Most Drone Startups Will Collapse Within Five Years, Podcast Warns

Amy Lewin and Anne Sraders tackled Europe's defense technology future in this week's Startup Europe podcast. They explored why the continent might actually need fewer drone companies rather than more.

European defense tech investment jumped from $114 million in 2016 to roughly $1.5 billion so far in 2025. Forecasts suggest the total could hit $2.3 billion by year-end. However, most funding concentrates in one area: drones. The hosts questioned whether this clustering makes sense long term.

Drone startups attract attention easily. They produce compelling videos and connect directly to battlefield narratives. But Sraders delivered a stark warning: "90 percent of drone startups will fail in five years." Intense competition, hardware complexity and scaling challenges in defense environments will kill most companies.

The podcast shifted focus to other promising defense tech segments including sensor networks, battlefield software, integration systems, logistics technology, cyber defense and supply chain assurance. These areas might offer more stability than the drone hype cycle.

Governments are opening defense budgets but most money still flows through large established contractors rather than nimble startups. European defense firms struggle to win procurement contracts, prove real deployments and handle regulations.

Founders need discipline to succeed. They must prove technical performance, secure government partnerships and demonstrate clear scaling paths. Investors require longer time horizons, deeper expertise and realistic expectations about exit timelines.

Europe's defense tech ecosystem might be entering its second act. Success demands moving beyond high-volume drone startups toward diversified system-level capabilities.