Two-In-One: Cross Points Between Military StartUps and Private Business Sector

As military technologies demonstrate a deeper penetration into our everyday lives, they become an integral part of it. Nowadays everyone may launch their own business by adapting military technologies to civil use. However, we face some logical questions here: which technologies have come to civil use from the army, what is a dual-use product, which military technologies may contribute to national security, and how a successful business be made out of such a startup?
Answers to these questions were given to the Defense Express correspondent by Mr. Dmytro Shestakov, the Partner of the Innovations Development Platform, the agency primarily focused on the commercialisation of defense industry start-ups.
Which existing military projects are used in our everyday lives and business?
Firstly, all of us have cell phones, and we all use mobile communications and built-in GPS navigators. For instance, a microprocessor, a satellite and the Internet were originally developed by the military in DARPA (the US Defense Advanced Research Projects Agency). They have turned the world upside down, being the technology development driver and the originator of the fourth technology revolution worldwide. If we dig deeper, the launching of the soviet satellite, as a military development, triggered the formation of DARPA. Today, satellites are commonly used for meteorological forecasts and remote Earth monitoring. Thus, agricultural businesses can get the NDVI (Normalized Difference Vegetation Index) to identify the vegetation parameters of crops.
Among the most recent developments implemented in Ukraine and used for civil purposes, attention should be paid to unmanned aerial vehicles (UAVs), which are employed to measure fields and calculate NDVIs with a precision level higher than that of satellites. Such technology solutions were originally developed to satisfy the needs of the defense industry, and, later, came to the agricultural sector. And their widespread use in Ukraine is only a matter of time.
In the USA, Western Europe and Malaysia, UAV solutions are already used by banks and insurers. The Innovations Development Platform, among others, is actively engaged in the matter of applying and scaling such technologies and products in the agricultural business in India.
By the way, recent media news informs that India gradually refuses Russian weapons and dual-use developments, and prefers cooperation with US, European and Ukrainian companies. This is because Russia is not able to make import substitutions, supply modern equipment and not ready to offer warranty services. Consequently, Ukrainian companies have the opportunity to learn based on the negative experience of our neighbour, and, due to our potential, to gradually strengthen our positions in certain segments of the Indian and other global markets.
Tropospheric communication is another good example. Our development is the only solution in the world that offers unbroken communication in all weather conditions and – in contrast to satellite communication – the best tamper resistance.
Given the high cost, tropospheric communication is not widely used in Ukraine. In addition to its use in the defense industry, this type of communication is used, for instance, by the Ministry for Emergencies in certain situations. In global practice, private companies extensively use tropospheric stations in the mining business, where reliable communication is critical.
Which developments or current Ukrainian projects may be emphasized in terms of their civil use adaptation?
In addition to the use of numerous data ciphering algorithms, cyber security is closely connected with encryption. Talking about civil use, encryption is applied in e-mail communications and instant messaging systems. Such developments also originate from the military sector and have a relation to confidential data ciphering. As a good example, I’d like to emphasize the Ukrainian cyber security industry, and, in particular, the HACKEN project which has already grown into a full-fledged business. The HACKEN helps to form and develop the environment to support communication between the blockchain community and the cyber security community.
Are there any restrictions related to sales of military developments by private businesses? And, if there are some, please describe them.
Yes, there are. However, we should differentiate such restrictions based on the type of developments, for instance, military developments or dual-use developments, export developments or import developments. Military-use products are surely subject to restrictions, and they are fully and ultimately controlled by the state. Of course, it’s not a mass market. Dual-use developments are a quite different matter. As an explanation we may take the example of Innovations Development Platform’s operation, for the reason that it works with non-lethal technologies. It enables domestic developers to focus on the business success, rather than on any other aspects. Talking about state-run companies, they have a complicated and excessively controlled procurement system, which prevents their flexible and prompt decision making in business. Exportation of dual-use products requires certain permissions, but they can be obtained.
Is the business size critical for this operation? I mean big, small and medium businesses.
Objectively, the business size does matter. Bigger businesses tend to obtain certain permits more easily, and they are respected to a greater extent. They have more power, connections and opportunities. For example, Myronivskyi Khliboprodukt Holding may easily purchase five or six unmanned aerial vehicle facilities without a significant impact on the company’s budget. However, it would be a substantial investment if a small company with an annual turnover of several USD million spends a few hundred thousand US dollars to buy unmanned aerial vehicles.
The business size is vital not only for unmanned aerial vehicles but also for other projects that may be related to radio electronics or space technology development.
Does it mean that anyone from the private business sector may enter the market and develop in a certain industry?
Yes. The restrictions majorly depend on the size of capital and financial reserves available. Even if you, as the business owner, lack funds, you may use the financial mechanism of a leveraged buyout. In other words, when buying an asset, you may apply to a bank and get a loan in the money multiplier. It’s a global practice, which, unfortunately, does not work in Ukraine yet.
Still, we have to identify the scope of our appetite and get down to business.
Dmytro Shestakov, 2018
Originally published in Defense Express