Defense tech startups, dual-use and investments: what issues do Ukrainian companies face

Ukrainian defense tech is growing very rapidly right now. Some teams are already operating not merely as local R&D projects, but as companies building technologies for the international defense market, NATO, and the global dual-use sector.

But the problem is that technologies scale much faster than the company structure around them.

While a startup is small, most things work "somehow." IP is partially documented. Contractors are brought in quickly. Source code is shared with partners without in-depth analysis. GitHub access is opened.

And at that very moment, the company assumes that its main challenge is the product or raising investment.

Although in practice, major problems often begin much later:

— during investor due diligence;

— when transferring technology abroad;

— during regulatory review (export compliance).

Especially if the matter concerns dual-use technologies.

What is currently becoming a problem for Ukrainian defense tech

One of the most underestimated topics is the international transfer of technology. Many teams still think:

"we are just showing software."

But for a regulator or an international partner, this may look like:

— transfer of dual-use technology;

— risk of military use;

— international transfer of controlled technology.

Especially if the product is related to:

— navigation;

— drones;

— AI systems;

— secure communications;

— military analytics.

And not only that, because there is a Catch-all mechanism under Ukrainian and European regulation (REGULATION (EU) 2021/821), pursuant to which even goods not included in the list may be subject to these rules.

And here the issue is no longer only IP or the contract.

At the same time, the following arise:

— export control;

— end-user verification;

— technology classification;

— investment structure;

— international compliance.

Where defense tech companies risk their investment readiness..

Often the problem lies in the company structure.

Classic scenario: IP is in one jurisdiction, R&D is in Ukraine, contractors are all over the world, access to the technology is granted without analysis of export risks, and the structure between the founders exists “on trust.” While the company is small, this is almost imperceptible. But when an investor, an international partner, or M&A interest appears, it suddenly turns out that the product is ready to scale, but the structure is not.

Why legal support in defense tech becomes part of the product

Modern defense / military tech is no longer just hardware. It is software, AI, data, autonomous systems, IP, export control, and international transfer of technology. And that is precisely why lawyers for defense tech are gradually ceasing to be only about document formalization. Legal support in defense / military tech becomes part of the company’s architecture and its readiness for the international market.

Especially for Ukrainian startups in the field of dual-use technologies and defense tech that want to work with international investors or global procurement processes.

If you are building a defense tech or dual-use product and want to understand the risks related to company structure, IP, or export control — write to us to book a consultation.