After the shell

What changes in European defense, and what it asks of long-term investors

In March 2026 alone, the Ukrainian General Staff reported that 96% of Russian casualties were inflicted by drones. The shell, for two centuries the dominant battlefield killer and Napoleon’s and Stalin’s "god of war", has been displaced as the primary cause of casualties on the modern battlefield.

As we are not military experts, we turn to one of the most renowned experts in this field to analyze the consequences of this radical change, Aleksandr Svechin. He would describe the shift as a productive-forces shock: a change in the material base on which war is fought, the kind of change that rewrites tactics, industry, strategy, and the art of war downstream.

This is the second of two posts. The first laid out the European defense-tech landscape. This one addresses the structural consequences of the drone war from a VC perspective : what has changed in the material base of war, what that means for the industrial structure of European defense, and what it asks of long-term investors. After attempting to shed light on these topics, we'll tackle the three concerns that surface regularly in our conversations with LP committees: that this is a Ukrainian bet, that legacy primes will absorb the shift, that defense remains incompatible with their mandates.

The new productive base

Artillery and the drone share no productive logic. The shell is forged at scale in a small number of integrated industrial sites: Rheinmetall, Nammo, BAE, KNDS. The capex per site runs in the billions of euros, the production cycle in months and years, the customer is captive and state-owned, the programme runs ten to twenty-five years on cost-plus contracts. A typical Western artillery shell weighs forty kilograms, costs three to eight thousand dollars, and is the product of a defense-industrial structure unchanged in its essentials since the Second World War.

The FPV runs on a different chain entirely: a 3D-printed airframe, off-the-shelf motors and controllers (largely Chinese), a flight-controller board the size of a credit card, a salvaged anti-tank warhead, capex per workshop in the tens of thousands of dollars. Ukraine’s Ministry of Digital Transformation counted seven drone manufacturers in 2022; by 2025 it counted around five hundred. The Brave1 platform holds 1,500 defense-tech firms in its portfolio. Ukrainian FPV output rose from about 20,000 per month in 2024 to about 200,000 per month in 2025. On the Russian side, the Alabuga special economic zone went from producing roughly a hundred Shahed-type drones per month in 2023 to 5,000 to 6,000 per month at peak in 2025, with a cumulative target above 40,000 by year-end.

The chain, traced upstream, points to one source: the Chinese consumer-electronics ecosystem. The motors, the electronic speed controllers, the lithium cells and the flight controllers all originate there. DJI alone holds 70 to 90% of the global civilian drone market and sits upstream of virtually every FPV airframe on either side of the front. Software updates change the weapon’s behaviour weekly; new electronic-warfare countermeasures spawn new waveforms in days. The production rhythm of war has shifted from defense-programme time, a decade, to consumer-electronics time, a quarter.

Svechin’s materialism becomes literal here. The character of a war is set by the kind of economy one has. A war fought with $400 drones refreshed every six weeks runs on consumer electronics, software, additive manufacturing, brushless motors, and lithium cells. The belligerent with the deeper consumer-electronics supply chain dictates the character of the war the other side has to fight: the tempo, the volume, the cost of entry.

The Western race for 100,000 155mm rounds per month is serious industrial engineering applied to the wrong problem. We keep measuring industrial power by the standards of the last war and % of GDP spent on weapons. Factories are running, production lines expanding, budgets climbing, while the adversary iterates on GitHub and sources components on Alibaba.

Why the answer is on cap tables

Legacy defense primes, structurally, cannot produce at the cadence the new war requires. Forging cycles measured in months, contracting cycles in years, platform unit costs from a million to a hundred million dollars per system: these constraints define the prime contractor model, and cannot be removed without dismantling it.

A new class of company has emerged: vertically integrated, software-first, manufacturing-light, raising venture capital at multiples normally reserved for technology firms. Anduril has closed at 61 billion dollars. Helsing is in the late stages of a 16-to-18 billion euro round. Shield AI, Saronic, AeroVironment after its BlueHalo merger, Tekever and Quantum Systems in Europe have all raised at tech-company multiples. US defense-tech venture capital rose from around 7 billion in 2020 to over 28 billion by September 2025.

Two qualifications matter. The first: combat validation is unevenly distributed. The Ukrainian layer (Vyriy Drone, Skyeton, Athlon Avia, dozens of smaller specialists) has been validated under fire, and Western primes increasingly co-invest in it. Most of the Western cohort has been validated only by venture markets, whether they can help win battles remains to be seen. The second: supply has moved to venture cadence; demand has not followed. Ministries of defense and their procurement systems do not contract at startup cadence. The Pentagon’s Replicator initiative, launched in August 2023 to field thousands of attritable autonomous systems within two years, delivered hundreds. The European programmes (with its fancy acronyms: ASAP, EDIRPA, EDIP, the SAFE 150-billion-euro loan envelope) pour money into the new ambitions through the prime-contractor pipework. Only the Ukrainian framework contracts directly with manufacturers in days. It is the one piece of the new procurement geometry that works.

The conditions for a multi-year venture wave are present: a sophisticated and capital-intensive industry, structurally inadequate for the war it is now asked to support, faces a software-and-electronics-driven challenger that can be funded by private capital and can iterate at consumer cadence, with economies of scale rooted in consumer electronics. This is what the venture market has been pricing. Whether ministries will move to take delivery, and on what timeline, is the open question. We think it is the binding constraint on returns over the next five to ten years. We do not think it changes the structural direction.

