By madmin 
Estonian tech investors are pointed out to both the direction of the Air Force and defense technology. The move takes place under the background of the situation when Russia is considered to be the main threat to the region, which results in the necessity to prioritize security and investment in defensive technology.
Figure earnings from Dealroom.co show an abrupt increase of 0.1% in the sector’s investments in venture capital in 2022 and 17% in 2024, which, together with the growth of investments in defense technology, highlight the sector as the most attractive for venture capital in Europe. The trend is on the side of a nearly $1 billion rise in investments in startups crafting and installing technology that helps in the area of defense, which consequently helps to reshape the investors’ focus and priorities.
Even though most of the available funds in this segment are targeted toward the western part of Europe, the shift of investments is still visible in the Central and Eastern European areas. The Ukraine war has stimulated a rise in the number of investment rounds in this region, which is threefold in comparison to the pre-war period, and it thus is clear that both investors and entrepreneurial efforts have been directed at improving the stamina in defense capacities.
Estonia being a member of the European Union and a NATO partner is in the forefront of the alliance’s eastern side. The nation can count their achievements in such technologies as Skype, Bolt, and TransferWise in addition to being a part of the Digital Single Market, and they are also providing their resources to strengthen the security in the Baltic Sea region with specific emphasis on Estonia.
The country’s rich businessmen who are able to invest in new defense organizations make it one of Estonia’s main advantages. They, in addition to providing the need themselves, come with invaluable experience in viral technology. Despite that, obviously, the geographical nearness of the related countries to the war zone provides a wonderful asset facilitating the connection with the front-line units thus making it possible to quickly check and utilize the latest defense systems.
Ragnar Sass, a founder of Darkstar, a group of tech entrepreneurs and former military personnel based in Tallinn, highlights the increasing interest in technologies used in battle that have immediate applications. Investors find thermal imaging for drones and new software systems as the key factors for investing because of their fast deployment in conflict zones as the main benefits of technologies such as Ukraine.
Sass notices a significant increase in the number of defense startups, stating that there are now approximately 100 such companies as compared to just 10 a few years ago. This dramatic success is both a result of the current global political turmoil and the belief of many people in the idea of defense being the place with the biggest potential for finding innovative ideas.
However, the transformation in the venture capitalists’ sentiment is not just limited to Estonia. Throughout the region, venture capital funds are replacing existing strategies with the inclusion of defense-oriented startups. Vojta Rocek, a physicist from the city of Prague who is a partner at Presto Ventures, says that his firm has newly collaborated with a Czech arms manufacturer, CSG, to establish their fund of 150 million euros, which is currently investing in companies producing new weapons and technologies for the defense industry.
Presto Venture has evaluated more than 1,500 proposals, connected with over 600 teams, and selected 60 startups since last spring. It is the culmination of this high volume of activity that has led to three closed deals, and three more are in the final stages of closure. Cybersecurity, quantum computing, and AI are the tech areas that are being invested the most in the field of defense, as Rocek says.
The rise of the venture capital craze in Eastern Europe is planned to tackle the financial difficulties that defense start-ups face. Traditional banks have been put off by environmental, social, and governance regulations, which are also the limitations of public funding, which is why they were loath to provide loans for this sector. Hence, the inflow of private money is plugging a critical hole in the defense innovation ecosystem.
Moreover, the presence of the governments of the area is very noticeable, and they are making provisions that are favorable to the trend. On the other hand, the Czech government has undertaken a project that will support small businesses in defense. The objective of the plan is to foster growth and encourage the birth of new defense ideas in the sphere of small enterprises. Like in the case of the Czech Republic, the Estonian government will soon reveal the 100 million euro fund designed to foster a defense tech industry.
SmartCap’s CEO and fund manager, Sille Pettai, whose company will be the one overseeing the Estonian government’s fund explains the plan of the defense sector in detail. One’s primary goal is to innovate a technology ecosystem and be globally competitive. We have already generated “patriotic capital” involving local tech affluent entrepreneurs in this idea that we are right now transitioning towards a technology-focused ecosystem. Another significant purpose of the Estonian defense sector in the near future will be to reach a turnover of 2 billion euros by 2030, which is quite a large growth compared to its current 500 million euros.
It is important to realize that defense technology is not just about dealing with the immediate problems of security; it is also regarded as a strategic investment in the country’s future. In the same way, she details, “However, keeping a state safe for its living is likely to take place at a great cost. We, besides, must think ahead and deploy our capabilities to their fullest, which is why we are talking technology.”
The strong technological foundation of Estonia, the region’s urgent security issues, and the surge of financial resources from the private and state sectors are the key forces that are driving the innovation in defense technology in the region. This development can not only bring to a higher level the security of the region but can also make Estonia and the neighbouring countries the pioneers in the field of defense innovation.
In this ever-changing nature of circumstances, the outcome of these investments in regional security, technological developments, and economic growth will be closely watched by lawmakers, investors, and defense professionals all over the world. The results of this development could be a light in the darkness for the other states that are experiencing similar security challenges by demonstrating the catalytic role that private sector innovations, when combined with national security organizations, can play in addressing national security issues.