Defense Startups Gain Traction as European Militaries Seek Larger, Lower-Cost Missile Arsenals

Lessons from the high-intensity conflict in Ukraine are prompting a fundamental rethink of European military procurement, as governments pivot from small inventories of sophisticated weapons toward larger arsenals of lower-cost missiles and interceptors. The daily barrage of Russian drones and missiles has exposed the rapid rate at which munitions are consumed in modern warfare, creating a surge in demand for systems that can be produced at scale.

The New Battlefield Calculus

For years, European defense planning prioritized advanced, high-cost weapons over mass production, a strategy now being challenged by the realities of a protracted conflict. "If you think you have enough cruise missiles in your inventory, you probably don’t," said Douglas Barrie of the International Institute for Strategic Studies. This sentiment is echoed by other analysts who note that industrial capacity has become as critical as technological superiority.

This shift is creating opportunities for a new generation of defense startups focused on designing missiles for large-scale manufacturing. These firms aim to complement, not replace, the advanced systems from established contractors like Lockheed Martin, MBDA, and Rheinmetall by providing high-volume options for dealing with lower-end threats.

The Economics of Air Defense

The economic disparity between cheap offensive drones and expensive defensive interceptors has become a critical vulnerability. Russia can launch up to 900 Shahed-type drones in a single night, according to Steven Barrett, CEO of Cambridge Aerospace. Defending against such swarms with traditional missiles, he told Reuters, "would cost billions of dollars per night ... which is just impossible for any of our allies to sustain."

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To address this, the industry is aiming for a dramatic cost reduction. Executives cited by Reuters state the goal is to lower the cost of a successful interception from as much as €20 million to between €1 million and €2 million. Startups are leading this charge:

• Ukrainian firm Fire Point aims to build a ballistic-missile interceptor for less than €1 million.
• The Netherlands recently ordered 700 Ruta Block 2 cruise missiles from European startup Destinus in a €250 million deal.
• Britain's Ministry of Defence has awarded initial contracts to Cambridge Aerospace for its Skyhammer interceptor.

The Industrial Capacity Challenge

The primary obstacle is no longer technology but manufacturing capacity. "The bigger challenge is industrial capacity, or the ability to produce, qualify and replenish systems on the scale required by modern conflicts," Destinus founder Mikhail Kokorich told Reuters. Investors are backing these new ventures, with Cambridge Aerospace raising $300 million last month to expand production.

These companies have set ambitious output targets. Cambridge Aerospace aims to produce 2,500 interceptors a month by the end of the first quarter of next year, while missile company Frankenburg is targeting up to 100 missiles a day. According to Frankenburg CEO Kusti Salm, building this industrial base is not just about supply, but also deterrence. "If the enemy knows that we can produce en masse... the equation tells him, I’m not going to reach my objectives," he said.