The primary objective of the Defence Fund is to strenghten Estonia’s defence industry, foster innovation and drive economic growth by investing in companies developing military or dual-use products and technologies.
“Estonia’s domestic defence industry is crucial for national security and economic competitiveness," said Erkki Keldo, Minister of Economic Affairs and Industry. "This fund represents one of the most ambitious industrial growth strategies in Estonia’s history. Moreover, a Defence Fund of this size can serve as an example in Europe, as we increasingly see the need to attract capital for the development of military and dual-use technologies.”
The Defence Fund makes direct investments in seed, early-stage, and growth-stage defence companies that develop or produce military and dual-use products and technologies. Additionally, the fund invests in venture capital and private equity funds, helping to bring new defence-focused investment funds to the market and increasing the diversification of capital supply in the defence sector.
The Defence Fund invests in companies alongside private investors, sharing and mitigating risks associated with developing defence technology. “The Defence Fund will provide new momentum for the economy, creating high-value jobs and maximizing domestic defence industry production, while also supporting Ukraine,” added Minister Keldo.
“The launch of this Defence Fund is a bold and necessary step in strengthening Estonia’s security and advancing our defence capabilities,” said Hanno Pevkur, Minister of Defence. “By establishing the fund, Estonia is leading by example in Europe, demonstrating how nations can strategically align their defence priorities with economic growth and technological advancement. This initiative also reflects our unwavering solidarity with Ukraine, as we channel resources into solutions to help Ukraine on their path to victory,” added Minister Pevkur.
Kalev Koidumäe, head of the Estonian Defence and Space Industry Association, said that attracting additional capital provides new opportunities for the development of new innovative products in the field of defense and security, which creates additional jobs and stimulates the economy. “The establishment of the Defence Fund is a key component of the defence industry ecosystem, enhancing Estonia’s business environment and making it more attractive to foreign companies and investors. It also serves as a recognition of the defence industry sector and its growing importance.”
According to Sille Pettai, head of SmartCap, the primary goal of the Defence Fund is to lay the foundation for the development of Estonia’s defence industry by providing equity investments to companies that offer innovative technological solutions to meet the growing defence and security needs across Europe. To achieve this, the fund will invest in companies and funds alongside private investors, making the defence sector more attractive to private capital through risk-sharing mechanisms and a clear signal to entrepreneurs that local defence technology development, industry growth, and export capacity are strategically important for the country.
The Defence Fund primarily invests in Estonian companies, but it may also invest in companies from NATO member states if there is a clear strategic interest for Estonia. Estonian companies and private sector funds with a strong Estonian presence are prioritized in the transaction flow. Investment sizes are anticipated to be up to €10 million per company and €20 million per fund.
The Defence Fund is part of a broader defence industry ecosystem that supports innovation and technological advancement.
More detailed info about Defence fund:
Defence Fund Direct Investments - SmartCap
Defence Fund - SmartCap
