Focus: Estonia's tech investors take defence into their own hands as Russian threat looms
Summary
Estonia leads central, eastern Europe in defence tech funding
Perceived Russia threat drives defence investment
Region's defence tech funding rounds tripled since 2022
Estonia aims to boost defence tech sector to $2 bln by 2030
PRAGUE, Feb 21 (Reuters) - Estonia, a Baltic country of 1.4 million people that has long punched far above its weight in the tech sector, is now leading central and eastern Europe's rush to fund defence projects spurred by Russia's 2022 invasion of Ukraine.
It is not hard to see why.
While heightened security concerns have boosted defence investment across Europe, nowhere is Russia's threat perceived so acutely as in Estonia and its Baltic neighbours, which border Russia and spent decades under Moscow's rule during the Soviet Union era.
"Philosophically, Estonians think about how to defend the country every day," says tech entrepreneur Sten Tamkivi.
The early-stage Skype executive told Reuters the war spurred him and his London partners to tap their 800 million euro investment platform Plural - which also includes TransferWise co-founder Taavet Hinrikus - for defence projects and others that support European sovereignty.
"We never came into this saying we want to do defence but growing tension in NATO's eastern flank is tactile," Tamkivi said, noting a growing number of defence pitches and foreign investors scouring for opportunities in the sector.
"We need to solve the urgent problem of defence first," he said.
For example, last July Plural joined the 450 million euro Series C funding in German AI company Helsing, which uses data to bolster defence, intelligence and national security systems, and has closed another defence deal so far in 2025.
According to data from Dealroom.co, the share of European defence tech investments has risen to 1.7% of venture capital funding in 2024 from just 0.4% in 2022, reaching nearly $1 billion.
Much of the money flows to western Europe but the number of funding rounds has tripled in central and eastern Europe since Russia invaded Ukraine in 2022, Dealroom.co data showed.
European Union member Estonia plays an outsized role in its eastern flank. As a home to several tech Unicorns - startups that reached a $1 billion valuation, such as Skype, Bolt, TransferWise and others - it has minted scores of wealthy tech executives with the financial heft to support emerging defence companies.
Its proximity to Ukraine also allows close cooperation with front-line units there to quickly test and tweak technology while the privately-funded groups in the Baltic nation are able to invest in purely military technologies. In contrast, in Poland - the region's biggest economy and major provider of military aid to Kyiv - many venture firms receive public funding which prevents them from directly financing military projects.
Still, funds supporting defence projects also emerge elsewhere in the region.
Vojta Rocek, a partner at Prague-based Presto Ventures, told Reuters his firm's new 150 million euro fund launched in partnership with Czech arms maker CSG plans investments in defence-focused startups.
Since last spring, the team has reviewed more than 1,500 pitches, held calls with more than 600 teams and short-listed 60 startups, resulting in three closed deals and three more nearing completion, Rocek said. He said cyber security, quantum computing and AI represent main areas of focus.
STRAIGHT TO BATTLEFIELD
Ragnar Sass, the founder of Tallinn-based Darkstar - a consortium of tech entrepreneurs and former military officers - told Reuters technology offering the best prospects of rapid deployment to the Ukraine battlefield such as drone thermal cameras and software systems is most appealing.
For example, Darkstar recently invested in drone data analytic company Farsight, said Sass who estimated defence startups numbered around 100 compared to 10 a few years ago.
"In the last few months there has been a big change among the sentiment of investors," said Sass, the founder of Estonian unicorn Pipedrive. "I haven't seen a sector developing as fast as I've seen now."
Growing venture capital interest across eastern Europe promises to fill a funding gap defence technology startups face because of banks' reluctance to lend on fears of falling foul of environmental, social and governance regulations, which also limit public funding, investors say.
"We were a little doubtful we would see enough pitch decks in the defence space but the number is growing each month," said Presto Ventures' Rocek. "Everybody woke up. People thought the war would end swiftly and it has not."
Governments in the region are also starting to act. The Czechs have launched a programme to co-finance small enterprises in the sector to spur its development, Radka Konderlova, the defence ministry official in charge of cooperation with industry, told Reuters.
In Estonia, the government last month launched a 100 million euro fund for the emerging defence tech sector, said Sille Pettai, chief executive and fund manager at SmartCap, which will manage the funds.
The longer term goal is to attract global investors to a tech ecosystem now supported by what she calls "patriotic capital" of local wealthy tech entrepreneurs. The Estonian defence industry aims to hit 2 billion euros in revenue by 2030, up from a current 500 million euros and with a focus on disruptive offensive defence technologies, she said.
