Defence Fund Direct Investments

SmartCap Defence Fund: strengthening the Estonian defence industry and the European defence tech ecosystem 

SmartCap Defence Fund’s principal objective is to develop the Estonian defence industry and advance innovative defence and security capabilities to address the growing global demand for new defence and security solutions. SmartCap Defence Fund also contributes to economic growth and diversifies access to capital for defence companies in Estonia and across NATO allies.  

For this purpose, investments will be made in companies producing or developing products or technologies, or providing sector-specific services either:

  • exclusively for military use, or 
  • for dual-use that can be used for both civilian and military applications. 

Specific requirements and restrictions for the companies and investment terms: 

  • The company is a private or public limited company under the laws of Estonia or similar form in a NATO member country. 
  • The investment shall be in company’s equity or quasi-equity through capital increase, including SAFE agreements, convertible loans and other similar convertible instruments. 
  • The size of an investment in a company can range from EUR 500,000 to 10,000,000 over one or more investment rounds.  
  • The aggregate holding acquired by SmartCap Defence Fund in a company over one or more investment rounds, either directly or indirectly, may not exceed 49%.  
  • Investment rounds should be led by an independent private investor(s). SmartCap may selectively lead or co-lead investments. 
  • Investments shall be in the following deal structures depending on the company type: 
    • venture capital investments starting from seed stage funding,   
    • private equity investments in expansion capital funding,   
    • other newly established companies,  

with a focus on non-controlling stakes. Other types of deals such as joint ventures might be considered at SmartCap’s sole discretion.  

  • Team members, investors and related entities of the company shall not be established or operating in, nor shall their shareholders or investors (including the UBOs of such investors in case of legal entities) be the citizens of Russia, Belarus, or citizens of other countries that are on the FATF ‘blacklist’, UN sanctions list, or any other sanction or exclusion list applicable to the fund.  
  • Preferably at least 50% of the aggregate amount of capital raised in the investment round shall be raised from private investors, whereas SmartCap reserves the right, at its sole discretion, to consider rounds with different proportions on a case-by-case basis.  
  • No state aid is provided by SmartCap. SmartCap Defence Fund invests pari passu with independent private investors, requiring that at least 30% must be invested by independent private investors at the same time and under the same terms as the SmartCap Defence Fund.

SmartCap may prioritize in its deal flow management investments to companies that contribute relatively more to the objectives of SmartCap Defence Fund

SmartCap shall retain sole discretion in its deal flow management and deal prioritization in pipeline, and may use additional considerations when prioritizing its investments. 

Companies that fit the mandate of SmartCap Defence Fund will be assessed throughout the investment process as SmartCap considers, among other elements, the following aspects: 

  • alignment with the SmartCap Defence Fund objectives, 
  • team composition and founders,  
  • existing investors and ownership structure, together with the structure of the new investment round,  
  • business model and product, service or technology, including its competitive advantage, 
  • market and competitive landscape, 
  • deal terms, metrics and financials. 

SmartCap Defence Fund shall remain open as long as it has uncommitted resources available for investments. SmartCap may amend the investment terms at any time and reserves the right, at its sole discretion, to cancel or discontinue SmartCap Defence Fund’s investments in defence companies in its entirety at any time. 

See our Investment Process and Responsible Investing sections, to learn more about our approach to investing. Further guidance on investment terms and insight on what we are looking at when assessing investment opportunities together with a Q&A can be found in additional Clarifications.  

Are you a defence company seeking investment from SmartCap Defence Fund? 

Reach out to our investment team at  and share your pitch deck!