Global Defense Firms Invest 6 Trillion Won in Startups This Year...Largest Ever

Active M&A Activity Among Defense Startups
Focus on Securing Advanced Technologies in Drones and Combat Robotics

Reuters Yonhap News

It has been revealed that major global defense companies have invested nearly 6 trillion won this year in advanced technology startups such as drone and combat robotics firms. As the nature of warfare shifts from traditional large-scale conventional weapons toward smaller, AI-powered systems, there are even assessments that defense companies are transforming themselves into venture capital (VC) investors.

On the 26th (local time), the Financial Times (FT), citing data from global startup investment analytics firm Dealroom, reported that "major global defense companies, which have longstanding ties with Western governments, have participated in VC investments totaling a record-breaking $4.1 billion (approximately 6 trillion won) so far this year." The report also noted, "Recent conflicts, such as the wars in Ukraine and Iran, are demanding new methods of warfare by combining traditional weapons with new technologies. Defense companies are thus seeking to secure access to innovative technologies."

In addition to VC investments, large defense contractors are actively acquiring startups with advanced technologies. According to market research firm Dealogic, the total value of global defense industry M&A transactions this year has already surpassed $40 billion (about 58 trillion won). If the current trend continues, it is expected to exceed the all-time high of $59 billion reached in 2019.

On the 5th of this month, French defense company Thales acquired Exail Technologies, which specializes in maritime autonomous robotics and navigation, for 3.9 billion euros (about 6.5 trillion won). On the same day, U.S.-based Lockheed Martin purchased marine technology company Ultra Maritime for $3.45 billion to secure unmanned submersible and AI detection technology. They are also pouring substantial funds into investments in cutting-edge weapon technologies. The UK's leading defense company BAE Systems contributed 50 million euros this year to a fund for defense startups.

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Defense contractors’ research and development (R&D) spending has also risen significantly. According to an analysis by market research firm Vertical Research Partners, R&D expenditures by 13 major weapon manufacturers worldwide—excluding Airbus and Boeing—reached $11.6 billion this year, marking an increase of over 25% compared to 2021.

Defense-related startups are also actively attracting investment. Earlier this month, German drone manufacturer Quantum Systems raised $1.2 billion from investors including Airbus, with its company valuation recognized at $8 billion. UK-based maritime defense company Kraken Technology received a $175 million investment on the 9th from parties including Germany’s Rheinmetall, raising its corporate value to $1 billion. With these significant capital injections, companies like these have grown from small tech firms into unicorns in the defense sector.

The changing dynamics of the defense market were also reflected at the Farnborough International Airshow in the UK, held on the 20th of this month. Of the 1,636 participating companies, half were from the defense industry, setting a record for the highest proportion ever. While the airshow has traditionally featured mainly civil aerospace companies, this year saw a large influx of startups with advanced defense technologies.

Andreas Leinecke, Head of Digital and Cyber Defense Sales at Airbus, commented, "Recent wars, including the conflict in Ukraine, have shown just how rapidly technology changes in modern warfare." He added, "For traditional defense contractors, it is essential to develop executable partnership systems with smaller, more agile companies to avoid falling behind in the face of rapid technological change."

This content was produced with the assistance of AI translation services.