In early May 2025, Toru Tokushige was alone in his Tokyo office when the general came knocking. It was the Golden Week, Japan’s biggest holiday, and everyone else was on vacation.
Manabu Shimamoto, a retired major general, had come to implore the 56-year-old CEO of Terra Drone to help secure Japan’s future. Their country desperately lacked drones, Shimamoto explained. Small drones. Cheap drones. Drones that could literally fly off the production line. Drones that could swarm and kill.
Tokushige, whose publicly listed drone company has been entirely civilian since its inception in 2016, had spent years researching the military side of the industry. Thrice he’d looked into the market, and thrice had chosen not to pursue. It was too complex, too archaic, with too much red tape. But now the defense ministry was calling for new companies to enter the fray. Japan had Russia, North Korea, and China to contend with. The military needed someone who could work faster than the traditional big defense firms like Mitsubishi and Kawasaki, Shimamoto told him — someone willing to take the risk.
By the end of their three-hour meeting, Tokushige tells me, he’d decided he was going to become a defense contractor. He just had to figure out how.
“It’s dramatically changed in terms of the landscape of engagement, the landscape of opportunities, compared to 10 years ago,” says Jerry McGinn, director of the Center for the Industrial Base for the think tank Center for Strategic and International Studies. A decade ago, he says, most defense startups could only get a foot in the door through a select few grants and programs. Now, military agencies are setting up offices in Silicon Valley and other tech hubs, hosting pitch days for entrepreneurs, and offering incubator programs for promising startups. In December 2024, the Department of Defense launched the Expedited Research Innovation System, an initiative that invites startups to submit 7-minute pitch videos to the military. At least 153 companies have since been vetted and introduced to the government, says Jennifer Thabet, director for the Defense Advanced Related Projects Agency’s small business programs office.
Tokushige says his startup’s “minimum goal” is to become the top interceptor drone maker in Japan.
Noriko Hayashi for BI
“If you don’t cast a wide net and take a bunch of small bets to figure out what’s going to pay off, you are going to be missing opportunities,” Thabet says. “No longer can we afford to take calculated risks. We have to swing big.”
Attitudes toward working in the defense industry have also dramatically shifted.
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Before the Ukraine War broke out, it was more acceptable for a tech entrepreneur “to run a porn site than to work in defense.”
“If you asked me 10 years ago what I thought of when I heard ‘defense contractor,’ I’d have pictured a shady arms dealer,” says Anastasis Leonidou, a former tea shop owner who now sells portable batteries to the UK military.
Before the Ukraine War broke out, it was more acceptable for a tech entrepreneur in Sweden “to run a porn site than to work in defense,” says the Stockholm-based Karl Rosander, who previously founded a podcasting platform and now sells interceptor drones. “Now, actually, when you tell people you work in defense, you get a hug.”
I spoke to five veteran business owners in Europe, Asia, and the US with no prior experience in military contracting who are now pivoting their careers to build defense firms. They say the industry is slow and plodding, and believe they can still make it big, banking on the move-fast-and-break-things ethos that led to their success in previous ventures.
Tokushige describes himself as a born rebel against traditional Japan. The son of a steelworker from the rural town of Yanai, he spent his early life studying to become an engineer at the local chemical plant — then defied his father’s wishes upon graduating in 1996 to start a finance career in Osaka. Five years later, he moved to Arizona in 2001 to pursue an MBA.
That choice turned out to be his biggest regret. The internet began its meteoric rise just then, and Tokushige still grieves over having missed it while in school. He became obsessed with avoiding the same FOMO sting, and worked for several years at a Silicon Valley startup, then returned to Japan to found the electric-bike company Terra Motors in 2010. Then, predicting a coming age of robotics, he launched Terra Drone in 2016; it’s now listed on the Tokyo Stock Exchange with 650 employees and a market capitalization of $800 million. To catch the electric car craze, he founded Terra Charge after the COVID-19 pandemic.
Now, he’s confident that the business of war is the next world-changing trend.
But he also knew that waiting a year for tender requirements from the Japanese military would kill any chance of momentum for Terra Drone. “Such a passive way of doing business,” Tokushige tells me of the bureaucracy he faced. “It’s not good.”
Drone warfare evolves in months, if not weeks. A nation at peace builds its defense industry on theory, he surmised. He needed one that was built on war.
“Japan needs its own Elon Musk,” reads a slide in Tokushige’s corporate deck, “and I intend to be that person.”
Noriko Hayashi for BI
Tokushige first arrived in Lviv in Western Ukraine under a gloomy mid-September sky. His aim was to attend a defense conference at the local soccer stadium, run by Ukraine’s Brave1 startup incubator. For security reasons, he was told the location on the day the conference started.
