Our high-confidence assessment points to a clear trend: no matter the political shifts in the U.S., Ukraine’s tech sector, particularly in defense and dual-use technology, will continue its growth trajectory, which has remained strong despite the ongoing war. Since 2017, Ukrainian startups have shown resilience with a consistent 25% YoY growth rate, and our analysis suggests this trend will only strengthen.
We are confident that Ukraine’s role in Europe’s security and innovation landscape is cemented. Except in the most unlikely scenario of a fundamental loss of sovereignty, Ukraine will remain a key driver of defense innovation in Europe. The recent ascent of a Ukrainian company into the top 50 global defense manufacturers underscores the nation’s emergence as a significant player in the industry – a monumental achievement few nations have attained.
Prompted by Russia’s aggression, Europe recognizes the need for greater defense autonomy. This urgency has led to record-high defense budgets, with NATO countries investing significantly to meet alliance spending targets. In 2022, EU defense budgets reached €240 billion, an 8% increase from the previous year, and the number of NATO members meeting spending goals rose from six to 23. This substantial commitment signals Europe’s strategy toward defense self-sufficiency, validating our investments in Ukrainian tech.
European leaders recognize that supporting Ukraine now is both strategically essential and cost-effective, avoiding greater containment expenses later. Ukraine has become an indispensable ally for Europe’s defense infrastructure, and this deepening alliance is likely to drive increased European investment in Ukrainian tech. This trend reflects our conviction that Ukraine’s expertise, innovation, and solutions are vital to the future of Europe’s defense and technology landscape.
Ukraine has emerged as a leading innovator in defense technology, rapidly developing scalable dual-use solutions tested in battlefield conditions. From counter-drone technologies to electronic warfare, Ukrainian innovation reinforces its role as a tech leader in Europe. Over 1,200 innovative companies have formed since Russia’s invasion, directly contributing to defensive and offensive successes. This surge in defense innovation mirrors Israel’s rise in the 1990s as a ‘Startup Nation,’ capitalizing on circumstances to build a formidable tech ecosystem that addresses immediate defense needs and positions Ukraine as a key technology provider for the West.
Beyond defense tech, Ukraine’s vast reserves of critical raw materials—including titanium, lithium, graphite, manganese, and rare earth metals—are indispensable to global supply chains upon which Europe and the world rely. Ukraine holds approximately 20% of the world’s titanium reserves, making it one of the top global producers essential for the aerospace, defense, and technology industries. The country ranks among the top ten producers of manganese, crucial for steel production and battery technology. With about 20% of global graphite reserves, Ukraine is a key supplier for electronics and renewable energy applications. Ongoing explorations suggest substantial lithium deposits, positioning Ukraine as a potential major supplier for Europe’s electric vehicle and energy storage industries. Additionally, Ukraine holds 10% of the world’s iron reserves, and supplies 15% of Europe’s steel, critical for infrastructure and defense. The nation is also rich in rare earth metals vital for advanced technologies in defense and renewable energy sectors. Moreover, Ukraine produces over 70% of the world’s neon gas exports, supplying more than 90% of the semiconductor-grade neon used by the U.S. chip industry, essential for semiconductor manufacturing.
However, a substantial portion of these critical resources are currently under Russian control due to the ongoing conflict. Russia occupies significant areas in eastern and southern Ukraine, where many of these resources are located—including key deposits of the aforementioned resources. This occupation not only threatens Ukraine’s economic potential but also disrupts global supply chains that depend on these resources. Europe’s and the world’s reliance on Ukrainian materials and technological innovations underscores the strategic importance of supporting Ukraine’s sovereignty and territorial integrity.
Ukraine’s highly educated workforce, particularly in STEM, forms the backbone of its tech sector. With over 300,000 professionals in STEM and thousands more graduating each year, Ukraine’s talent base is rapidly growing and is poised to surpass Israel’s highly-technical workforce by 2028. This robust talent pipeline is crucial to Ukraine’s ability to advance dual-use technologies, mirroring Israel’s transformation into a tech powerhouse driven by human capital.
Ukraine’s defense innovations, tested in real-world conflict, are refined at a pace few countries can match. This ensures their technologies are battle-proven—an essential factor in today’s defense market. Ukraine’s export strategy positions it as a key defense supplier to Europe and beyond. Prior to the conflict, the country was already building a profitable tech sector to buttress its agriculture, manufacturing and natural resource wealth. Ukrainian innovators were focused on peacetime technological advancements across various industries, including IT, agriculture, renewable energy, and manufacturing. With the onset of war, many of these innovators have pivoted from plowshares into swords, redirecting their expertise toward defense technologies to support the nation’s immediate needs. This shift in focus of talent has accelerated Ukraine’s emergence as a leader in defense tech innovation.
A scenario where Ukraine loses complete sovereignty is highly improbable. The more likely scenario is that Ukraine and Russia will be asked to negotiate some of the currently occupied territories in Russia and Ukraine. These future and critical negotiations will be over where lines are drawn and the US can play a critical role in this conversation. Regardless of where the lines are ultimately drawn, post-conflict, Ukraine will ensure that it is never again reliant on external partners for early defense. Even with potential territorial compromises, we anticipate continued exponential grown in Ukraine’s tech-aligned defense sector, supporting its own defense as well as the defense of its EU neighbors.
Russia’s continued aggression is taking a toll on its economy, with defense spending projected to reach 13.5 trillion rubles ($145 billion) by 2025. High inflation, rising interest rates, labor shortages, and limited access to high-tech imports due to sanctions further strain Russia’s resources.
Increased global demand for innovative defense capabilities, coupled with Ukraine’s rapid technological advancements, creates fertile ground for substantial returns. Investing in Ukraine’s tech sector is a strategic economic decision rooted in strong market dynamics. The thriving tech ecosystem is not just surviving adversity—it is poised for exponential growth. A strong, sovereign Ukraine enhances European security and prosperity, bolstering market stability and growth potential.
The original post on LinkedIn can be found here.
