Finnish defense tech on the rise

The ground is ripe for capitalising on the Finnish tech sector which has mostly been focussed on gaming technologies and telecom innovation. There are 368 defence tech companies in Finland of which 144 are startups that are ready for a major upscaling where 5 of those startups are worth over 1 billion USD. Not surprisingly Helsinki has been redubbed as one of the 5 top defence tech hubs of Europe. With an expected turnover of over 2 billion EUR these startups are expected to grow substantially in the coming years.

The Finnish Government pitched in with EUR 120 million and Business Finland launched a designated programme to support this new trend in startups, which by now have over 5 companies worth more than USD 1 billion.

As the EU plans to spend EUR 800 billion on defence in the coming years that signals a big opportunity for a Finnish expertise, the high tech industry.

According to a report published by Tech Data Dealroom in February 2025, Helsinki has become the fifth largest city in Europe attracting startups and venture capital within the defence sector.

The changes in the geopolitical landscape and increased military tensions, the Ukraine war and lastly

Trump's presidency, have all contributed to an increased interest in military technology, coupled with NATO member countries ramping up their defence budgets. Capitalising on the Finnish tech sector which has mostly been focussed on gaming technologies and telecom innovation, startups in defence technology have been “on steroids” as one respondent stated in an interview with the BBC.

The tide has changed for defence tech companies in Finland. Before the Ukraine war, investors had ethical and environmental concerns when investing in dual tech companies, that is companies that produce technology that could be used for gaming or simulations, and found use for defence and military purposes. After the Ukraine war investors seem to have no such concerns.

One example of a dual purpose technology company is Varjo, a Finnish startup that develops advanced headsets equipped with multiple cameras, eye-tracking technology, and electronics designed to simulate high-stakes military operations. These goggles are utilized for training soldiers in combat scenarios and are employed by NATO forces in both the United States and Europe..

An example of how Finland nurtures the growth in defence technologies is the defence Tech Hub in Espoo. A tech network based in Otaniemi, it is a hub connecting high tech companies such as Iceeye, IQM, a global leader in radar technologies), and Aalto University. Iceeye which is a global leader in synthetic aperture radar (SAR) satellite imaging for high-fidelity earth observation, provides the user with realtime images in high resolution of up to 25 cm. The technology is proprietary for Iceeye as it uses microwaves that are projected from a satellite to earth and back. The advantage of using a microwave technology is that the waves can penetrate cloud cover and therefore weather and light conditions do not deteriorate the image. Since 2018 Iceye has launched 48 satellites, the last launch being in March 2025. Iceeye was founded in 2012 and through a series of funding rounds, increased its venture capital from its initial 2.8 million USD in 2015 to over 500 million USD in December 2024.

Iceeye started as a tech company primarily focused on providing real time satellite images that can be used for environmental purposes, natural catastrophe monitoring and ground observation, but has found a new use for military and defence purposes. With NATO, Japan and Ukraine among its customers, Iceeye started generating revenue in 2017 and reached the 100 million USD revenue goal in 2023, and has grown from a handful of employees in 2012 to over 700 in 2024. Among its investors are companies such as BlackRock and Blackwell in the US, both prominent hedge fund investors in defence technology. The company has filed no less than 81 patents and the total number of investors are 35. The Finnish government agency, Business Finland granted the company 47 million USD June 19.

Another example is IQM which was founded in 2018 as a quantum computer company. Initially the company focused on building a quantum supercomputer, which has since found use for military and defence purposes. In fact to such a degree that the chief technology officer for the US Department of defence paid a visit to their headquarters in Finland in June 2024. The founders of IQM, two computer scientists, secured venture capital funding of 11.4 million EUR in 2019, which at the time was the highest seed capital raised by a startup in Finland. In the seven years since its inception the company has grown to a value of over 200 million USD, has filed over 300 patents, with more than 300 employees and operates in 9 locations including Japan, South Korea and Germany. Its product was initially a very large and powerful computer used in science, but has now found use as the most powerful and reliable computing system to operate military and defence operations.

Dual purpose or single purpose?

While ethical and moral considerations may prevent investors from backing companies that produce goods exclusively for warfare, these restrictions generally do not apply to dual purpose companies—particularly since the invasion of Ukraine. As a result, the surge in scaling up dual purpose firms has been largely driven by investors eager to take advantage of rising military budgets across the EU and NATO. A study done by TESI, a Finnish industry investment institute showed that more established Finnish miltech companies such as Patria and Bittium demonstrate modest growth measured by single digits while the dual purpose startups grow by 30-40% from year to year, attracting investors eager to claim a stake in their newfound military purpose.

The greatest increase has been in dual purpose startups that develop augmented reality and virtual reality as well as startups that develop software used for communications and logistics solutions that can be sold equally to the civilian and the defence market.

Product development for miltech companies (single purpose products for military use only), is slower than in dual purpose products. The reason according to the TESI study is that for single purpose products, the domestic market, that is the Finnish defence Forces (FDF), lack formal processes to support the development of innovations. Even if having the Finnish defence forces as their customer, it seems problematic getting feedback from the end user to understand in what environment and how the product was used. Therefore as venture capital gravitates to dual purpose startups, the older more established armaments manufacturers in Finland grow slower and do not display the same type of innovation as the startups.

Even if the growth spurt is most prominent in dual tech startups, the older more established miltech companies such as Patria, have enjoyed growth in the years since the Ukraine invasion. Over a five-year period, Patria has demonstrated consistent growth, driven by Finland’s defence modernization efforts and the company’s expansion into international markets. Revenue in 2024 marked the highest in Patria’s history, reflecting a strong recovery from the challenging year of 2020, when sales were approximately €510 million. The years 2022 to 2024 saw significant gains, aligning with increased defence spending across Europe. These financial outcomes highlight Patria’s evolution from a domestically focused manufacturer to a globally engaged defence supplier. Following Finland’s accession to NATO in 2023, Patria’s integration into the alliance’s supply chains is expected to further accelerate its growth beyond 2024.

Effects on the Finnish economy

Export licenses have quadrupled for products created by the dual purpose companies, as the domestic market is limited and a prerequisite for growth is export (fig. 3). In 2024, the Ministry of Defence issued 432 licences for the permanent export and transfer of defence materiel to 52 countries. These licences had a total combined value of EUR 1.4 billion—more than double the EUR 667 million recorded in 2023, marking an all-time high. Regionally, the majority of licences were approved for exports to European nations.

According to the Finnish ministry of Defence, the top three destination countries for export of military equipment in 2024 were Sweden, Latvia and Norway. Exports to Sweden mainly consisted of land vehicles and small arms designed for military use. Exports to Latvia were also largely made up of land vehicles, while exports to Norway primarily included fire control and surveillance sensors. Examined by region, by far most of the products were exported to the Member States of the European Union with nearly 95 per cent of all exports went to Europe.

As macabre as it may be, the fact that products designed explicitly for warfare—or converted from civilian use to serve military purposes—can fuel economic growth highlights a grim reality. Yet, Finland finds itself in a position where every avenue for economic growth, even one rooted in conflict, is increasingly vital. In the years ahead, this growth is expected to persist as more startups advance into their scaling phases and new entrants make their debut on the stock market. The sharp rise in the share prices of dual purpose and military technology companies signals a significant influx of investment capital—delivering a much-needed stimulus to the national economy.