Since Russia invaded Ukraine in February 2022, the nation’s battlefields have become proving grounds for drone technology.

Dronemakers have incorporated AI to circumvent jamming and used sensors and algorithms to deploy swarms of drones, among other advances.

“If it weren’t for a hot conflict like we have in Ukraine, you would never get this type of live feedback from a customer base and then be able to iterate on a product so quickly,” said Dewey Briglia, who leads the commercial banking defense technology group at Wells Fargo Securities LLC.

Unmanned aircraft systems, or UASs, also play to economic trends.

“When you think about where the spend needs to happen as related to the defense budget, buying really large, exquisite systems is not sustainable,” said Kirk Konert, a managing partner at AE Industrial Partners LP, which sold drone maker and AI technology developer Edge Autonomy to Redwire Corp. (RDW) for $925 million in January.

While peace talks between Ukraine and Russia proceed, dronemakers are looking towards markets such as Europe and diversifying portfolios through consolidation.

Alongside Redwire’s purchase of Edge Autonomy, AeroVironment Inc. (AVA) purchased BlueHalo LLC from Arlington Capital Partners LP for $4.1 billion. Meanwhile, investors such as Andreessen Horowitz, Baillie Gifford & Co. and Founders Fund Management LLC have put money into the sector.

“Deals like BlueHalo and Edge Autonomy are kind of just the tip of the iceberg,” BTIG LLC analyst Andre Madrid said.

AE purchased Edge Autonomy predecessor UAV Factory Ltd. in January 2021, more than a year before the Russian invasion of Ukraine.

The San Luis Obispo, Calif., company is known for drones built for long range reconnaissance missions and, as the name suggests, for autonomous operation.

“It was a typical deal for AE’s playbook,” Konert said of the investment.

“We identify a theme that we have conviction will grow in a target-rich industry,” Konert said. “We back a founder-owned business in a fragmented sector and accelerate their growth.”

The firm helps portfolio companies navigate complex supply chains, long lifecycles and strict regulations. With Edge Autonomy, AE provided connections to sell technology to the U.S. Department of Defense, U.K. Ministry of Defense and other allies.

Drones are already well suited to the DoD’s interest in “more attritable assets,” Konert said, referring to items that are inexpensive to replace.

“When a drone is shot down, you don’t lose a $10 million asset,” Konert said. “You lose a $100,000 asset.”

Editor’s note: The original, full version of this article was published April 23, 2025, on The Deal’s premium subscription website. For access, log in to TheDeal.com or use the form below to request a free trial.