"Defending a small country is expensive. We need to be smart and know where our strengths are, so we built on technology," Pettai told Reuters.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Belfast Telegraph
32 minutes ago
- Belfast Telegraph
‘It raises a lot of complicated questions': Drogheda's US owner opens up on impact of European nightmare
United co-chairman admits internal confidence around navigating Uefa's ownership rules were 'misplaced' but resolves to fix 'bump in the road' It was late Monday morning in Birmingham, Alabama when Ben Boycott, the co-chairman of Drogheda United, learned the crushing news that the club's European campaign was over before it had started. He immediately booked a flight to Ireland and told his wife he was going to be away until the weekend. The Court of Arbitration for Sport (Cas) hearing that confirmed Drogheda's fate, by standing over Uefa's decision to expel them from the Europa Conference League, may have been a six-hour virtual affair with scratchy connectivity, but Boycott knew the fall-out needed to be handled face to face.
Western Telegraph
34 minutes ago
- Western Telegraph
US strikes on Iran an ‘extraordinarily dangerous escalation'
Simon Harris, who is also Ireland's deputy premier, said an escalation in the 'tinderbox' region was more likely than ever and that the international community were at risk of 'losing all control' of the conflict. Irish premier Micheal Martin and Mr Harris both called for an 'urgent' de-escalation and a negotiated solution on Iran's nuclear facilities. They said they are in close contact with their European counterparts before a meeting of EU foreign leaders on Monday and of EU leaders later in the week. 'Diplomacy and dialogue is ultimately the only way to resolve these issues,' Mr Martin said. 'Iran should commit not to develop nuclear weapons and disavow its nuclear and uranium enrichment programme. 'Nuclear safety is an issue here, modern warfare is very destructive. It is civilians who ultimately suffer, and that is why we need an end to these wars and bring an end to conflict.' There is an urgent need for de-escalation, dialogue & diplomacy in the Middle East. Iran should unequivocally disavow the development of nuclear weapons. A negotiated solution is the way forward. We remain in close contact with international partners ahead of the EU Council. — Micheál Martin (@MichealMartinTD) June 22, 2025 Mr Martin said the escalation on Sunday should not draw attention away from the humanitarian catastrophe in Gaza. 'We shouldn't lose sight of the catastrophe that is still unfolding in Gaza while the war between Iran and Israel continues,' he said. 'What is happening in Gaza is appalling and a breach of international humanitarian law, and again, innocent civilians and children are being starved there, and we need that to come to an end.' Staff from Ireland's embassy in Tehran left the country on Friday as the embassy was closed, and updates are being provided on over 300 Irish peacekeepers stationed in Lebanon. Mr Harris said there were no plans to withdraw Irish troops and that 'decisions are being made constantly' to ensure their safety. When asked whether he supported Donald Trump's strikes on Iran, Mr Harris said: 'I think it's resulted in an extraordinarily dangerous escalation of a conflict that already best be described as a tinderbox. 'We're now entering a moment of particular danger, because I think the chances now of a spiral of escalation are more likely than ever before, and there is a real prospect now of the international community losing all control of this very, very volatile conflict.' He said there was only a 'very small' number of Irish citizens, many dual nationals, seeking an evacuation, and they were working with European counterparts. He said a significant update on this would be available in the hours ahead. 'Thank god we woke this morning to the International Atomic Energy Agency saying they haven't detected any increase in radiation,' he told RTE Radio. 'But imagine if we were waking up this morning to a situation where radiation levels were extraordinarily high, and the health and human danger that that would have presented far beyond Iran as well. So this is an extraordinarily dangerous time.' He said that it was 'sadly true' that international legal norms are not being adhered to, citing the Russian invasion of Ukraine, Israel's 'genocidal activity' in Palestine and now the Iran-Israel conflict. He said there was a diplomatic process in train and his understanding from readouts was 'there was a commitment from the Iranian side to further talks'. Mr Harris said Ireland and Europe are 'fully united in the clear view' that Iran should not be allowed to possess nuclear weapons. 'The way to address this was always through a negotiated solution. Any alternative to that is simply too dangerous for civilians, for the Middle East region and for global security. 'Together with my EU counterparts, we will in the coming hours and days discuss and review the latest developments and consider the next steps Europe can usefully play to support de-escalation.' Minister for Culture Patrick O'Donovan said people woke up on Sunday 'terrified, really, to be quite honest, about the prospect of what's unfolding'. He told RTE's The Week In Politics it is 'terrifying' for citizens in Iran and Israel. 'It does take great people to make leaps of faith in particular places in time to come forward, whether it was in relation to (Anwar el-Sadat) in Egypt, and later on in relation to Bill Clinton and what he did, we do now require people to actually get people around the table,' he said. 'Because ultimately, as the Taoiseach said, this is terrifying, not only for the innocent communities that are living in both countries, but as well as that for the neighbouring countries in the Middle East, who we obviously all hope are not drawn into a much bigger conflict.'
