Estonia’s proves its commitment to foster innovation in the defence sector, as the government announces plans to increase the Defence Industry Fund to €100 million.
The move, revealed by Prime Minister Kristen Michal as part of the new budget, was proposed by the Minister of Economy and Industry, Erkki Keldo and builds upon the earlier initiative to establish a €50 million fund, announced this spring,
It will make direct investments in companies that develop or produce products and technologies for military use, as well as take stake in funds that focus on high-added value sectors and DeepTech. The fund is managed by the national management company AS SmartCap, and the first investments are planned to be made at the beginning of next year.
Prime Minister Michal, in his address to the Riigikogu on the 2025 budget, emphasized the significance of this expansion: “Defence will grow into a new branch of industry that unites the country’s defence potential with opportunities for economic growth, since we plan to double the size of the Defence Industry Fund to 100 million euros.”
Estonia, already one of the most committed NATO members, sees defence not just as a necessity, but as a catalyst for economic development and technological advancement. The expanded fund aims to supercharge local defence tech sector, particularly by investing in companies developing defence and dual-use technologies, which have more challenges obtaining financing.
“To ensure the security of the Estonian state, increasing the defence fund is an important step and also a message to investors — the contribution made by the state is an example and gives private sector funds greater confidence in making investment decisions,” explained Minister of Economy and Industry Erkki Keldo. He added that with the support of the fund, Estonian defence industry companies will have the opportunity to develop and bring to the market innovative products that will strengthen Estonia’s security and also contribute to helping Ukraine.
Estonia’s increased investment in defence technology comes at a crucial time. The country continues to lead globally in direct support to Ukraine as a percentage of GDP. “We have pledged 0.25% of our GDP, which is itself around €100M, to help Ukraine each year, so over four years this will amount to €400M. This is an opportunity for our defence industries to develop and produce what Ukraine needs to fight Russia and defend the freedom of the whole of Europe, including our own,” noted Michal.
Beyond that, Estonia’s defence tech ecosystem is already showing signs of vibrant growth on its own. NATO’s DIANA innovation accelerator has established a presence in Estonia, managed by the Tehnopol Startup Incubator in collaboration with other key players in the startup ecosystem. The flagship tech conference Latitude59 now features a Defence DemoDay, highlighting the increasing focus on defence technologies in Estonia’s tech scene.
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