The trillions that governments around the globe are spending to prepare for a new era of high-tech warfare in a more combustible world are transforming the way modern nations equip their fighting forces.
In Europe, where Russia is using drones to bombard Ukraine and even test NATO’s resolve, a new generation of start-ups is sidestepping how countries have traditionally built their arsenals. Instead of waiting for governments to propose and fund projects, private investors are using their own money to speed up financing, research and prototypes, hoping that buyers will follow.
“It’s a pretty big revolution in the defense industry,” said Gundbert Scherf, a former adviser in the German defense ministry and partner at McKinsey and Company who helped found a defense tech company called Helsing in 2021 with seed money from Spotify’s chief, Daniel Ek, and others. “It’s a totally different business model.”
Helsing, which has headquarters in Munich, began arming Ukraine with drones and then updating them every few weeks to counter shifts in technology and strategy. Helsing is now valued at 12 billion euros ($14 billion) — making it one of the most valuable start-ups in Europe.
The idea is that a competitive ground-up approach can deliver innovations faster and more efficiently than a top-down system. Yet there are risks. Private investors’ first priority is profit, which could be at odds with strategic and security goals. There is the danger of bloating a military industrial complex, and worries about how advances in military technology could be used.
Entrepreneurs and their investors are driven, to varying degrees, by money and a sense of mission. Globally, venture capital investment in defense-related companies leaped to $31 billion last year, a 33 percent increase from the year prior, according to McKinsey.
And investments in European defense start-ups were five times larger from 2021 to 2024 than in the previous three years.
The money is pushing the outermost boundaries of what’s possible: low-cost missile and drone interceptors, fighter jets and naval ships piloted by artificial intelligence, cockroaches with remote-controlled backpacks and surveillance cameras to collect data in inaccessible locations.
Ukraine was the turning point.
American start-ups like SpaceX and Palantir in the early 2000s were some of the first companies to take the Silicon Valley mind-set and technology to military procurement.
Today, start-ups receive a tiny fraction of the monumental sums countries are devoting to defense. But Russia’s invasion of Ukraine in February 2022 turbocharged the trend, especially in Europe.
“Before, no European V.C. was interested in defense,” said Torsten Reil, a video gaming entrepreneur and co-founder of Helsing with Mr. Scherf and Niklas Köhler, an artificial intelligence engineer. Now a gold rush mentality has set in. “Everyone wants to invest in defense,” Mr. Reil said.
EuroAtlas was a decades-old German defense company when it was bought in 2021 by Mimir Group, a Swedish private equity firm. The new owners were expecting a safe and steady business that sold power supply systems for submarines. Then the war in Ukraine “changed entirely the course of the company,” said Verineia Codrean, head of strategy and special projects at EuroAtlas.
Now the company is on a “new mission,” Ms. Codrean said. EuroAtlas created a division to develop autonomous underwater vehicles that can monitor vital cables on the ocean floor.
Anti-militaristic sentiment, strong in Europe, also began to shift after Russia’s invasion. This year, President Trump’s retreat from Europe prompted another surge of investment as governments in the region vowed a huge buildup.
Germany Is leading the way with defense start-ups that include Helsing, ARX Robotics and Bioswarm, the developers of the experimental spy cockroaches.
War creates a battlefield laboratory.
The new business model reflects a sea change in warfighting that may be as profound as the shift from horse cavalries to armored tanks and airplanes in World War I. Technologies like robotics, artificial intelligence and computer vision are widely accessible, mass producible and increasingly affordable. Now they are being militarized.
Software is constantly updated, and can be compatible with a range of existing weaponry. In May, for example, Helsing conducted a test flight that allowed its A.I. system, Centaur, to temporarily take control of a Saab Gripen E fighter jet above the Baltic Sea.
Autonomous weapons that do not need complex and costly safety features to protect human life are also cheaper and simpler. A drone made of plywood and foam costs a few hundred dollars, but it can destroy a multimillion-dollar tank.
Ukraine, which has established a huge and cutting-edge drone industry, is functioning as a battlefield laboratory. Roughly 80 percent of targets there are destroyed by drones.
