The talk was delivered by Raul Kirsimäe, Head of Manufacturing Department at Swedbank, who brought nearly two decades of experience working with industrial and manufacturing companies through growth, investment cycles, and crises.

Defence as a structural economic shift

Raul opened by framing defence spending not as a temporary response, but as a long-term necessity. Ongoing conflicts, depleted stockpiles, and rapid technological change have reshaped how nations think about security. Defence today is driven by urgency rather than ideology.

Global defence spending now represents roughly 2.5 percent of world GDP, nearing three trillion dollars annually. In Europe, spending has risen from 1.4 percent to around 2 percent in just a decade — with further increases already committed. What matters for founders is not the headline numbers, but the implication: defence has become one of the few sectors in Europe showing consistent double-digit growth.

Why the Baltics — and Estonia — matter

The Baltics occupy a unique position in this landscape. For the region, defence is not an abstract policy topic but a question of existence. This proximity to real security challenges creates an environment where rapid testing, iteration, and deployment are not optional — they are essential.

Raul highlighted that Baltic defence companies benefit from close cooperation with Ukrainian partners, allowing them to learn directly from real-time battlefield conditions. Compared to larger Western peers, these companies often move faster, iterate more quickly, and adapt at speed — creating both strategic and economic advantage.

Estonia’s broader startup culture reinforces this. Comfort with uncertainty, early testing, and fast execution align naturally with the needs of defence innovation. Combined with sector-specific support structures, this creates a credible pathway for globally scalable defence companies.

From technology to contracts: the real Valley of Death

In defence, innovation rarely starts with abstract ideas. It begins with concrete security problems. That urgency accelerates early validation — but the real challenge comes later.

Raul described the defence sector’s Valley of Death as deeper and wider than in typical startups. The gap between a working product and a signed contract is long, complex, and capital-intensive. While early pilots prove technology, contracts change everything.

Products prove the technology.
Contracts change the entire company.

Once contracts enter the picture, the core question shifts from does it work to can you deliver, scale, and finance growth. At this stage, liquidity becomes critical — not just for survival next month, but for managing operating expenses and working capital six, twelve, or even twenty-four months ahead.

Many strong teams stall here not because their technology fails, but because their financial structure is not ready for scale.

The role of banks in defence growth

There is a persistent perception that banks avoid the defence sector. Raul addressed this directly: that assumption is outdated. Risk frameworks have evolved, but the decisive factor is not policy — it is understanding.

Banks today are increasingly prepared to support defence companies earlier than founders expect, provided there is transparency, credible leadership, and a long-term view. Financing, Raul stressed, is not only about loans. It is about managing complexity, speed, and cooperation across supply chains, exports, currencies, and long payment cycles.

Financing is not just about lending money.
It’s about helping companies manage complexity and move faster.

Early engagement allows companies to remove friction before it becomes a bottleneck — freeing founders to focus on execution rather than firefighting.

Growth creates pressure — even when things go well

One of the less intuitive insights from the session was that rapid growth can be as dangerous as slow progress. Each new defence contract increases working capital needs: materials, suppliers, wages, taxes, and delayed payments all have to be financed upfront.

Without proper structures, growth itself can strain cash flow and slow momentum. This is where targeted financial instruments and long-term partnerships become decisive, allowing companies to scale with confidence rather than caution.

What banks look for in defence companies

Raul outlined several factors that matter when banks assess long-term cooperation.

Proximity matters. Operating in the same country enables faster understanding and response. Transparency is critical — from ownership structures to management credibility and founder commitment. In long-term financing, predictability is key.

Defence customers are often states. While procurement cycles are slow, contracts tend to be long-term once signed. This predictability changes the financing equation, making it possible to support not only working capital but also factories, equipment, and long-term investments.

When long-term contracts are in place, everything changes — including how banks can support growth.

Partners, not just capital

Defence innovation is too important to be treated as a transactional relationship between founders and financiers. As a systemically important bank, Swedbank sees supporting the defence sector as part of its societal responsibility.

History shows that transformative technologies are often underestimated early. In the current environment, success will not belong only to those with strong ideas, but to those who build the right partnerships early — before pressure peaks and time runs out.

For defence founders, the message was clear: engage early, structure early, and treat finance as a strategic tool — not a last resort.