Venture capital flowing into defense tech startups has already surpassed last year's full-year total, with $12.3 billion invested in the first half of 2026 alone. The prolonged wars in Ukraine and the Middle East have sent valuations of "war technology" companies soaring, with investment expanding beyond drones into autonomous vessels, satellites and electronic warfare. Analysts warn of overheating even as they say structural demand will outlast any single conflict.
By Seo Ji-yeon, The Herald Business
Global investors are pouring money into defense technology startups — drones, autonomous vessels and battlefield AI systems — as the wars in Ukraine and the Middle East drag on. Venture capital flowing into defense tech startups worldwide in the first half of this year has already surpassed the full-year total for 2025.
Citing data from Pitchbook, a global private capital markets research firm, the Financial Times reported Sunday that venture capital investment in defense tech startups this year has reached $12.3 billion (about 18.8 trillion won) — already exceeding last year's full-year total of $9.95 billion.
Investors are taking note of how rapidly the nature of warfare is changing. As drones, autonomous weapons and AI-driven battlefield systems displace expensive fighter jets and warships as the core of modern military power, valuations of companies in those fields have surged.
"We are witnessing the most significant transformation in the conduct of warfare since the beginning of time," Daniel Rudnicki Schlumberger, head of JPMorgan's Europe, Middle East and Asia security initiative, told the FT. "As investors recognize long-term demand, company valuations are rising rapidly."
Investment has been concentrated overwhelmingly in the United States. American startups absorbed $11.4 billion, or 93 percent of the global total. Defense unicorn Anduril led the market after raising $5 billion last month, pushing its valuation to $61 billion.
The Middle East conflict has also ignited investment in maritime defense technology. British defense startup Kraken Technology supplied unmanned mine-hunting vessels to the Royal Navy, with the equipment set to be deployed in the Strait of Hormuz. Kraken is now seeking additional investment at a valuation of around $1 billion.
The investment boom is spreading across Europe as well. Venture capital flowing into European defense startups has exceeded $460 million this year. German drone maker Helsing and loitering munitions company Stark are both pursuing fundraising rounds in the billions of dollars.
The satellite sector is also growing rapidly. Iceye, a Finnish-Polish joint satellite venture, recently raised 1 billion euros (about $1.15 billion), quadrupling its valuation in just six months.
Investment targets have expanded well beyond simple drone manufacturers to encompass battlefield data analytics, electronic warfare, autonomous maritime systems and military satellite networks.
Some voices in the market, however, are sounding overheating warnings. Critics say some companies have been valued far above their actual business performance by riding the wave of surging defense demand since the Ukraine war began.
"Concerns about some of the higher valuations are valid," said Shonnel Malani, managing partner at private equity fund Advent International, "but the structural factors driving demand for defense technology will not disappear after conflicts end."
Experts say the drone sector shows signs of overcrowding, but autonomous maritime systems, military satellites and battlefield AI remain in the early stages of growth.
"If the first wave of investment was about restoring weapons production capacity, we are now moving into a race to secure supply chains and advanced technology," said Mikolaj Firlej, co-founder of Expeditions, a European defense-focused venture capital firm. "Sensors, electronic warfare and battlefield AI will be the core investment areas for years to come."
The wars in Ukraine and the Middle East are reshaping global capital flows, not just geopolitics. Silicon Valley money that once flowed toward consumer platforms and AI is now turning toward the companies transforming the battlefield.
sjy@heraldcorp.com