Doctrine catches up the hard way

Three twentieth-century precedents tell the same story. In May 1940, the French Army fielded more tanks than the Wehrmacht, a larger air force, the Maginot Line and the prestige of 1918. It collapsed in six weeks. French tanks were dispersed across infantry formations as auxiliary support where the Wehrmacht had grouped them into ten autonomous armoured divisions with radio command and air-ground coordination. The new weapon sat at the heart of German doctrine. French doctrine kept it at the periphery. Marc Bloch, writing L’Étrange défaite in the days after the collapse, called it a stunning intellectual failure: the staff could no longer process information at the speed at which the war was being fought.

In thirteen months between November 1940 and December 1941, the battleship lost its status as the capital ship of the world’s navies. Between Taranto, Pearl Harbor and the sinking of HMS Prince of Wales and HMS Repulse off Malaya, the largest navies discovered that the carrier strike group, which the Imperial Japanese Navy had organised its doctrine around since the mid-1930s, had displaced the battle line. The Royal Navy and the US Navy had to rebuild their doctrine under fire, scrap battleship programmes in progress and reconstruct their fleets around the aircraft carrier.

In February 1991, the Iraqi Army, the world’s fourth-largest on paper, built around 1970s Soviet doctrine, was destroyed in a hundred hours by a coalition that had internalised the integrated air-land doctrine of the post-Vietnam US Army. In each of the three cases, doctrinal lag against a peer that had reorganised its forces around the new weapon was paid in weeks.

NATO’s approach to the drone, in 2026, reproduces the French armour pattern. Replicator, the European drone programmes and the scattered Brave1 imitations treat the drone as a useful capability to bolt on to the existing combined-arms structure. In Ukraine, the drone has become the spine of the new doctrine. The four NATO forward battlegroups in the Baltic (UK in Estonia, Canada in Latvia, Germany in Lithuania, US in Poland) and the German permanent brigade scheduled for full operational capacity in Lithuania in 2027 are designed to deter through forward presence and reinforce from Germany and Poland in the opening days of a crisis. None of these forces fields a Brave1 equivalent, organic FPV mass, fiber-optic drones in inventory, or counter-drone protection at the densities Russia operates in Ukraine. The forward battalions and the reinforcement axis are sized and equipped for the war NATO understood before 2022. The war that has been running in front of NATO since has not yet been integrated into its posture.

This historical analogy is not a prediction, but when an adversary reorganizes its forces around a new weapon and the defense establishment fails to do the same, this doctrinal gap takes its toll and can lead to the unthinkable.

What this asks of investors

Three initial observations can be drawn from this analysis.

First, the productive-forces shock is decadal. It does not unwind with a Ukrainian ceasefire, or reverse if a particular Russian government changes. The shift is in the material base of war. The chain that produces the lethal instrument has moved out of the prime contractor’s forge and into the workshop, on consumer-electronics timeframes. That movement has its own momentum. Even in a Europe at peace, the same productive logic will determine which defense capability gets built quickly, which slowly, and which not at all. Investing here means twenty years of exposure to the structure of European defense, regardless of how the war ends. And, as one might fear or suspect, Europe is not the only focus of attention, as we already see in Sudan, Lebanon, and throughout the Persian Gulf

Second, the binding constraint is procurement. Supply will reach venture cadence ahead of demand. Returns over the next five to ten years will be set by whether and when European ministries find their Brave1 equivalent. We think a crisis-driven reform is more likely than a deliberate one, which is uncomfortable for an institutional investor used to underwriting predictable cycles. Every previous doctrinal reform in the twentieth century was crisis-driven. Investors who underwrite the structural exposure now will arrive ahead of those waiting for institutional resolution. Those who don't anticipate a change of doctrine will invest in equipment that will be obsolete before it’s even put to use.

Third, this is a strategic technological initiative aimed at building a European industrial base. This type of investment differs significantly from a simple venture capital investment in the defense sector and requires the investor to develop certain capabilities even before capital is deployed: access to Ukrainian operators, who validate what works on the battlefield; collaboration with major European contractors, who will resist, adapt, and eventually acquire; and a presence at the heart of the institutional bottleneck where the reform of European public procurement will take shape. A generalist venture capital approach or a passive role as a sponsor does not allow for the development of these capabilities.

The three concerns from LP committees look different in that light. What the Ukrainian-bet framing reads as a war outcome is a structural change in the productive base. The primes-will-absorb framing is correct in part: the primes will resist or acquire, and the right investor posture takes that into account. The ESG framing is increasingly out of date in the European context, where the Commission, the Council and most LP advisory bodies have shifted since 2022, and the moral case for European strategic autonomy is now the dominant interpretation.

The case for VC investment in defense is fundamentally uncomfortable. War is not a stable state, and if we want to support a European effort in this area, we must be willing to change many of our habits. Clearly, this isn’t for everyone, and the most pessimistic voices won’t necessarily be right.

We are having this conversation with the LPs, industrialists and operators who have moved past the threshold question of engagement. The substance is how, with whom, and on what timeline. If you are reading this and you are at that point in your thinking, we should talk.

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