“I was the only Asian guy there,” he says. On his own — none of his staff would risk entering a wartorn country at the time — the CEO set up a booth and swapped business cards with 136 companies. He was amazed at the blistering pace of Ukraine’s drone industry compared to back home. The locals produced millions of drones a year, while Japan aimed to make 80,000 annually. More importantly, drone tech there was adapting so quickly that Ukrainian engineers were contending with a new phase of innovation every few months.
What I’m offering is not a theory. I’ve got product proven, bodies stacked.Troy Smothers, a real estate entrepreneur who now sells drone tech
Tokushige’s plan was to first build a drone under Ukraine’s lightning-fast industry, then deliver a working, proven product ready for the Japanese defense ministry to see.
With Ukraine’s battlefield now the Holy Grail of weapons testing, startups arrive by the horde, hoping to put their tech in the hands of fighters. Last year, Ukraine said at least 500 foreign startups opened offices in its territory.
Troy Smothers, a Utah real estate entrepreneur and Marine veteran, has traveled to Ukraine nine times since 2022. First, he visited as a medical and IT volunteer, then as a defense tech advocate, helping deliver US-made fiber-optic cables to Ukraine’s workshops and front lines to help attack drones fly through jammed areas. Months of testing with the Ukrainians helped him build his own design for a fiber-optic attack drone.
Smothers now thinks he can use his extensive experience “putting warheads to foreheads” in Ukraine to sell cheap drone tech to the Pentagon. “What I’m offering is not a theory. I’ve got product proven, bodies stacked. This works,” he says. He’s started a 501(c)(3) called American Made Freedom, and is fishing for around $30,000 in funding to build manufacturing for drone parts and fiber-optic kits.
Troy Smothers, who was a sergeant with the USMC, still travels regularly to Ukraine while seeking to build his startup in Utah.
Troy Smothers
“Financially, it’s been difficult because I’m all in,” Smothers tells me on a video call from his office in Salt Lake City. A stout Mormon with laugh lines etched into his cheeks, he showed me his collection of AR-15s, and on the wall behind him were a pair of attack quadcopters beside his 7-year-old’s drawing of an insect. He’s been sleeping there since his wife of 14 years divorced him last year, over what he says was too much time and money spent in Ukraine.
To keep his drone dream going, Smothers says, he’s burned through life savings and precious metals investments. He’s sold six collector’s cars worth about $10,000 each, and much of his work now relies on donations. This year, he secured a partnership with Brave1.
He believes that his crusade for fiber-optic drones was given to him by God. He’s been called, as he says, to be a “sword to defend the innocent.”
“I’m not smart enough or capable enough to have done what I’ve done. Who walks away from my 19-year career to do what I was inspired to do? I wouldn’t have left my kids, it was crazy to leave my kids,” he says. “You only get one chance, brother, to be on the right side of history.”
Thriving on the right side of history when competition is tight, however, is another story.
In Lviv, Tokushige saw that dozens of manufacturers were already making light attack drones: the type seen destroying tanks and killing men every day on the front lines. Anyone could assemble one, Tokushige thought.
What caught his eye, instead, were interceptors, which were more expensive and harder to make. The Ukrainians built them faster and nimbler, engineered to chase down and catch Russian Shahed attack drones in the air. Born out of a desperation for an affordable way to protect Ukraine’s skies, the tech had cut the cost of anti-drone defense — traditionally reliant on high-end missiles — by orders of magnitude.
If one of Japan’s neighbors wanted to attack from across the ocean, waves of cheap drones like Shaheds would probably be a top choice, Tokushige surmises. His country, and the rest of the world, needed a cheap counter.
The fit seemed natural for Tokushige. Most Ukrainian interceptors were still piloted by humans, meaning that a crew still had to drive out to deploy them. Terra Drone sold software for managing drone traffic. The Ukrainians could provide the hardware, and Tokushige wanted to provide its brains: software that turned the drones into autonomous swarms. He plans to invest an initial $10 million from his firms to build the code, which he hopes will be finished by 2027.
If he’s fast enough, he says, a Ukrainian drone with autonomous Japanese software would give him more than an edge in the market.
“In terms of interceptors, we would become the No. 1 in market share,” he tells me. “That is our minimum goal.”
For six months, Tokushige shuttled in and out of Ukraine nine times, meeting with interceptor drone companies in Lviv and Kyiv. Back home, he estimates he’s visited the Japanese defense ministry’s headquarters in Ichigaya more than 50 times.
He plans to eventually expand from interceptors to an entire fleet of products: jet-powered drones, drone boats, reconnaissance drones. Tokushige’s corporate deck is telling of his ambition. “Japan needs its own Elon Musk,” Slide 91 says, captioning a photo of the SpaceX and Tesla owner. “And I intend to be that person.”
This world-changing boldness is shared among many upstart founders angling to win over the defense industry.
Rosander, the Swedish entrepreneur, who previously ran the podcasting company Acast (which posted a revenue of $273 million last year) and the monetization platform Sesamy, started Nordic Air Defense in March 2024. He was inspired by the war in Ukraine, after following it on Twitter for hours after work every night and fretting the same could happen in his own country.
