Estonia’s Defense Contractor Startups

Like any trade fair, London’s annual DSEI show allows participants so inclined to salivate over their industry’s latest innovations. But DSEI—the acronym stands for Defense and Security Equipment International—showcases the latest in military equipment. This year participants could, for example, admire BAE Systems Hägglunds’s 360 Battleview, a tank with technology that allows its commander and crew to “see” through the heavy metal. No need for a soldier to stick his head up, risking his life to survey enemy activity.

But military innovation doesn’t come cheap. The US Air Force’s new F-35 Joint Strike Fighter has set taxpayers back $400 billion and is not yet combat-ready. Even less ambitious gear comes with a steep price tag. Poland is, for example, about to spend $1.1 billion on 30 attack helicopters, $3.4 billion on 50 utility helicopters, and $800 million on 60 armed drones. The bidders are all large conglomerates: Airbus, Boeing, Rafael, and their usual competitors.
This year’s DSEI, which took place last month, featured a more unconventional participant as well: Milrem, an Estonian startup that has developed a self-driving mini-tank. One can think of it as a military Google car. Given the belief that wars fought with fewer soldiers are far less devastating, Milrem clearly has a marketable idea. (It’s cooperating with Estonia’s Defense Forces and Ministry of Defense on the development of the tank.)
Indeed, it’s strange that armed forces haven’t already introduced self-driving tanks. One can make the case that a bit of startup mentality is exactly what the defense industry needs. After all, it took an Estonian startup called Skype to show the world that international phone calls don’t need to be expensive, and another one called TransferWise (along with a couple of competitors) to show bank customers that they don’t need to pay a fortune for international bank transfers. Another Estonian startup, Eli Airborne Solutions, has introduced a portable drone with ultra–high definition cameras for both civilian and military use. Yet another one, BHC Lab, provides cybersecurity solutions, as does Clarified Security.
Can Estonia’s military startups disrupt the big-player defense industry? I asked Martin Hurt, a Swedish-Estonian former defense official (in both countries) who now works at ICDC, a defense think tank in Tallinn, the capital. He was skeptical, noting that several companies are trying to break into established markets where they offer no competitive advantages. But, he added, the cyber security companies do offer a competitive advantage thanks to Estonia’s experience with a massive cyber attack eight years ago.