How a European DefenceTech Fund Closed Its Investment in a Drone Startup

The fund and the startup

The investor is a European DefenceTech fund. The target was a startup developing drones and autonomous ground and aerial systems, with an international structure: part of its activity was organized in Ukraine and Poland, its R&D team worked mainly in Ukraine, and a holding company was planned in Estonia to receive the investment.

The startup's technology rights were not fully in order. Rights to its software code, design, embedded AI and other technology components were not fully assigned to the company, and part of its relationships with developers still needed proper contractual treatment.

For the fund, that created a real risk: investing in a business that did not formally control all of its key assets. On top of that, the fund still needed to confirm the legal status of the product, clear AML and KYC checks, and build an investment model that fit Estonian jurisdiction requirements.

Without resolving IP ownership and the corporate structure first, the fund would have been funding a company that could not prove it owned its own technology, a defect that no amount of commercial traction can fix after the fact. The product also needed a confirmed legal status, since drones and autonomous systems can fall under military or dual-use classification, which carries its own compliance and export consequences. And because the deal ran across Ukraine, Poland and a planned Estonian holding company, the investment itself had to be structured to satisfy Estonian jurisdiction requirements, not retrofitted to them later.

We ran a comprehensive legal due diligence process on the startup, covering:

1. 1Corporate structure. The structure of the companies operating in Ukraine and Poland.
2. 2Ownership. The ownership structure and the relationships between founders.
3. 3Technology rights. Rights to the software code, design, algorithms and embedded AI.
4. 4Contracts. Agreements with developers, employees, contractors and suppliers.
5. 5Confidentiality. NDAs and the mechanisms protecting confidential information.
6. 6Product status.The product's potential status as a military or dual-use technology.
7. 7Sanctions and compliance. Sanctions, AML and KYC risks.

From that audit, we built a list of legal risks and a plan to clear them before the investment closed. In particular, we put the transfer of IP rights to the company in order, updated the contracts with team members, and settled how confidential information and the results of their work would be used.

We designed a staged legal model for the investment: the fund could provide financing at the initial stage, then receive its equity once the Estonian holding company was formed.

We then prepared and negotiated the investment agreement itself, setting out:

• the terms and stages of financing;
• the fund's rights as investor;
• the founders' obligations;
• the terms for receiving equity in the holding company;
• guarantees over the structure and the rights to the technology;
• mechanisms protecting the investment; and
• the procedure for further financing rounds.

We also supported the necessary registration steps and proposed an international IP model: concentrating the key rights at the level of the Estonian structure, then licensing the technology back for operational activity in Ukraine. Separately, we gave recommendations on protecting the relevant intellectual property in the EU, and strengthened the contractual protection of the technology through NDAs and properly documented relationships with the key developers.

As part of financial compliance, we ran KYC checks on the startup, its founders and its beneficiaries, and analyzed the end use of the technologies. To help the deal clear bank checks, we prepared legal explanations covering the product's functional purpose, its legal status, and its anticipated use scenarios.

The European DefenceTech fund successfully completed its investment in the drone and autonomous systems startup.

By the time the investor came in, the key corporate, contractual and IP risks had been identified and properly resolved. The fund got a transparent ownership model, a clear structure of rights to the technology, and contractual mechanisms protecting its investment.

The startup, in turn, put its relationships with founders and its team in order, secured rights to its key developments, and built an international corporate foundation for raising further investment and grants.

The compliance work and the legal explanations we prepared helped the deal clear the checks that come with international financing of defense and dual-use technology.

For the fund, the model we built was not just a solution for one deal. It is a foundation that can be adapted for further investments in DefenceTech companies with R&D teams and operations in Ukraine.

The case shows that investing in Ukrainian DefenceTech takes simultaneous work across corporate structure, intellectual property, international compliance and regulatory restrictions, all at once. Comprehensive legal support is what lets European funds get access to Ukrainian technology through investment models that are transparent and protected.

If your company is building toward foreign investment with an international structure, corporate, technology-rights and compliance gaps like these are exactly what a fund's due diligence will find. The work we did here, clearing IP ownership, structuring the entities across jurisdictions, and building compliance into the deal, is what it looks like to close those gaps before an investor asks about them, not after.

This case study was delivered in exclusive partnership with our legal partner —