Since Russia’s full-scale invasion in 2022, Ukraine has become the world’s proving ground for battlefield innovation. Drones, autonomous strike systems, electronic warfare, and swarming software are all tested under fire, iterated weekly, and validated through wartime combat missions.
You would expect the founders behind all this to be racing to incorporate in Delaware, much like any ambitious European founder in the civil tech sector. They aren’t. And Washington should be worried.
In the civilian world, the US remains the obvious destination: it has the deepest capital, the biggest market, and the strongest pull. In defense and homeland security, the logic has inverted. The European and Ukrainian founders building the most combat-relevant companies of this decade are deliberately keeping their intellectual property — and their engineers — on the old continent. At most, they set up a thin US holding entity to tap American capital, while the real work, the intellectual property (IP), and the value stay in Tallinn, Warsaw, or Kyiv.
Look at the companies. Destinus, one of Europe’s most ambitious defense-tech firms whose products include lower-cost cruise missiles, is headquartered in the Netherlands and builds across Spain, Germany, and France — even though its founder spent more than a decade inside the American startup world before leaving it.
Swarmer, the Ukrainian drone-swarm company whose software has been used in more than 100,000 combat missions, anchors its engineering, data, and operations in Ukraine, Poland, and Estonia, using its US presence as a channel for capital rather than a home for its technology. London-based Uforce does the same — and its CEO spent years in Silicon Valley. Across Ukraine’s Brave1 system, which brings together the government, military, and private sector, the same script repeats: build in Europe, stay in Europe. In conversations with founders across the region, the calculation is remarkably consistent.
Why?
The moment a startup brings defense IP under US jurisdiction, it inherits the International Traffic in Arms Regulations, or ITAR — and with them, registration, the compliance burden, and expensive lawyers that founders have to pay for upfront, before there is any meaningful revenue. Worse, ITAR hands Washington a veto over where the company is allowed to sell. For a founder whose entire customer base is in Ukraine and Europe, that is not an advantage. It is a cage. A single misstep carries the threat of severe penalties. Founders have learned that the safest move is simply to stay out of reach.
Then there is the procurement slog — the years-long, paperwork-choked path to a US government contract that exasperates even American startups and offers a foreign founder no clear payoff at all.
Capital is the other half of the story. Foreign defense founders have almost no real access to US government capital — the non-dilutive funding and early contracts that anchor a young company. Yet those same founders have world-class engineers, hard-won combat experience, and a European funding environment that is suddenly awash in money. The incentive math is simple: no reason to move to America, and every reason to stay.
And the structure itself now actively pushes the two sides apart. The NATO Innovation Fund — a €1bn ($1.2bn) vehicle backed by 24 allies — pointedly excludes the United States, Canada, and France, and invests only in startups based in participating nations. American defense startups are ineligible by definition. The European Union’s own instruments go further still: the €1.5bn European Defence Fund, the EDIP, and the new €150bn SAFE program require companies to be established in the EU, free of third-country control, and to use EU infrastructure and management structures. A startup with US roots cannot meaningfully access any of it. And a European startup would be foolish to give that up.
Add these forces together, and the conclusion is uncomfortable. The United States is losing not only IP and talented engineers. It is losing future markets. Every barrier and every disincentive means fewer category-defining defense companies will be rooted in America and more in Europe. And European governments, the buyers of tomorrow, will increasingly source products from their own. Market share follows where companies are built.
There is a bitter symmetry here. For years, Europe’s regulatory regime — GDPR above all — pushed the continent’s most ambitious civil-tech founders toward the United States, where they could build without the friction. In defense, the US has now built its own version of that wall. ITAR, the procurement maze, and a funding architecture closed to outsiders do to defense founders exactly what GDPR did to European software developers: they tell them, plainly, to build somewhere else.
The United States still has the capital, the talent, and the demand to lead. But leadership is not permanent, and the founders of the next defense giants are already voting with their feet. Right now, they are walking the other way.
Vitaliy Goncharuk is an American entrepreneur of Ukrainian origin, specializing in autonomous navigation and AI, and a member of CEPA’s Business Leadership Council. He is the CEO of A19Lab, a company developing autonomous systems for drones and robots. In 2022, his previous company, Augmented Pixels, which focused on AI autonomy, was acquired by Qualcomm. From 2019 to 2023, Vitaliy chaired Ukraine’s AI Committee.
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions expressed on Europe’s Edge are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
