Why Defence Tech Is No Longer Taboo

Think of the most talked-about tech sectors of the past decade or so – the ones that are always in the tech press headlines, generating a steady stream of articles accompanied by photos of intrepid founders wearing branded t-shirts and positively glowing with excitement after completing major investment rounds.

You’ll probably be thinking of sectors like fintech, climatetech, autotech, quantum computing, and AI (of course). What probably won’t spring immediately to mind is defence tech, a sector which has – to use an apt metaphor – traditionally flown under the radar.

This is understandable. Companies specialising in brave new renewable materials or fintech solutions for debt management are more likely to be awarded the media limelight, compared to those which are working on attack drones and other militaristic innovations.

Similarly, defence tech has also been something of a taboo subject among investors and acquirers. Indeed, prior to 2021, the defence tech sector in Europe never raised more than $100 million in a single year. However, investment activity has accelerated in recent years, with the importance of defence tech being impossible to deny in an age of dramatic geopolitical turbulence.

As Andriy Dovbenko, founder of TechExchange – a startup support programme for British and Ukrainian agritech and defence tech firms – recently wrote: “The gate to defence tech investment has been opened, with much of the stigma surrounding the sector set aside by investors in favour of supporting Ukraine with the immediate demands of war and beyond.”

One top defence tech entrepreneur, Brandon Tseng, has spoken about how he was turned down by dozens of seed investors when launching his AI fighter pilot company Shield AI in 2015, but saw the taboo around investing in defence startups abruptly evaporate following the invasion of Ukraine.

His experience was recounted in a Financial Times piece on the defence tech boom, which went as far as comparing it to the AI gold rush, noting that VCs are now markedly less “spooked” by negative perceptions around defence tech. Indeed, some defence tech firms are positioning themselves as being a force for good. See

Helsing, the defence AI company backed by Spotify founder Daniel Ek, whose stated mission is to leverage AI algorithms to “protect our democratic values and open societies.”

Another key reason defence tech is attracting more attention from investors is that many startups can’t simply be pigeon-holed solely as defence tech companies. Their tools often have civilian use cases, which can make such firms more palatable to investors and acquirers who may have a lingering qualms about the reputational ramifications of backing purely militaristic innovators.

Just as importantly, civilian use cases can be a quicker means of generating revenue, meaning such companies can be more immediately appealing to backers who are understandably cautious about getting involved with startups which are at the mercy of notoriously slow and sluggish military procurement processes.

Let’s take a look at some of the firms that have risen to prominence as a result of these shifting perceptions.

Every sector has its impossibly precocious wunderkinds, and defence tech is no exception. A Zuckerberg-like example is Ethan Thornton, who dropped out of MIT and founded US startup Mach Industries at the age of 19. Last year, Mach raised a $5.7 million seed round led by Sequoia Capital, which was the first time the VC colossus had dabbled in defence tech.

Mach is seeking to develop technology, including unmanned aerial vehicles, which are powered by hydrogen, though exact details are (perhaps inevitably) unclear. However, it’s clear that Thornton’s vision – stemming from his childhood fascination with electrolysis, or the splitting of water into its constituent elements – has struck a chord, with the startup closing a $79 million Series A round just months after the seed windfall.

Based in Germany, Quantum Systems is one of the superstars of the defence tech space, with a suitably starry backer in the form of Peter Thiel. The company develops dual-use reconnaissance drones which can be utilised by both commercial and defence clients, and has raised hefty amounts of capital – most recently, close to $70 million in Series B.

Hundreds of its unmanned drones have been dispatched for use by Ukraine’s fighting forces, and the company is hoping that its dual-use approach will help it become “the global leader in AI-powered aerial real-time surveillance.”

German startup ARX Landsysteme also boasts a fascinating figurehead in the form of Marc Wietfeld, who started the company while still an active army officer. The firm grew out of a robotics project Wietfeld worked on while stationed at a Munich army base, and he went on to create ARX Landsysteme with former army officer Stefan Robel as co-founder.

Raising an undisclosed amount in pre-seed funding last year, the company has developed a range of autonomous robotic carrier platforms which can be adapted for a wide range of tasks – from serving as targets in exercises through to sensing enemy locations in battlefield scenarios. Wietfeld has also emphasised how ARX Landsysteme technology can be deployed in non-military contexts – for example, merchant ships might deploy the robots to deter pirates from boarding their vessels.

In a world of colourfully-named startups, Unmanned Defense Systems stands out by taking the complete opposite approach to branding, and taking a name which sounds unashamedly generic. The Lithuanian firm does exactly what it says on the tin, developing tactical military drones designed for both armies and law enforcement agencies.

Raising just over $1 million in pre-seed funding in 2022, the company’s devices include the Catfish Target UAV, a low-cost drone designed to be flown into enemy territory to carry out reconnaissance work or to trick the enemy into firing and giving away their position. The effectiveness of Unmanned Defense Systems’ technology has since been tested in an actual war situation, having been deployed by Ukrainian forces – a major feather in the company’s cap.

Another rising star in the Lithuanian tech space is Aktyvus Photonics, which is a prime example of a firm that cannot simply be defined as defence tech. It develops lasers which are robust enough to withstand extreme conditions, such as sudden temperature changes and shock.

This allows the lasers to be mounted on drones and other unmanned military devices, in order to be utilised in laser-guided munitions strikes. However, the company has also emphasised the manifold industrial applications of its tough technology.

Whatever tech sphere you’re active in, Hampleton Partners’ team of experienced dealmakers and sector principals can help you maximise your M&A outcomes. Say hello to our Managing Partner Jan Eiben to find out more.