A panel organised by Startup Estonia and Invest Estonia at the recent Techarena conference in Stockholm looked at the European potential of start-ups operating in the defence industry.
The panellists agreed that there is room for companies of all sizes in the industry and that the New Nordic region is an important part of Europe’s defence landscape.
Estonian Minister of Economy and Industry Erkki Keldo, who opened the discussion, noted that the defence industry has become one of the fastest-growing industries in Europe and that Russia’s war in Ukraine has created new needs. “Whereas defence was a purely domestic issue just a few years ago, now the development of the industry and its capabilities is being discussed at the EU level, with cooperation and close interaction with our allies, especially in the New Nordic region,” he remarked.
Kati Pärn, the Nordic Partnerships Lead at Startup Estonia, added that in a field as capital-intensive as the defence industry, international cooperation makes the development of new technologies much more effective. “The countries in our region have enormous potential to become the hub of the European defence industry, because we understand the importance of bolstering our defence capabilities only too well,” she said. “That said, on their own, the New-Nordic countries are pretty small players, which is why working together will boost the chances of development success and attracting investments.”
Stefan Behre, the Deputy Chief Sales Officer at Milrem Robotics, pointed out that big companies have become somewhat set in their ways with their existing products and technologies, creating opportunities for start-ups with new approaches. “When a new field like robotics enters the market, industry doesn’t always jump on board at first,” he said. “But recently, large companies have started looking for ways to integrate robotics into their portfolio as well. They’ve realised it isn’t some fad, but a real direction with huge potential. That’s opened the way to new opportunities for collaboration.”
The panellists agreed that there is room for companies of all sizes in the defence industry. “As recently as a decade ago, the industry was the preserve of big players, since it requires a lot more capital and a highly skilled workforce,” Keldo explained. “But rapid developments in technology and the evolving geopolitical situation have created opportunities for smaller players who have fewer resources but the ability to adapt to unexpected changes and to think outside the box.”
For smaller tech companies, new opportunities are most likely to emerge in areas where complex platforms and industry support are not needed. For example, the defence industry is characterised at present by rapid technological advances in the cyber field, in autonomous systems and in dual-use technologies. The development of distributed sensing, smaller radars and new-generation weaponry is also promising.
The experts on the panel recommended that start-up founders use existing accelerators and support programmes to enter the defence technology market, as these help to launch a dialogue with actors in the Defence Forces and the defence industry.
Hampus Delin, Strategy manager at Saab, added that demand has been increasing rapidly. “Companies, suppliers and contractors need to adapt to meet it,” he urged, “and I do not think that this is a temporary spike. As an industry, we’re rapidly increasing our production capacity. And in parallel to increasing customer demand, there is a very fast technological development.
The panel noted that Europe’s defence industry start-up companies need more investments in order to develop and expand. “They’ve been finding it difficult to raise money from investors to grow and enter the market, because companies developing things like lethal technologies can’t get loans from banks, or else investors are afraid to take risks,” Keldo explained. “For example, in Estonia we’ve set up a 100-million-euro national defence fund through which, by investing in companies, we’re setting an example to investors and sending out a strong message: that the defence industry is a priority and that it’s important to inject capital into the sector. With the fund, the state is opening the door for the capital the sector needs to enter the market.”
Behre advised start-up founders in the defence industry to dare to be a little less perfect. “Over the last 30 years, the industry has been focused on making things as impeccable as possible,” he noted. “We want everything to work flawlessly. Processes are perfected when you have 30 years to develop new products, but we don’t have that much time. We have to be bold enough to take more risks, not strive for some ideal, but test solutions and keep working on them. That would help speed up innovation.”
The panel, entitled ‘The Future of Defence Technology: Revolutionizing Regional Capabilities’, was organised by Startup Estonia as part of the New-Nordic Deep Tech Valley initiative, which aims to establish Europe’s most successful region for deep tech start-ups to produce new technologies and export them around the world. The discussion was moderated by Kadri Tammai, the Regional Director of NATO DIANA.
About Startup Estonia
Startup Estonia is a governmental initiative within Enterprise Estonia. We work with different stakeholders to connect various sectors with the startup community. The Startup Estonia program is funded by the European Regional Development Fund.
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