Estonia increases size of Defense Fund to €100M

The Estonian government has doubled the funding of the Defense Fund, established in May 2024. Its size has now increased to €100M. 

The fund, which is managed by state-owned investment company SmartCap, will focus on direct investments in defense companies and startups, as well as financing specialized venture capital funds.

There are a number of requirements for participants of the Fund. For example, companies and fund managers must be registered in NATO countries and have no ties to countries under international sanctions. All investment projects require the participation of private investors, and the share of their investments should be at least 30% of the total volume. 

According to Sille Pettai, the head of SmartCap, the fund will focus on attracting private investments in the Estonian defense sector. Therefore, despite the fact that priority is given to Estonian companies, the fund may consider investments in NATO countries as well. The main thing is that they must meet the strategic interests of the Estonian defense system.

The fund will continue to operate as long as it has free capital. In addition, SmartCap has the right to change the terms of investment or close the program completely.

According to Estonian Prime Minister Kristen Michal, the work of the Fund will help strengthen the country's defense industry and economy. He specified that defense spending will increase to 5% of GDP in 2026.

Representatives of the Estonian defense industry also supported an increase in the size of the Fund. Kalev Koidumäe, who heads the country's Defense and Space Industries Association, said the initiative would make Estonia more attractive to foreign companies and investors.