The Herald Scotland
44 minutes ago
- The Herald Scotland
Starmer steel deal shows Swinney how nationalisation should work
A compelling read it certainly wasn't but it helped pass the time before the sun started to go down and I could think about dinner. Economists have never agreed on the benefits of nationalisation and history is littered with failed examples, particularly in the UK. But the two leaders currently occupying Bute House and Downing Street certainly seem to be in agreement that it's a good thing. And in many cases it is good but it's what you do with the assets as a Government after it is been taken into public control that is the important thing. It is here that John Swinney and Sir Keir Starmer diverge dramatically if recent events are anything to go by. Last week, a £500 million five-year deal was struck between Network Rail and British Steel to help save the Scunthorpe steelworks. British Steel is to supply 337,000 tonnes of rail track, which will secure thousands of manufacturing jobs. Why this is important is that it comes just two months after the UK Government used emergency powers to prevent the blast furnaces from immediate closure. Transport Secretary Heidi Alexander, said it 'truly transforms the outlook for British Steel and its dedicated workforce in Scunthorpe'. British Steel is to supply a minimum of 337,000 tonnes of long and short rail. A further 80-90,000 tonnes is to be provided by other European manufacturers and deals are expected to be announced shortly, the Department for Transport (DfT) said. In March, Chinese firm Jingye, which bought British Steel in 2020, proposed to shut Scunthorpe's two blast furnaces and other key steelmaking operations. Alan Simpson: The new £144m electric rail line without enough trains Alan Simpson: Build more houses for rural Scots, not tax second home owners Alan Simpson: NatureScot may be threatening a rare mussel it should be protecting Alan Simpson: Scotland's tourism sector needs to be heard before it's too late This came despite months of negotiations and a £500 million co-investment offer from the UK Government. As a result, Jingye launched a consultation which it said would affect between 2,000 and 2,700 jobs. In April, the UK Government used emergency powers to take control of British Steel and continue production at the site. The Scunthorpe plant has been producing steel for Britain's railways since 1865. The Network Rail contract, worth an estimated £500 million, starts on July 1 and is set to provide the company with 80% of its rail needs. To ensure security of supply, Network Rail is set to award smaller contracts to some European manufacturers, who will supply specialist rail products alongside British Steel. The agreement is the first major public procurement since the emergency legislation was passed. Both Network Rail and the Scunthorpe steel plant are both owned by the UK Government and the swift deal is clearly a direct benefit of being nationalised. No need for public procurement rules when both sites are state-owned. The Government sees it as being complimentary to the UK and US trade deal which aims to lower tariffs and protect jobs across key sectors, including steel. The deal also compares to the complete and utter horlicks that the Scottish Government has made following nationalisation of key industries. Ministers, of course, took over the stricken Ferguson Marine shipyard in Port Glasgow in 2019 after it collapsed into administration. It seemed to be the right decision as the shipyard's main customer was the state-owned ferry body CMAL, so a steady stream of orders should have been expected. Instead the yard is facing an uncertain future after losing out on several publicly funded ferry building contracts. Now ministers have even halted a vital subsidy for the yard that is needed to bring in vital work to keep it alive, it can be development has raised alarm that the yard will not survive beyond any delivery of the much-delayed and over budget CalMac ferry Glen Rosa. The yard's business plan to 2029 assumed that the Scottish Government would sanction a direct award of the small vessel replacement programme. It was an integral part of a plan to deliver a 'sustainable, profitable, efficient and competitive yard'. After it was decided that the £175m contract would go to a competitive tender, CMAL, the state-controlled ferry procurer declared in March that the job to build seven new loch-class electric ferries would go to Poland .It previously awarded two other ferry contracts worth to £220m to Cemre Marin Endustri A.S (Turkey) - with Ferguson Marine again losing out. Transport secretary Fiona Hyslop confirmed a 'substantial subsidy' was needed to allow it to get a direct uncontested contract to build seven new small ferries and secure its future. But she admitted in correspondence with former community safety minister Ash Regan that that subsidy was not justified. Ms Regan has raised concerns that it was 'not the direct award that's the issue it's the unwillingness to put public money behind a public asset'. Ferguson Marine has been dogged with issues with the delivery of ferries Glen Sannox and Glen Rosa which were due online in the first half of 2018. The last estimates suggest the costs of delivery of the vessels for CalMac will have soared to more than five times the original £97m cost. The shipyard firm currently employs more than 400 staff including over 100 sub-contractors. Goodness knows how they must be feeling, knowing full well that the Scottish Government is in the process of sinking the yard once and for all. For all the arguments against nationalisation, no book on economics will ever list sheer incompetence by Government ministers as a reason it will fail. While there are very good reasons that the yard is struggling, one of the main reasons is the sheer complexity of the two ferries which have made them very difficult to build. As it was the current administration that insisted on the specifications of being dual fuel and 'green' then it seems extremely harsh for ministers to now throw the workforce under a bus. Sir Keir Starmer's Government has shown exactly how nationalisation should work for the benefit of the workforce and the economy as a whole. For it to be a success, there has to be a will, strategy and above all, economic competence amongst ministers. Ministers at Holyrood have shown none of that and the Ferguson's workforce and islanders have been left high and dry as a result.
