European VC breaks taboo by investing in pure protection tech from Ukraine's battle zones

[ad_1] Protection tech has gone from a no-go zone for VCs to a scorching funding sector. Nevertheless, twin use — that means that the expertise should even have civilian functions — remains to be a requirement for many of them, together with the NATO Innovation Fund.

Estonian VC agency Darkstar breaks from this pattern by investing in purely army functions, with the aim of serving to rearm Europe utilizing combat-proven options rising from Ukraine. “That is very vital, not solely as we speak however for the following 10 years,” mentioned its cofounder and basic companion Ragnar Sass (second from the left within the image).

The agency takes a hands-on method to this mission, serving to startups deliver merchandise to army clients each in Ukraine and all through Europe. For Ukrainian groups, this implies not simply funding but in addition assist with organising compliant entities in NATO nations like Estonia. “In any firm which desires to be a part of European procurement and even grants, the operational facet must be good,” Sass mentioned.

With a fundraising goal of €25 million (roughly $29.2 million) within the subsequent six to 12 months, Darkstar intends to deal with pre-seed and seed rounds, with a ordinary verify measurement of €500k to €1 million. It has already made two investments: in Ukrainian-Estonian startups FarSight Imaginative and prescient, which focuses on geospatial analytics and 3D mapping for drone pilots, and Deftak, which develops ammunition for drones.

For Sass, investing in weapons wasn’t an apparent transfer. A key determine within the Estonian startup ecosystem ever since Skype’s founders funded his first startup, a neighborhood for pet homeowners, he went on to co-found CRM and gross sales instrument Pipedrive, and used the proceeds of that unicorn-sized exit to make greater than 50 angel investments.

A few of these investments grew to become unicorns, too, together with Veriff. However none of them had been in protection, even after Russia’s full-scale invasion of Ukraine in 2022 prompted Sass to ship vehicles and help to Ukraine, to which he has private and enterprise ties.

“It took fairly a very long time mentally to know that I wish to be concerned in weapon methods,” Sass mentioned. He ultimately made his selection a 12 months and a half in the past when Estonian drone startup Krattworks grew to become his first protection funding.

Krattworks marked a turning level for Sass; it was additionally his final funding as an angel investor. Sass is now placing his cash into Darkstar, which began out as a coalition organizing hackathons and bootcamps, leveraging his decade-long expertise at hackathon neighborhood Garage48 between 2010 and 2020. Since then, Sass went on to fund and promote one other firm, Salto X, though it's unclear whether or not he made cash from that exit.

Sass isn’t the one one backing this method. Fifteen-month-old Darkstar simply accomplished a primary shut of €15 million (roughly $17.5 million) backed by European entrepreneurs, household workplaces, and Estonian state-backed LP SmartCap, TechCrunch realized completely.

Backing a fund like Darkstar makes SmartCap an exception as nicely, alongside Lithuania’s sovereign VC fund Coinvest Capital, which grew to become approved to make protection investments with out requiring civilian use instances in 2023. It’s no coincidence that each one of those come from the Baltics.

Russia’s proximity and the Soviet Union’s former occupation give Estonians like Sass a way of urgency that's now spreading throughout Europe as traders acknowledge the significance of protection. “However should you don’t have actual know-how in that space, you’re struggling,” Sass mentioned. For Darkstar, constructing that know-how meant speaking to finish customers from day one.

In Darkstar’s case, the top customers are Ukraine’s brigades. Whereas some adjustments are being carried out, the nation has adopted a decentralized method, enabling fight items to make their very own choices. This may be exhausting to navigate for outsiders, however Sass received a head begin.

“Within the final three and a half years, I've been to Ukraine 20-plus occasions, and I've personally met 100-plus unit commanders — hung out with them, talked with them, realized from them,” mentioned the entrepreneur, who additionally discovered numerous widespread floor. “Elite items are extra just like startups than we will think about.”

Though low cost first-person view (FPV) drones have been used to destroy tools price thousands and thousands, Sass says that it could be an enormous mistake to suppose that tech developments from Ukraine are simply copyable. There’s sophistication — “most elite drone battalions in Ukraine have their very own R&D” — and there's velocity on each side of the frontline. For example, fiber-optic drones have been a recreation changer.

For startups outdoors of Ukraine, it implies that an answer that works on paper may turn out to be pointless, and that’s the place Darkstar’s bootcamps are supposed to assist. The following one will happen this summer time in Kyiv, and in line with its web site, will give corporations “suggestions, field-testing alternatives and fight validation.”

A few of Darkstar’s deal movement will come from its bootcamps, the place employees work hands-on with groups for 5 days. However the pipeline is broader, and Ukraine’s 2,000 eligible groups stand out. “Most of the Ukrainian corporations we're usually are not six months outdated; they've been round two-plus years and so they have already managed to construct a product and firm with minimal capital.”