Sweden’s Nordic Air Defense tests its interceptor drones. Cofounder Karl Rosander previously ran a podcasting platform.
Courtesy of Karl Rosander
Like his Japanese competitor, he’s started with a low-cost interceptor (made mostly of carbon fiber), and plans to expand dramatically from there. Rosander’s long game is to eventually compete with the likes of Raytheon and Lockheed Martin and become the next defense prime. This is a bit like saying someone who just launched a flag football league saying they’ll build the next NFL dynasty. He remains undaunted.
“I get things done,” he tells me. “You can give me anything. You give me the best idea you can come up with. I promise I will make it successful.”
Whenever Rosander has met with defense executives, he’s found them unnervingly comfortable with working at what he considers a glacial pace. “I presented what I was doing,” he says. “And they told me: ‘Karl, you don’t have anything to do with this industry. It works like this. We eat dinners and have long-term relationships.'”
“I understood then,” he adds. “They were afraid of me.”
“You can give me anything. You give me the best idea you can come up with. I promise I will make it successful,” says Rosander.
Courtesy of Karl Rosander
Rosander does admit he didn’t understand how difficult it is to break into defense. It’s something the entrepreneurs I spoke to repeatedly brought up: the maze of bureaucracy and trust-building far more complicated than their previous careers.
Leonidou, who ran a chain of tea shops in London before leaving the business amid the COVID pandemic, now sells large, portable batteries to the UK military through his new firm, Solus Power. His team, he says, initially had to learn how to navigate the industry’s many restrictions and regulations from the ground up. Simply getting meetings with the defense ministry required them to get through a mountain of protocols.
“It’s been such a learning curve that I don’t think we really had any expectations apart from people in a lot of camo turning up for meetings,” says Leonidou.
Joakim Sjöblom, a Swedish entrepreneur who sold his fintech firm in 2024, pivoted to defense that same year, just as Sweden joined NATO. His startup, Sweden Ballistics, or Swebal, is building a manufacturing plant to supply Europe the TNT he says the continent desperately needs (China controls most of the world’s TNT sales). But the process to break ground has dragged on for more than a year, as Sjöblom has navigated a litany of regulations: surveying the ground for ancient remains and geological deposits, building a new road, measuring the impact of an accidental explosion, and checking for endangered species. He was granted an environmental permit in December, but had to wait until late summer to cut down the nearby trees in case of nesting birds. He’s also unable to plug water holes, to protect local frogs.
Sjöblom, pictured here in the center, and his team are building their TNT factory on this patch of forest in Sweden.
Åsa Sjöström for BI
But Sjöblom, unfazed, tells me he feels a sense of urgency to help secure Europe’s future. “My son just turned three, and my daughter 10 months. I don’t ever want them to experience an armed conflict,” he says. His plant is on track for production in 2028, he says.
In Japan, Tokushige worries that even after manufacturing in Ukraine, traditional government processes would remain painfully slow. After his dozens of visits to the defense ministry and a year’s wait for the military’s specifications, officials would still have to settle on a budget, then take at least one or two more months to deliberate on a contract winner. Only after securing a contract would Terra Defense be expected to deliver a product — six months later.
“It would be a very, very long history,” he says.
In late March, Tokushige beamed before a crush of reporters in Kyiv, as he announced Terra Drone’s partnership with a Ukrainian interceptor drone company, Amazing Drones.
“In Japanese mentality, I am a crazy guy,” Tokushige says.
Noriko Hayashi for BI
“A friend in need is a friend indeed,” Tokushige told the crowd. In the months since, he’s consolidated Amazing Drones and another Ukrainian interceptor startup, WinnyLab, buying 50% stakes in each firm. Terra Drone is now working on three different drones.
Tokushige has now settled into a more comfortable pace in Ukraine, learning to stop taking shelter every time his phone alerts him of a drone attack, though he stays in hotel rooms on lower floors to reduce the chance of a Shahed crashing through his window. His wife and two adult daughters no longer fret constantly about his safety, he says.
The defense bet is already starting to pay off. Terra Drone’s share price was 12,670 yen when the market opened on Thursday, surging 499% year to date. It’s also secured a small order of 300 general-purpose training drones for Japan’s defense ministry, to be delivered in September for about $732,000.
Meanwhile, Tokushige is leaving much of the work at his other companies in the hands of his staff. As he buses in and out of Ukraine, his two private companies, Terra Motors and Terra Charge, are both preparing for an initial public offering.
“In Japanese mentality, I am a crazy guy,” he tells me.
For Japan’s would-be Elon Musk, crazy has gotten him this far.
Matthew Loh is a senior reporter at Business Insider’s Singapore bureau, primarily covering defense and how the war in Ukraine is rapidly changing battle technology and tactics.
Business Insider’s Discourse stories provide perspectives on the day’s most pressing issues, informed by analysis, reporting, and expertise.
