Veterans lead Europe's defence tech revolution as Ukraine war fuels investment boom

By Michael Kahn and Supantha Mukherjee

PRAGUE/STOCKHOLM (Reuters) -When former German army officer Matt Kuppers evaluated an Austrian startup's anti-drone weapons system, his military eye spotted what the young civilian founders had missed: the heated gun barrel lost accuracy after repeated firings.

That insight exemplifies how military veterans are reshaping Europe's defence technology landscape, bringing their experience to boardrooms and development labs, as the Ukraine war drives unprecedented investment in the sector.

"They did not realise a weapon barrel heats up during prolonged firing and can subtly skew [its targeting accuracy] due to the heat," said Kuppers, a co-founder of venture capital firm Defence Invest, comprising former German and British soldiers, which is testing the technology with the Austrian military.

"This is something an experienced infantry soldier would instinctively account for by adjusting their aim."

Veterans lead a quarter of Europe's 80-plus defence startups, a Reuters analysis shows, while the CEOs of the region's top 10 defence contractors tend to have no military background.

The war in Ukraine and NATO's spending push have driven defence investment to record levels for both established firms like Germany's Rheinmetall and a startup ecosystem that has long lagged the United States.

These emerging companies are attracting record funding, with VC investment hitting $5.2 billion in 2024, up over 500% from pre-war levels, according to NATO Innovation Fund and Dealroom data.

Reuters spoke to more than two dozen veterans, start-up founders, VC firms and soldiers on the ground in Ukraine to shed light on the critical advice, know-how and investment that former military personnel bring to the defence technology sector. 

On the battleground, their role has helped satisfy demand for tested technology, ranging from kamikaze drones to AI-powered battle-planning software.

'CAN'T SOLVE A PROBLEM YOU DON'T KNOW' 

Efforts to support Ukraine have compressed development timelines to weeks or months, from years, with veteran-led startups able to make rapid refinements based on frontline experience in Ukraine since Russia's 2022 full-scale invasion.

"You can't solve a problem you don't know - one you've never felt yourself," said Marc Wietfeld, a former German officer who founded unmanned ground vehicle maker ARX Robotics.

At the same time, rising NATO defence budgets are creating further opportunities for soldier-entrepreneurs across Europe.

Emmanuel Jacob, president of the European Organisation of Military Associations and Trade Unions, said he was witnessing long-serving soldiers joining defence startups at the fastest pace he has seen in his 40 years in the industry.

Some veterans also bring along knowledge of military procurement vital to a new product's success and underlining their value to startups new to navigating these processes, former soldiers and investors say.

"I see people who spent their life in the military in Europe really seeing opportunities now for the first time," said Ragnar Sass, founder of Estonian unicorn Pipedrive who now backs defence startups through the Darkstar consortium.

BATTLE-TESTED SOLUTIONS

Three factors have helped drive the soldier-entrepreneur boom: Ukraine creating billions in new defence markets, record venture capital investment, and AI tools that accelerate product development.

Florian Seibel, a former German helicopter pilot, co-founded drone maker Quantum Systems, now valued at $1 billion, and launched another drone company, Stark, last year. 

Other veteran-led companies include Arondite, founded by a British Army officer making battle-planning software, and BlinkTroll, run by former Norwegian soldiers producing military training equipment. 

The low barrier to entry for drone technology, unlike fighter jets or submarines, has enabled rapid startup formation.

Francisco Serra-Martins, an ex-Australian Army combat engineer who co-founded Ukraine-based Terminal Autonomy in 2022, said veterans brought an edge beyond development. 

"Veterans see firsthand what solutions are missing on the battlefield, and ... have a deep understanding of what works, and what is hype and marketing," Serra-Martins told Reuters.

"You understand the user, the constraints, and what will or will not be adopted. It is also a credibility builder with customers."

His firm has expanded from kamikaze drones into cruise missile development and now supplies drones to German defence AI startup Helsing.

STARTUP INVESTMENT SOARS

A McKinsey analysis shows European defence tech startup investment skyrocketed over 500% between 2021-2024 compared to 2018-2020, with military veterans playing key roles as founders, advisors and investors.     

Veterans say starting a defence company is easier than joining established contractors, as technology has lowered barriers to entry and offered those with specialised skills the opportunity to become entrepreneurs rather than employees.

"Soldiers on the front line don't have time to figure out technology while being shot at," said Jan-Erik Saarinen, founder of Double Tap investments and former Finnish soldier who served in Bosnia and Afghanistan. "You need actual combat soldiers in your company if you're providing technology to Ukraine."

Dymytro Kuzmenko, head of the Ukrainian Venture Capital and Private Equity Association, told a conference startups sending technology to Ukraine need battlefield-tested solutions, not prototypes requiring extensive trial and error.

The expertise gap also becomes critical when lives depend on the technology. 

Viktoriia Honcharuk, a Ukrainian soldier with the 3rd Assault Brigade, described how one unmanned vehicle looked great on paper but failed at the front lines, wasting 300,000 euros.

"I wish more companies were founded by military people," she told Reuters.       

(Reporting by Michael KahnEditing by Bernadette Baum)