weapons. Industry leaders argue that selling weapons abroad would not only not harm the war effort, but would actually help it, as efficient mass production could mean lower costs. The Ukrainian government sees untapped capacity in its own arms industry amounting to a total of €30 billion annually.

Technology transfer and learning effects

Experiences under real combat conditions

A unique advantage of the Ukrainian defense industry is the ability to test and improve technologies under real combat conditions. This has led to a speed of development that would be unthinkable in peacetime. From the initial concrete planning of an idea to its deployment on the battlefield, it often takes only three months.

This direct link between frontline needs and innovation has enabled Ukraine to progress faster than larger, better-funded systems in NATO countries. NATO Innovation Fund representatives emphasize that their mission is not charity, but learning and scaling.

Lessons for Western armed forces

The technological backwardness of traditional Western armed forces becomes glaringly obvious when compared to the daily lives of Ukrainian soldiers. While lengthy procurement processes and outdated order lists hamper development in Germany, Ukrainian soldiers are provided with 3D printers to put their ideas into practice.

A system like the SIRKO 2 drone would likely not have received approval in Germany, but it has been successfully serving on the front lines for over three years. If 80 percent of the systems function as intended, that is sufficient – ​​an approach that enables mass production and uses simpler components.

Challenges and limitations

Infrastructure and protection of production sites

The infrastructure of the production facilities is a latent vulnerability due to Russian air raids. New construction is not feasible, which is why companies like Rheinmetall are utilizing existing plants. Since the beginning of the war, Ukrainian arms companies have partially relocated, divided, and duplicated their production abroad in order to keep it running. While this makes the arms industry more resilient, it hinders its expansion.

Dependence on imported components

A key weakness of the Ukrainian drone industry is its high dependence on imported components. Currently, only about 40 percent of the required parts are manufactured locally – motors, batteries, and flight controllers, in particular, come predominantly from China. Beijing's ambiguous stance on Russia's war of aggression and export restrictions are forcing Ukraine to significantly expand its domestic production of critical components.

Financing bottlenecks

Despite the impressive figures, capacity utilization is only around 40 percent. The biggest obstacle is limited government demand due to tight budgets. Orders only cover the next three months, which complicates long-term planning and investment.

International competitiveness and future prospects

Comparison with established arms nations

In just a few years, Ukraine has reached a level of military capability that impresses established arms nations. The recent Ukrainian operation "Spiderweb"—a precisely coordinated drone attack on Russian airbases—resulted in the destruction of 34 percent of Russian bombers and caused damage amounting to seven billion US dollars.

This efficiency is also reflected in the cost structure. Ukrainian developments can often achieve the same or better results at a fraction of the cost of traditional weapons systems. A Ukrainian cruise missile costs less than one million dollars, while comparable Western systems cost many times that amount.

Potential for the European defense industry

Cooperation between Ukraine and its European partners could change the way Europe organizes its defense. Jan Christiaan Dicke, the Dutch Commissioner for the Defense Industry, emphasizes that cooperation with Ukraine is critical for revitalizing the European defense industry.

The Ukrainian defense industry is demonstrating incredible resilience and innovative strength. A crucial step is combining Ukrainian solutions with production capacities in Europe. This could lead to increased competition and a faster adoption of new technologies in other countries.

Long-term development prospects

Ukraine is positioning itself not only as a defense partner, but also as a co-architect of Europe's preparation for future wars. The country possesses unique experience and is ready to share it. Its expertise in modern warfare, combined with its rapid pace of innovation, makes Ukraine an indispensable partner for the Western defense community.

The development extends beyond mere weapons production. Ukraine is evolving into a hub for the entire spectrum of modern defense technologies, from cybersecurity and artificial intelligence to autonomous systems. This diversification strengthens the country's position as a leading player in the global defense landscape.

Social and cultural transformation

From the volunteer movement to industry

The transformation of the Ukrainian defense industry is also a story of social mobilization. What began as a volunteer movement has evolved into a professional industry. This development demonstrates how social cohesion and technological expertise can combine to create a powerful force.

The integration of military personnel, engineers, and entrepreneurs in a shared ecosystem has led to a unique climate of innovation. Soldiers provide direct feedback on developments, engineers implement this feedback, and entrepreneurs scale the solutions – a cycle that would be unthinkable in traditional procurement systems.

Digital infrastructure as a foundation

Ukraine's already robust digital infrastructure, established before the war, plays a crucial role. The Diia app, used by more than 70 percent of the adult population, demonstrates the country's digital competence. This widespread digital penetration facilitates the rapid implementation of new technologies and coordination between various stakeholders.

An understanding of digital solutions and a willingness to adopt new technologies have significantly facilitated the transition from civilian IT to military technology. Ukraine had already demonstrated its ability to overcome complex technological challenges before the war.

Ukraine has transformed itself at an impressive pace from a war-torn country into one of the world's leading centers for defense technology. This transformation is based on a unique combination of technological expertise, wartime necessity, international support, and social cohesion. Being called the Silicon Valley of the defense industry is not just a metaphor, but reflects a real shift in the global innovation landscape.

Ukraine's successes in defense technology offer important lessons for other nations and the international defense community. The speed of innovation, the efficiency of development processes, and the cost-effectiveness of Ukrainian solutions challenge traditional procurement models. At the same time, international cooperation, particularly with European partners, demonstrates how the necessities of war can lead to lasting technological partnerships.

The challenges – from infrastructure problems and skills shortages to funding bottlenecks – are real and significant. Nevertheless, Ukraine has proven that, under the right circumstances, an unprecedented pace of innovation is possible. The question is not whether Ukraine can maintain its position as a leading center for defense technology, but rather how other nations can learn from these experiences and create similar dynamics of innovation.

For Europe, the partnership with Ukraine represents an opportunity to revitalize its own defense industry while simultaneously benefiting from battle-proven innovations. The BraveTech EU initiative and other cooperative projects point the way to a stronger, more innovative, and more efficient European defense community. Ukraine has proven itself not only as a defense partner but also as a catalyst for technological innovation, significantly shaping the future of modern warfare and defense technology.

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Chairman SME Connect Defense Working Group

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