At the international investment summit Defense Tech Valley, held in Kyiv on October 3-4, KSE Institute and Brave1 presented the first comprehensive study on the drone manufacturing industry in Ukraine. The report provides an in-depth analysis of the sector’s growth, investment trends, product innovations, and challenges.

Since the full-scale invasion, Ukraine has developed a unique support ecosystem for defense developments, forming the foundation for advancing unmanned systems. The majority of companies in this industry emerged only after February 2022, with investors and accelerators stepping in to bridge the lack of experience through their expertise and networks.

“We are convinced that data-driven decisions are the cornerstone for the development of any sector, especially in defense. This report analyzed investment climate, product trends, major market challenges, and possible solutions. We hope this will serve as a valuable resource for the government, developers, and investors,” highlighted Olena Bilousova, ​​Senior Research Lead, Military and Dual-Use Goods at KSE Institute. 

In 2023, Ukrainian defense startups secured up to $5 million in investments, with this amount potentially reaching $50 million by the end of 2024. The average size of investment rounds has grown from $500,000 to between $1 million and $3 million, reflecting the increased confidence investors have in Ukrainian developers.

Production capacity in the sector has grown significantly, with approximately 300,000 drones produced in 2023. By 2024, Ukrainian manufacturing facilities have the potential to produce up to 4 million units. While the initial goal focused on scaling production rapidly, the priority has now shifted to efficiency and cutting-edge technologies. Experts anticipate that competition will drive further consolidation among producers in the coming years.

Significant progress has been achieved in the development of aerial, marine, and ground drones, as well as electronic warfare systems. Key trends include computer vision applications, swarm technology, and innovations in navigation and communication systems. Overall, the Brave1 platform has registered over 2,800 projects from more than 1,200 Ukrainian innovators.

”Thanks to this research, we are establishing a systematic assessment of the Ukrainian defense tech industry. This is crucial for building partnerships with foreign companies and defense agencies — now they will have a clear understanding of the potential and capabilities that the Ukrainian industry offers. We will continue to work on making the Ukrainian defense innovation ecosystem as attractive as possible for investors and generating true technological game-changers”, – Nataliia Kushnerska, Brave1 Project Lead,

Despite these achievements, the industry still faces numerous challenges. While investment volumes are increasing, funding remains insufficient to reach full production potential. In the first half of the year, the state funded the production of around 1 million units, underscoring the importance of securing additional financing sources to further advance the industry.

For foreign companies, the Ukrainian market offers a unique opportunity to test products in real combat conditions; however, localization and adapting to Ukrainian realities, as well as safety concerns, remain significant challenges.

The industry also faces workforce issues, including difficulties in reserving key specialists and a shortage of highly skilled personnel.

Experts emphasize that establishing mechanisms for the export of defense technologies is essential for the industry’s continued growth, as it would provide companies with financial stability. Additionally, expanding a local manufacturing base to reduce import dependence and fostering innovation through international cooperation are critical to enhancing the global competitiveness of Ukrainian developments.

Read the full study “Ukraine’s Drone Industry: Investments and Product Innovations” here.