Basic mobilization of Ukrainian males isn’t as huge an impediment as typically assumed. Founders constructing efficient fight merchandise can obtain exemptions and journey approval, and a big proportion of Ukraine’s protection startup founders are girls, together with FarSight Imaginative and prescient CEO, Viktoriia Yaremchuk, Sass mentioned. As for the restriction on protection tech exports out of Ukraine, that hurdle is within the means of being eliminated.

<img loading="lazy" decoding="async" height="509" width="680" src="https://techcrunch.com/wp-content/uploads/2025/07/darkstar-and-farsight-vision-edited.jpg" alt="darkstar and farsight vision" class="wp-image-3025820" srcset="https://techcrunch.com/wp-content/uploads/2025/07/darkstar-and-farsight-vision-edited.jpg 1190w, https://techcrunch.com/wp-content/uploads/2025/07/darkstar-and-farsight-vision-edited.jpg?resize=150,112 150w, https://techcrunch.com/wp-content/uploads/2025/07/darkstar-and-farsight-vision-edited.jpg?resize=300,225 300w, https://techcrunch.com/wp-content/uploads/2025/07/darkstar-and-farsight-vision-edited.jpg?resize=768,575 768w, https://techcrunch.com/wp-content/uploads/2025/07/darkstar-and-farsight-vision-edited.jpg?resize=680,509 680w, https://techcrunch.com/wp-content/uploads/2025/07/darkstar-and-farsight-vision-edited.jpg?resize=430,322 430w, https://techcrunch.com/wp-content/uploads/2025/07/darkstar-and-farsight-vision-edited.jpg?resize=720,539 720w, https://techcrunch.com/wp-content/uploads/2025/07/darkstar-and-farsight-vision-edited.jpg?resize=900,674 900w, https://techcrunch.com/wp-content/uploads/2025/07/darkstar-and-farsight-vision-edited.jpg?resize=800,599 800w, https://techcrunch.com/wp-content/uploads/2025/07/darkstar-and-farsight-vision-edited.jpg?resize=668,500 668w, https://techcrunch.com/wp-content/uploads/2025/07/darkstar-and-farsight-vision-edited.jpg?resize=501,375 501w, https://techcrunch.com/wp-content/uploads/2025/07/darkstar-and-farsight-vision-edited.jpg?resize=824,617 824w, https://techcrunch.com/wp-content/uploads/2025/07/darkstar-and-farsight-vision-edited.jpg?resize=708,531 708w, https://techcrunch.com/wp-content/uploads/2025/07/darkstar-and-farsight-vision-edited.jpg?resize=50,37 50w" sizes="auto, (max-width: 680px) 100vw, 680px"/> Darkstar GPs Kaspar Gering, Philip Jungen and Ragnar Sass with Farsight Imaginative and prescient CEO Viktoriia Yaremchuk Picture Credit:Darkstar

Sass is making use of the same location philosophy to protection investing. Simply as he as soon as argued that “early-stage Nordic startups ought to reduce the crap and transfer to Silicon Valley,” Darkstar gained’t spend money on corporations that intend to remain primarily based completely in Ukraine. It's also speaking to groups primarily based in Central and Japanese Europe, Latvia, the U.Okay. and Germany, amongst others. “After a 12 months or two, this [portfolio] will likely be a far more various and blended group.”

In alignment with this aim, Darkstar describes itself as pan-European in background. Sass is joined by Estonia-based GPs Kaspar Gering, who spent a decade at Smart in engineering and knowledge science roles, and Mart Noorma, director of the NATO Cooperative Cyber Defence Centre of Excellence (on the left in the primary image). A fourth GP, Philip Jungen, relies in Germany, with one other companion and extra staffers in Ukraine.

As for classes, Darkstar plans to spend money on autonomous methods, air protection, electromagnetic warfare, communications, cybersecurity, sensors, in addition to surveillance and intelligence, each with single and twin makes use of.

In accordance with Sass, a few of these may flip into acquisition targets for cash-rich prime contractors struggling to ship the fast options that NATO nations are actually keen to purchase from them. However fueled by governments coming to phrases with how the battle in Ukraine has remodeled trendy warfare, different startups may additionally attain lots of of million in income on their very own and even go public.

It's unclear whether or not protection startups, notably these with out civilian functions, can obtain breakout success on their very own. Nevertheless, the fast rise and valuation of corporations like Anduril and Helsing together with a wave of latest defense-focused funds, means that the prospect of venture-scale returns is being taken extra severely.

Both means, what retains Sass going is one thing greater. Although he embraces the humor of NAFO, a world on-line motion leveraging memes to assist Ukraine, Sass additionally delivers a sober warning about Russia’s relentless battle financial system. “The enemy is shifting very quick, and that’s precisely why I consider that we have to have the tech neighborhood being concerned far more to deal with that massive and rising menace.”