Estonia investing €30 million in NATO Innovation Fund

The €30 million from Estonia will go towards the one billion euro-total the NATO Innovation fund will have at its disposal.
The €30 million from Estonia will go towards the one billion euro-total the NATO Innovation fund will have at its disposal. Source: Rafael Pol/Unsplash

Estonia is to contribute €30 million in investments into a newly-founded NATO fund aimed at developing dual-use tech.

The NATO fund will total €1 billion across the alliance and will go towards innovative solutions in defense tech that also has a non-military application.

The €30 million is to be invested into the NATO Innovation Fund, announced last year, via the state fund management company SmartCap, following a decision by the government to authorize IT and foreign trade minister Kristjan Järvan (Isamaa) to forge ahead with the project.

Järvan said: "The present-day security situation has significantly increased the need for new tech, in the field of defense. In my opinion, the Estonian defense industry has a very large growth potential; I was convinced of this fact at the recent Garage48 defense hackathon, and I believe that our companies have plenty to offer our allies."

"On the other hand, underfunding of dual-use and advanced technologies is a problem across Europe. The NATO Innovation Fun will heighten cooperation between member states and offers a secure financing option for the development of strategically important areas," Järvan went on, via a Ministry of Economic Affairs and Communications press release.

Meanwhile, SmartCap fund manager Sille Pettai said: "In Estonia today, we boast a successful landscape of innovative tech companies, an outstanding business environment and a strong defense and national defense policy."

"However, we still need to build bridges … and we still lack a well-functioning tech firms ecosystem of operating in the field of defense," Pettai went on.

"SmartCap considers the contribution of the NATO Innovation Fund important to create, for companies and venture capital funds alike, the prerequisites needed to attract money from supra-national strategic funds, plus to gain access to a unique network and potential client base."

The NATO Innovation Fund overall gives member states the opportunity to observe new technologies on the horizon and to find and invest in companies with both clear commercial viability plus potential for dual use and thus possible security and defense output.

This will all aid NATO to maintain its technological superiority and secure its position as a carrier of technological innovation on the world stage, Sille Pettai said.

SmartCap's purpose is to create and finance new companies developing deep technologies with dual, i.e. civilian and military, use.

A lack of willingness to provide what is known as patient capital, aimed at the development of capital-intensive deep technologies makes the funding of deep tech focused on the defense industry, the ministry argues, adding this effect is particularly pronounced in the case of firms whose client is the state, as in most cases the state is not prepared to buy prototypes, but wants ready-to-go, working solutions.

The NATO Innovation Fund will total one billion euros, following an agreement signed at last year's Madrid Summit, by 22 of the current 30 member states.

Investment rounds utilizing the fund begin late on his year, while the advent of participation in the NATO Innovation Fund is also provided for in the government's action plan for the years 2022-2023, the economic affairs ministry says.

The one billion euros will go to early-stage start-ups and other venture capital funds, developing dual-use emerging technologies of priority to NATO, such as artificial intelligence, big-data processing and quantum-enabled technologies.

The fund complements NATO's Defense Innovation Accelerator for the North Atlantic (DIANA).

Editor's note: While the Riigikogu was dissolved the week before last ahead of this week's elections, the Reform/Isamaa/SDE coalition remains in office in a caretaker role until a prime ministerial candidate is appointed by the president, a new coalition deal is inked, regardless of who it involves, and an assembled coalition passes a vote at the new, XV Riigikogu.


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Editor: Andrew Whyte

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