Inside Finland’s Thriving Defence Tech Industry: Innovation Meets Security

• Finland’s defence technology sector has been growing fast with the rise of geopolitical tensions, government support and a firm tech legacy.
• Varjo and Kelluu are on their way towards redefining military training and surveillance while attracting significant investment and global attention.

In a brightly illuminated laboratory in Helsinki, production specialist Jose Barrientos carefully assembles a new headset with practised skill. In the lab coat and silver gloves, he works with great care because even minor details can be significant in defence technology.

This is not just a simple headset but rather a mixed-reality head-mounted device created by the Finnish company Varjo. It is intended to be used for ultra-realistic training of NATO forces in its patented multi-cameras and very advanced eye-tracking technology, which enables fighter pilots and soldiers to simulate kill-or-be-killed conditions while remaining on the ground.

Finland, perhaps, would not be the first country to cross most people’s minds when considering military technology, but that is rapidly changing. Not only is this small Nordic nation growing great guns with 368 defence tech companies (40% being fast-growing start-ups), but also interest in Finnish defence innovations has never been so great thanks to global security concerns transforming.

Why Finland? 

Finland had a well-founded defence mentality from time immemorial. A 1,340-kilometre border with Russia and history-laden with wars, such as the Winter War, have outsized effects on the country’s security priority. Call it the legacy of the Ukrainian conflict or Finland’s higher budget share on defence before them; Finland would be spending more than its European neighbours in that respect.

Preparation seems to extend beyond military apps: it pervades the national psyche. Survey results claim that more than 80% of Finns would be willing to enter the fray for their country if need be. That attitude has also spread to businesses, with a good number of entrepreneurs and investors preferring to look into defence technology instead of the typical startup services like fintech and renewable energy.

Varjo: Reinventing Military Training

In Finland, defence tech leader Varjo challenges the notion that army training must occur in huge, energy-consuming aircraft hangars. Instead, Varjo’s mixed-reality headsets bring war simulation to life, giving soldiers and pilots an immersive experience in training for real combat situations from practically anywhere.

Interest in Varjo’s technology surged following Russia’s invasion of Ukraine and Finland’s joining NATO. So far, more than €50 million has been raised by Varjo, given the rising demand from European militaries focused on increasing readiness. 

About two years ago, private capital investment was rather scarce, with investors being wary of ethical and environmental issues. Now, the pendulum has swung, and as the CEO describes, there is no more tiptoeing around issues of defence innovation. Now, it is all about looking out for the next big thing in security.

From Climate Technology to Defence: The Evolution of Start-Ups in Finland

Varjo is not the only Finnish start-up to have shifted its focus in the backdrop of global security issues. Another example would be Kelluu, which started with a focus on building airships for climate research. They pivoted in 2022 to transform the technology into a platform designed for surveillance solutions in cities and governments.

For Kelluu’s CEO, Janne Hietala, it was also a very personal realisation. “It was a very concrete, personal feeling that we need to also do something for the security situation,” he makes clear. Like many other Finnish entrepreneurs, he saw opportunities for innovating in the area of national and global security.

A Legacy of Tech Talent

Finland’s defence tech sector is thriving also from its strong history in technology. If we talk about today, many of the start-up founders must have their roots at Nokia, the Finnish mobile-phone giant that flourished in the early 2000s and later found itself unable to compete with the iPhone. When Nokia started downsizing, a highly skilled wave of engineers and developers branched out to set up their own companies. 

This technology legacy contributed to highlighting Finland as a rising tech centre. Although it cannot compare in size to Sweden and the UK, Helsinki can boast that great billion-dollar start-ups have been born here, Oura being a case in point (the one with a ring to track fitness) and game development company Supercell. The same spirit of innovation is energising the defence tech boom today.

Support from the Government and Finnish Defence Technology in the Future

This involves the active state participation of the Finnish government. Business Finland, the state agency whose foundation is supporting innovations, has just inaugurated a new programme worth €120 million focused on defence and digital resiliency. It also adds investments to small businesses and accelerators to ensure that Finland keeps pace with the latest military and security technologies.

There are challenges. The fast-paced dynamics of a start-up do not match the slow-moving nature of defence, where it can take years for approval and integration of new technologies. There is also stiff competition for software talent among companies globally that are vying for the best developers and engineers.

However, Finland has something unique to offer. Besides its innovative mentality and robust governmental support, it is a country that has a phenomenal quality of life, flat hierarchies of work, and a reputation for safety which attracts top talents in the long run.

Small Nation, Major Recognition: The Conclusion

Finland – a tiny nation – is swiftly carving its increasingly powerful role in the global defence-technology arena. With its culture of resilience, historic advances in technology, and a newly discovered sense of urgency toward national security, it has earned the place of one of the important defence-technological players in Europe.

As the world faces rising tensions, it can only mean an increase in demand for Finnish defence innovations – from mixed reality military training and AI-driven surveillance to dual-use technologies – showing that even a country of five million people can change the tide in the shaping of the future of security.