Challenges and Commercialization Pathways for Startups in the Swedish Defence Industry A descriptive case study on the defence landscape

Abstract

The Swedish defence industry is undergoing change as a result of geopolitical uncertainty, increased defence spending and the NATO-membership. Additionally, ongoing conflicts such as Russia’s invasion of Ukraine showcase the use of innovation and new tactics in modern warfare. The Swedish authorities have expressed the need for defence innovation and that startups play a crucial role in developing innovation. Despite this, startups face multiple challenges when attempting to commercialize in the defence industry. This thesis explores challenges related to five dimensions: value and customer need, funding, commercialization pathways, innovation and system integration, and regulation and permits. This is explored through a qualitative, descriptive case-study approach and by conducting interviews with startups, established organizations, authorities and other relevant stakeholders. Additionally, secondary data is gathered through a literature review which is used to explain and analyze the empirical data. The study suggests that adopting a dual-use strategy has the potential of addressing challenges related to all dimensions but may introduce regulatory complexity. Furthermore, four key methods of addressing the identified challenges are presented, namely: iterative stakeholder mapping, defining and narrowing the value proposition to signal value, validating the solution through different tests, and choosing a suitable commercialization path based on validation opportunity and access to complementary assets. Additionally, the authors propose that startups develop an early prototype to signal capability. Challenges related to funding, regulation and permits are not explored as extensively as the others. Nonetheless, the thesis suggests that startups should balance an ambitious narrative with realism as well as build early awareness regarding regulatory aspects and permits. The thesis contributes by providing an overview of the challenges that startups face and proposing methods to address the identified challenges.