Finland is a small Nordic nation with a population of just five million. It is quietly and rapidly morphing into a major player in global defense technology. The country’s innovative startups and government backing are developing novel solutions for militaries and governments across the world.
A Finland-based venture capital firm named Tesi claims that the country has a thriving defense tech ecosystem comprising around 368 firms. What’s even more noteworthy is its blushing age, close to forty percent of these corporates are either startups or scale-ups. Finland is experiencing an impressive economic growth, acquiring nearly thirty to forty percent increase in yield thanks to “dual-use” technologies, which serve a dual purpose: military and civilian use.
Helsinki’s status is heightened to one of the top five cities in Europe for defense, security, and resilience investment due to the cities remarkable level of development. This is recognition from Tech data platform, Dealroom, alongside NATO Innovation Fund.
Mixed Reality Applications For Military Training: Varjo’s Newest Development
This Finnish innovation includes a company called Varjo which is working on advanced mixed reality headsets. These headsets, which Barrientos describes as needing “perfect” refinement, integrate synthetic artificial overlays with real-world views. This new technology provides exceptionally true-to-life simulations for military training that allow warfighters to partake in high-stress situations without the costs and logistical hurdles associated with traditional war game exercises.
Training Efficiency Innovations and Cost Savings
Timo Toikkanen, CEO of the company, states that their headsets are used to deliver 80 simulation programs to Allied forces in the U.S. and Europe. He highlights the breakthrough efficiency and significant cost reductions that are possible when compared to conventional training, as pilots are now able to conduct “99% of the same [training] inside of the headset,” which does away with expensive and energy costing travel to massive aircraft hangers.
Geopolitical Catalysts: Ukrainian Conflict and NATO Accession
The defense technology market in Finland was receiving ample investment even before the war in Ukraine, but these events have acted as an acceleration force in the last few years. It remarks that Russia’s assault on Ukraine, and Finland’s acceptance into NATO a year later, have “just kind of put everything on steroids” regarding interest in its defense offerings. Since March 2022 alone, Varjo has received over €50 million (£42 million; $54 million) in additional funding.
Finland Scrutinizes a steep shift in defensive expenditure: From a red flag to a green light.
Toikkanen notes how there has been a steep change in the investors attitude towards advanced military technologies. He remarks that, in the pre-war period, military-capable technologies were considered to be “kind of a red flag” in socially responsible investing circles. Varjo executives said they had to “tiptoe around” the defense portion of their business in the search for capital. There are now also other extremes. “There are investors who actively seek out companies engaged in defense technology, and that’s acceptable now,” he points out.
Most Important Finnish Defense Tech Firms
Besides Varjo, other Finnish startups including Iceye are rapidly expanding. Iceye specializes in fine-resolution imaging, providing imaging data services through their microsatellites. Re-orbit supplies satellite software for adaptable and efficient satellite operations. Distance Technologies, a Google backed startup, is developing headset-free immersive training and simulation technologies. In March, Distance Technologies announced a partnership with Patria, a Finnish defense contractor, to test its technology for use on their armored vehicles.
Geography, History, and National Identity: The Drivers of The Economy
Many factors explain Finland’s vigorous activity in defense technology. Finnish defense tech investor Nicholas Nelson highlighted the ’tyranny of geography’ – Finland is located right next to Russia with an approximately 1340 km (830 miles) border. Russia’s expansionist policy greatly increases the perceived threat. The memory of the Winter War where Finland successfully repulsed a Soviet invasion during World War II also shapes national identity and defense priorities.
A Culture of Defence: The Finnish Mindset
Finland takes a culturally holistic approach to national defense. The Constitution and its accompanying laws obliges citizens to defend the state, and men are conscripted into the armed forces. Nelson hypothesizes that this cultural orientation for defense may have incentivized some gifted people to become founders or investors in defense technologies instead of pursuing other faster growing industries like renewables and fintech.
Maria 01: A Hub For Defence Innovation
Entrepreneurs like Janne Hietala, the CEO of Kelluu, are coming up with new advancements in the former hospital turned startup ecosystem in Helsinki known as Maria 01. Kelluu used to concentrate on climate research with its unmanned airships, but in 2022 shifted focus to surveillance platforms for cities, governments, and research institutions. Hietala states that the change was motivated by, “A very concrete, personal feeling that we need to also do something for the security situation.” He also cites national surveys that indicate at least 80% of population is willing to defend the nation, illustrating the strong feeling of nationalism towards Finland’s security policy.
Government Support: Alliances and Funding.
The Finnish government is quite proactive about the funding of defense tech. Business Finland has, for example, started a new initiative in the area of defense and digital resilience last year. This initiative is earmarking 120 million euros to aid small businesses and startups with R&D activities. Public-private partnerships are important elements of the program, so in Ms. Kokko’s words, “the government understands the urgency.”
The Defense Sector’s Challenges: Cultural Conflicts and Workforce Competitiveness.
Defense tech in Finland has some hurdles to clear even with its growth. The founder of Kelluu, Hietala, notes a certain ‘collision of cultures’ between nimble smaller organizations and slow-moving defense contractors, government entities who put heavy reliance on testing and prototyping. This may slow down rapidly deploying creative solutions which many startups build on. She also highlights the fierce competition for software developers as critical for the growth of dual-use technologies.
Finland’s Strengths: A Compelling Narrative
Kokko brings out Finland’s strengths as its willingness of embracing changers along with its core cybersecurity innovations. In Finland, the innovation reputation ranges along with virtually nonexistent crime rates. Kokko points out that most of these innovations come from abroad, which brings her to believe that Finland has a good story to tell.
