A dual-use product: Ukrainian military tech startup Drill recovering in the US
Will the team succeed in raising funds and becoming a meta university for shooters?
A Ukrainian military tech startup, Drill, is developing an application for shooters. The company has already been incorporated in Ukraine and Poland. The next destination is the USA. Their plan is to build a complete infrastructure – a meta university for shooters. "What we have now is just a small piece. In the future, the application will allow exchanging experiences, provide access to literature, events, shooting range rentals, and trainers," says co-founder Oleksandr Gusarov. However, for now, the company is seeking investments to further advance in the US market. Will the startup manage to attract funds? How does the company intend to conquer this market? And why is the solution called a "dual-use product"? Find out about this and much more in the piece by Mind.
What is Drill? At the end of 2021, two founders – Oleksandr Gusarov and Igor, an Anti-Terrorist Operation (ATO) veteran – started developing Drill, an application with exercises for shooters. "It's like a fitness app, but for gun owners or people who want to learn how to handle firearms. You watch and repeat the exercises," explains Gusarov. The surname of the second founder is not disclosed for security reasons. It is known that he is a career serviceman with over 15 years of experience. "I am responsible for the business, development, and innovation, while my co-founder is responsible for the conceptual part," says Gusarov.
The idea emerged during the COVID-19 pandemic, when there was no opportunity to practise at the shooting range. "People couldn't go to shooting ranges during the lockdown, but training with firearms requires constant practice," says the interlocutor. It is not the first startup in Gusarov's portfolio. Before this, he had a project in the travel retail sector – Mydutyfree. It was an online ordering service for duty-free shops. Apart from gaining business experience from the exit, the entrepreneur received funds that later became the first investment in Drill.
How did Drill become a dual-use product? The development of the product began with a pistol handling course. After visiting the frontline, the founders noticed that the guys on the front often didn't know how to handle weapons safely. "We urgently decided to add lessons on the carbine based on the Kalashnikov and American AR rifles. That's how we transitioned to a dual-use product," says Gusarov.
Oleksandra Balkova, a Partner and Head of Portfolio at Startup Wise Guys, clarifies that for regular investors, dual-use is more of an advantage, as the application's potential uses affect the market size that the startup plans to capture.
However, despite the startup being named a "dual-use development", the team is more focused on civilians. "It's an understandable market," says the interlocutor. Although, according to him, there are requests for the product both from private military companies in the Middle East and from the Ministry of Defenсe of Ukraine. The startup has received the status of Brave1, which allows it to receive grants and government orders from the ministry. "We have been reviewed by military experts, business experts, obtained the status, and now we are preparing a pilot for the Ministry of Defenсe," shares Gusarov.
In which countries is it already operational? Initially, the team aimed directly at the American market. "We are a wild world. There is no arms market in Ukraine. But in the States, there is the Second Amendment to the US Constitution: a person has the right to bear arms for self-defence. There are over 400 million registered firearms there. That's three units per citizen," says Gusarov.
However, the war shifted the founders' plans. The first open market became Ukraine, followed by Poland. Only recently did the company announce its entry into the US market.
"Considering the regulatory variability of US legislation regarding the civilian use of firearms, this product may pique the interest of users. At the same time, given the number of tragedies involving lethal incidents, the popularisation of the app could lead to an increase in their frequency. On the other hand, depending on the startup's business model, the application has the potential to enhance the efficiency of training programs and organisations if the startup chooses a B2B direction," evaluates Balkova.
How is the product being adapted to the market? Before conquering the USA, the team tried to enter the Polish market. "We needed to confirm how much the market needs this project without spending crazy amounts of money. We wanted to present potential investors with the figures from paid conversions, taking into account the average cost, user acquisition, and average revenue per user. And with these numbers, raise funds. So, we initially entered the Polish market," said the company representatives.
Adapting the product to the market is now a top priority for the startup. Gusarov explains, "Each country is different. For instance, in Poland, the civilian population is frightened by shooting training. For them, a great call to action is the safety and responsible handling of firearms. Americans, on the other hand, want an American instructor in the app. They say that Ukrainians are the most powerful warriors right now, but it's crucial for them to train with an American. We'll need to add such content."
What about the demand? The startup already has 8,000 Polish users and 5,000 American ones. In Ukraine, the app has been downloaded almost 25,000 times. The average user interaction session with the app lasts 35 minutes.
What are the monetisation and initial sales? For Ukrainian users, the application is free. Outside our country, the startup sells a subscription and a feedback feature – the ability to record completed exercises on video, send them to instructors, and receive feedback. The paid features were launched about a month ago. The result? There are already the first 600 subscriptions. The cost varies depending on the region. It amounts to up to $10 on average.
How does the team seek to attract investments? In the startup, they have already invested about $70,000 of their own funds and received $60,000 in grants from USF. "The earlier you raise money, the more you give away at a lower price. We wanted to gain traction, users, make sales of paid subscriptions, have the numbers, and then seek investments at a higher valuation," says the interlocutor.
Nowadays, the startup has opened a company in the USA to structure shares for investment purposes. "Investors find it easier to invest in companies from the US. If you want to attract money, establish a company in America," says the co-founder. Now the team is waiting for a relevant investor to start the incorporation process.
The next step is to open a local office in the USA and hire a team. For this purpose, the founders are seeking $700,000. "There are commitments, but they don't suit us. Many see risks because our team is in Ukraine. For venture investors, this is seen as a red flag. The project is attractive, but there are risks due to the ongoing war. And we don't plan to leave, the social component of the project is essential to us. The entire team of 15 people is currently based in Ukraine," notes Gusarov.
The head of the Startup Wise Guys portfolio specifies that founders and teams building a business while being in Ukraine face additional risks, such as mobilisation and increased danger. "Even with full ideological support for Ukraine, venture funds have to consider the risk profile of their portfolio. Therefore, investments in Ukrainian startups fall into the highest-risk category. As a result, the number of such investments will be much smaller," believes Balkova.
She further explains that every venture fund has its own investment strategy, which determines the verticals in which the fund invests. The investment cycle of a fund typically spans three to four years. The full-scale invasion began a year and a half ago. "Funds that already existed at the time of the invasion cannot change their existing investment strategy to include military tech, unless it was originally part of their strategy. Moreover, military tech is a niche industry. Therefore, startups are limited by the strategies of existing funds and must either wait for newly established funds that include military tech in their strategy or focus on countries that historically were investing more in this direction, such as the United States and Israel, but not Europe," explains Balkova.
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