How NATO Membership is Supercharging Finnish Startups in the Defense Sector

Thriving Startups in Finland's Defense Sector

HELSINKI — Startups are driving growth within Finland’s defense sector following the country's NATO membership last year. An industry survey by the Helsinki-based investment firm Tesi Oy reveals that these companies are experiencing revenue increases of 30% to 40%.

The survey highlights that the “NATO dividend” particularly benefits dual-use companies that provide solutions for both civil and military applications, allowing them to grow faster than traditional defense companies.

Investment Surge Among Established Firms

Many established firms, including the Finnish state-controlled defense group Patria, are significantly scaling up their investments to enhance international reach and leverage NATO partnerships and contract opportunities.

According to Jakob Sandell, Tesi’s research director, dual-use companies are not only growing rapidly but are also attracting both indigenous and international investors.

“Finland’s oldest defense companies date from the 1800s, yet the industry is still young and developing rapidly,” Sandell noted.

Fast-Growing Startups in the Defense Sector

The Tesi survey identified 368 companies in the indigenous defense sector, with 144 classified as fast-growing startups. Over one-third of these dual-use product companies have venture capital and private equity backing, with venture capital being the largest investor group.

New capital is essential for these firms to meet increasing demand and capitalize on the opportunities arising from Finland’s NATO membership, as explained by Keith Bonnici, investment director at Tesi.

“Testimony to the country’s competitiveness in the defense industry is that Finnish companies include the world’s largest defense contractors among their customers,” Bonnici stated.

Opportunities for Companies like Varjo Oy

Finland’s NATO membership has opened a “vast array” of projects for startups like Varjo Oy, which specializes in virtual- and mixed-reality solutions for flight training. Varjo’s CEO, Timo Toikkanen, emphasized that NATO membership has positively impacted their operations, unlocking opportunities for business with NATO countries.

In August, Varjo opened a new secure manufacturing facility to enhance production of high-resolution extended-reality (XR) solutions, which are projected to be a $900 million market by 2027.

Growth in Defense Contracts

The NATO dividend is also boosting orders for established defense companies like Patria, which continues to supply 6x6 armored vehicles to the Finnish Defense Forces (FDF). The FDF has signed agreements for the purchase of 91 armored personnel carriers in 2023, with additional options for future purchases.

Finland’s commitment to NATO is reflected in its increased defense budget, which will rise by 12% to a record $7.3 billion in 2025, enhancing growth prospects for local defense companies.

The procurement of advanced military equipment is part of Finland’s strategy to fortify its position within NATO and strengthen its defense capabilities along its border with Russia.