Inside Finland’s defence tech gold rush

Finland has positioned itself as a leading technology hub for defence innovation in the Nordic region.

Venture capital is flowing in, start-ups are emerging rapidly and innovation is spreading from Helsinki and Espoo to the smaller town of Riihimäki.

The 64.000 dollar question is why Finland.

- There are several reasons, says Rasmus Basilier, a Swedish-Finnish developent manager for Millog and Nato Diana lead mentor:

- Finland has a defence mindset deeply rooted in our history. We need to maintain the technological edge.

A growing ecosystem

Basilier was educated in Sweden but has lived in Finland for twenty years.

He previously served in the Swedish armed forces and has worked with accelerators and start-ups for more than a decade. 

Today he works at Millog Oy, where he helps build connections between start-ups and the Finnish defence forces, maturing new technologies for operational use.

That position gives him a clear view of why Finland - driven by Helsinki, Espoo and the smaller town of Riihimäki - is now home to almost four hundred defence start-ups.

- Because of the proximity to Russia and several wars with Russia over the past five hundred years, there is a strong national will to defend the country, Basilier tells Defence Nordic.

- One person once told me he imagined fighting Russians while hiding behind a rock and shooting to fall asleep. It is an anecdote, of course, but to me it shows how deeply this runs in the Finnish spirit.

The persons behind Angry Birds would probably have built a command-and-control system if they started today,

Rasmus Basilier

Rasmus Basilier explains that people with technical or specialist skills often think about how those capabilities could contribute to national defence. Since Russia’s invasion of Ukraine, that mindset has accelerated.

-  The persons behind Angry Birds would probably have built a command-and-control system if they started today, Basilier says with a huge smile, referring to the Finnish studio that launched the globally successful mobile game in 2009:

- Many people with access to capital see it as a form of patriotism to invest in defence start-ups. We are seeing a lot of money flowing into the system in Finland. People want to be part of this movement.

Engineering strength meets defence demand

Finland already had a strong technology sector specialising in high-end engineering.

Companies such as Iceye and IQM have attracted large amounts of venture capital and, as reported on Monday, European defence primes are increasingly building space capabilities through Nordic firms, particularly in Finland.

- Finland simply has great engineers, Basilier says.

- There is a saying here: the Finns design the best product, while the Swedes sell theirs. It may not be quite as good, but it is branded perfectly.

He smiles again.

- The engineering base was already here. It has simply turned towards defence.

Regulatory changes have also played a role. Until recently, venture capital could not easily invest in defence in Finland because the sector was categorised alongside controversial industries such as pornography and drugs.

That restriction has now been lifted, allowing large amounts of capital to enter the defence sector.

- It is almost as if the ‘S’ in ESG has shifted towards security, Basilier says.

- People increasingly believe that if you do not have a country, the other priorities do not matter. The hesitation around defence investment has changed.

Nordic cooperation and growth ahead

A strong defence start-up ecosystem does not mean Finland is turning inward, Basilier stresses.

- Finnish companies are very oriented towards the Nordic region. There is a similar mentality and businesses are very open. In many cases they are not even competing directly with each other, which is quite unusual.

Finnish companies are very oriented towards the Nordic region. There is a similar mentality and businesses are very open

Rasmus Basilier

Speaking with Basilier, there is a clear sense of pride. Finland, he notes, rarely describes itself as exceptional. But in defence, he believes the country stands apart.

Finland maintains one of the largest defence forces in Europe relative to its population, with only 5.6 million inhabitants.

- Most people I work with are part of the reserves, he says. 

- They spend up to fifty days a year training in the forest. It is simply part of the culture.

Industry expectations reflect that momentum. The Finnish Defence and Aerospace Industries association, PIA, expects sector turnover to increase fourfold by 2030, reaching twelve billion euro.

Basilier also expects strong growth and points to several reasons.

First, Nordic defence forces are building new innovation structures designed to accelerate the adoption of emerging technologies. Within the next three years, this could significantly increase the pace of integration.

Second, innovation itself is accelerating and becoming embedded in defence culture.

- We are in a hype cycle. It is not overheated, but it is definitely warm, he says.

- I do not know how long this will last, but conflicts are increasing and defence institutions move slowly, like tankers. Even if every conflict ended tomorrow, I think the momentum would continue for several years.