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Estonia to create a €50M defence investment fund

Government to invest €50M to supercharge domestic tech for defence & dual-use applications, eyeing the ambitious goal of doubling the Estonian economy by 2035.

Estonia’s defence industry boom is here to stay. The Estonian government has approved a proposal by Prime Minister Kaja Kallas to establish a €50 million fund this year. The fund will invest in companies developing defence technologies or dual-use technologies through direct equity investments.

The fund will primarily invest in Estonian companies to reduce risks and make them more appealing to private investors. The Ministry of Economic Affairs and Communications will finalize the fund’s terms and conditions, which will be reviewed by the government in July.

Kallas explained that the fund aims to enhance Estonia’s security and promote economic growth by supporting local defence industry companies in developing and launching their products.

“Estonia has a very highly developed technology sector, but there is a market failure in the use of this capacity to increase our national security. The state can help with seed funding here,” she said, adding it will also create jobs.

Minister of Defense Hanno Pevkur welcomed the initiative as a positive move for Estonia’s defence industry and overall security, noting it could also benefit Ukraine. Estonia currently leads globally in direct support to Ukraine as a percentage of GDP.

Minister of Economic Affairs and Information Technology Tiit Riisalo said this will help double the volume of the Estonian economy by 2035. “New investments are important for the development of the defence industry, as they support the companies of the field in developing innovative technologies and marketing new solutions. In order to launch the funding operationally, we created the SmartCap national investment fund creating a new defence industry fund in addition to the already functioning Risk Capital Fund and Green Fund to manage investments. Those funds allow to involve private capital in the development of defence industry start-ups and deep-tech,” said Riisalo.

The upcoming fund is not the first effort from Estonia, which ramped up defence investments and has a thriving innovation sector.

Last year, NATO’s DIANA innovation accelerator initiated a call for private sector companies to propose technical solutions for defence-related challenges. Among the five new innovation accelerators, one is opened in Estonia and is managed by the Tehnopol Startup Incubator in collaboration with the Sparkup Tartu Science Park and Startup Wise Guys business accelerator. Nine companies are currently refining their solutions there.

Additionally, Estonia’s flagship tech conference Latitude59 put together a Defence DemoDay side event, which was hosted by the NATO Innovation Fund and Invest Estonia.

In Estonia, there’s innovation aplenty, and an evident deep desire to go all out for a more secure world. Send your request for e-Consulting and an advisor will reach out to help you line up investment opportunities.

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