“You can have a couple million bucks of venture capital money that can fund the development of these smaller technologies,” said Eric Slesinger, a former C.I.A. officer who established a defense venture capital firm that invested in Helsing and other start-ups.
Many military analysts agree that start-ups are more innovative. The big legacy defense contractors “may still be appropriate for large systems,” said Cynthia Cook, a senior fellow at the Center for Strategic and International Studies, “but their approach doesn’t allow for the rapid adoption of emerging tech.”
The military often spends years or decades developing the next generation of equipment like fighter jets and tanks. Development on the F-35 jet began in 1995. Lockheed Martin won the contract in 2001. Production started in 2006. One plane costs roughly $80 million.
Defense start-ups are working from a different playbook. “We’re building a ship with our own dollars,” said Dino Mavrookas, a former Navy SEAL and co-founder of the maritime defense firm Saronic Technologies in September 2022.
In April, Saronic bought a shipbuilding yard slated for closure in Franklin, La. Its 150-foot unmanned ship, Marauder, will hit the water in December, Mr. Mavrookas said.
During Mr. Trump’s state visit to London, the British government announced that Saronic would spend up to $50 million to build a production facility in Portsmouth, England.
Cambridge Aerospace, a British start-up that makes missile and drone interceptors, was co-founded a year ago by Chris Sylvan, a former Marine. The company tested its first prototype in February, and is ready to start production, he said.
At a military trade show in London this month, crowds gathered in the rain to watch small autonomous boats like Kraken Technology’s K3 Scout navigate twists and turns on the Thames River.
Mal Crease founded Kraken in 2020 when the Covid-19 pandemic shut down his powerboat racing business. His team later got an innovation grant from the Atlantic alliance. In August, Kraken started a joint venture with the German shipbuilder NVL Group.
“We built a prototype in 10 weeks,” Mr. Crease said. Kraken already has two plants in Britain and is building a third in Hamburg, Germany. The company can produce a boat in two days, he said, and has contracts with Britain and the United States.
K3 Scouts, which are 27 to 60 feet long, are all “plug-and-play,” equipment that can be used right out of the box, said Mr. Crease. The boat’s design is modular so parts and payloads can be easily swapped — like popping a cassette in and out of a tape recorder — for a variety of missions from surveillance to search and rescue. Each ship costs $250,000, he said, bargain basement prices in the world of military procurement.
A.I. will be in control.
Helsing, with its enormous pot of cash, has expanded rapidly. In June it bought the German aircraft manufacturer Grob. Helsing works with a range of new and established companies to develop advanced software like artificial intelligence systems that can coordinate reconnaissance missions and conduct electronic warfare. It is also building equipment, mini-submarines and strike drones.
“You have to start developing these systems before the government starts paying for them,” said Mr. Reil, a co-founder.
Last week, Helsing announced it would manufacture its latest project, a 36-foot-long unmanned fighter jet, the CA-1 Europa, at a Grob facility in Tussenhausen, 55 miles east of Munich. It expects the plane to be conducting missions within four years.
In Munich, a program director explained how Centaur, the A.I. system, was trained to control a jet fighter through repeated re-enactments in dogfights with human pilots.
In the darkened training center, two experienced veterans sat at cockpit simulators and faced off against two aircraft controlled by Centaur.
Viewers followed the skirmish on a simple digital screen that depicted the jets. Human pilots were shown in green and Centaur’s in red. The planes swiveled and ducked, charging ahead and retreating in a complicated tango as they fired missiles.
Centaur, which can process 10 decisions a second and figure out the most fuel-efficient course of action, managed to down one green fighter jet. A couple of minutes later, it destroyed the second.
Founders at Helsing and several other defense start-ups said that many investors joining the frenzy don’t really understand what it takes to succeed.
Just having the right tech is not enough. The number of firms with the know-how to navigate government procurement processes is limited, they agreed.
And the timeline for returns is also much longer than many venture capital firms are accustomed to.
“Selling to the government is hard,” said Mr. Sylvan of Cambridge Aerospace. “But it should be hard. That’s our taxpayer dollars, pounds and euros.”
Patricia Cohen writes about global economics for The Times and is based in London.
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