Estonia launches €50M fund for investment in defence startups and dual-use technologies

Estonia will create a €50M defense industry fund, aimed to invest directly and through private funds in companies developing defense-related or dual-use technologies. If the fund proves successful, its size can be increased. The defense industry fund will be launched this year.

The defense industry fund aims to strengthen Estonian security, create more jobs, and accelerate the development of the Estonian technology sector. Financial support of defense companies and startups, developing dual-use technologies, and bringing new solutions to the market can facilitate the goal of the Estonian economic plan, published in March, to double the size of the Estonian economy by 2035.

The main focus will be on startups operating in Estonia. Investments will be made at a level that reduces excessive risks for the startups and makes them attractive for private capital. 

The idea to create the fund belongs to Prime Minister Kaja Kallas and was supported by the government. The detailed terms and conditions of the fund will be developed by the Ministry of Economic Affairs and Communications, and the government plans to discuss them in July.

According to Tiit Riisalo, Minister of Economic Affairs and Information Technology, Estonia has established the SmartCap national investment fund to operationally launch the funding. To date, SmartCap manages two funds: Risk Capital Fund (Venture Capital Fund) and Green Fund, which allow defense industry and deeptech startups to attract private capital.

Defence Minister Hanno Pevkur also added that the development of the Estonian defense industry can be accelerated by the military aid provided by Estonia to Ukraine. He believes that providing Ukraine with Estonian defense products allows Estonia to collect valuable experience on the battlefield.