European VC Backs Ukraine Defense Tech Amid War, Breaking Taboo
▼ Summary
– Defense tech has shifted from a VC-avoided sector to a hot investment area, though most funds still require dual-use (civilian and military) applications, unlike Estonia’s Darkstar, which focuses purely on military solutions.
– Darkstar invests in combat-proven tech from Ukraine to help rearm Europe, offering startups funding and operational support, including help with NATO compliance and entity setup.
– The firm aims to raise €25M, targeting pre-seed and seed rounds with checks of €500k–€1M, and has already invested in drone-focused startups FarSight Vision and Deftak.
– Co-founder Ragnar Sass, a veteran Estonian entrepreneur, transitioned to defense investing after Russia’s invasion of Ukraine, driven by personal ties and a sense of urgency about Europe’s security needs.
– Darkstar’s hands-on approach includes bootcamps and direct engagement with Ukrainian military units to validate tech, while prioritizing startups willing to expand beyond Ukraine to Europe.
The defense technology sector has transformed from a niche market into a thriving investment opportunity, with venture capital firms increasingly backing innovations that strengthen military capabilities. While most investors still prioritize dual-use technologies, those serving both civilian and military purposes, Estonian VC firm Darkstar is taking a bold approach by funding purely defense-focused startups. Their mission? To equip Europe with battle-tested solutions emerging from Ukraine’s frontline innovations.
Ragnar Sass, Darkstar’s co-founder and a veteran of Estonia’s startup scene, emphasizes the urgency of this shift. “This isn’t just about today, it’s critical for the next decade,” he says. The firm doesn’t just write checks; it actively helps Ukrainian startups navigate NATO procurement processes by establishing compliant entities in countries like Estonia. “Operational precision is non-negotiable for companies eyeing European defense contracts,” Sass explains.
With a €25 million fundraising target, Darkstar focuses on pre-seed and seed investments, typically ranging from €500,000 to €1 million. Its portfolio already includes FarSight Vision, specializing in geospatial analytics for drone operations, and Deftak, which develops drone ammunition. For Sass, the pivot to defense wasn’t immediate. A serial entrepreneur behind successes like Pipedrive, he initially hesitated before committing to weapons development. Russia’s 2022 invasion of Ukraine changed his perspective, leading to his first defense investment in Estonian drone startup Krattworks.
Darkstar’s strategy resonates beyond Estonia. The firm recently secured €15 million in its first close, backed by European entrepreneurs, family offices, and Estonian state fund SmartCap, a rare move for government-backed investors. Lithuania’s Coinvest Capital has also embraced defense-focused funding, reflecting the Baltic region’s heightened awareness of geopolitical risks.
Sass’s hands-on approach sets Darkstar apart. Over the past three years, he’s made more than 20 trips to Ukraine, meeting over 100 military commanders to understand battlefield needs. “Elite military units operate like startups, agile, resourceful, and innovative,” he notes. This insight drives Darkstar’s bootcamps, where startups receive direct feedback from soldiers and field-test their technologies.
Ukraine’s defense tech ecosystem is thriving despite challenges. Contrary to assumptions, mobilization hasn’t stifled innovation. Founders creating high-impact solutions often receive exemptions, and women-led startups like FarSight Vision play a significant role. Export restrictions are also easing, opening doors for international collaboration.
Darkstar’s vision extends beyond Ukraine. The firm seeks startups across Europe, from Latvia to Germany, prioritizing those willing to establish a presence in NATO countries. “Our portfolio will reflect a diverse mix of geographies and technologies,” Sass predicts. Investment areas span autonomous systems, air defense, cyber warfare, and intelligence, sectors ripe for disruption as NATO accelerates procurement.
The rise of defense-focused funds like Darkstar signals a broader shift. Companies like Anduril and Helsing have demonstrated that military tech can deliver venture-scale returns, challenging the stigma around defense investments. For Sass, the stakes are existential. “Russia’s war economy is advancing rapidly,” he warns. “The tech community must step up to counter this threat, there’s no time to lose.”
As defense tech gains momentum, Darkstar’s unconventional strategy could redefine how venture capital supports national security. With combat-tested innovation and cross-border collaboration, the firm is betting that the next generation of defense solutions will emerge from the frontlines, and reshape modern warfare.
(Source: TechCrunch)
