NATO to launch €1B Innovation Fund for deeptech startups in July. How it will work

NATO Innovation Unit is launching the world’s first multi-sovereign venture capital fund — NATO Innovation Fund (NIF), which will unite 23 allied-countries in order to drive innovation within their markets. This number also includes Finland that has recently announced to join the initiative with €35 million investment from Tesi, a state-owned investment company. Altogether, NIF is planning to invest €1 billion in early-stage deeptech startups whose solutions can be used for defense and security purposes of NATO.

AIN.Capital tells more about the fund’s purposes and how it will operate.

What is NATO Innovation Fund?

• The creation of the NATO Innovation Fund and the participation from 22 NATO member countries was committed at the NATO Summit held in Madrid last March. It will support member countries’ early-stage deeptech startups that develop mainly civilian and commercial solutions, but that can also be used for defense and security purposes of NATO.
• NIF will essentially boost member countries’ local innovative startup ecosystems, allowing them to receive more funding for their innovative ideas and technologies. This will, in the long term, strengthen the alliance’s economical and technological capabilities, that can enable better security against possible foreign threats for the members.

“This fund is unique, with a 15-year timeframe, the NATO Innovation Fund will help bring to life those nascent technologies that have the power to transform our security in the decades to come, strengthening the Alliance’s innovation ecosystem and bolstering the security of our one billion citizens,”

Jens Stoltenberg, NATO Secretary General, explains.

• The size of the fund is capped at around €1 billion. The fund will invest in startups with focus on artificial intelligence, big-data processing, quantum-enabled technologies, autonomy, biotechnology and human enhancement, novel materials, energy, propulsion and space.
• It will also complement NATO’s Defence Innovation Accelerator for the North Atlantic, DIANA, which supports the development and adaptation of named technologies. Participators in DIANA’s programs will have access to a network of more than 9 Accelerator Sites and more than 63 Test Centres across Europe and North America.
• NATO Innovation Fund will officially launch around the time of the NATO summit in Vilnius, which will take place on July 11-12, 2023.
• On March, the Alliance confirmed that the headquarters of NIF will be based in the Netherlands. Given the wide geographic remit of the Fund, further regional offices will be set up across the Alliance.
• After Finland’s accession to NATO in 2023, the country’s application to NATO’s Innovation Fund has been approved. Tesi, a state-owned investment company, will make a €35 million investment in the fund. This also provides a new gateway to cooperation and financing opportunities for Finnish startups.

“We develop international networks and we channel international capital and expertise into Finland. Tesi’s investment will make NATO’s Innovation Fund and its cooperation networks available to Finnish venture capital funds and startups,”

Pia Santavirta, Tesi’s CEO, comments.

Why is it important?

NATO made the decision to establish the new Innovation Fund in October 2021. Following the full-scale Russian invasion of Ukraine in February 2022, those plans gained much more importance than previously, as there is a real direct threat to the alliance security, and the technological advancement is a key component of repelling the enemy. So already in March 2022, in Madrid, the member countries agreed to put into effect NATO Innovation Fund and DIANA by the next summit, which will be held in July.

Although Ukraine is not yet a NATO member, in April 2023 the Ministry of Defense of Ukraine and NATO agreed on possible cooperation in terms of innovations. In particular, the sides discussed the involvement of Ukrainian startups in joint innovative projects, testing of modern developments in real combat conditions, and the use of Ukrainian experience in the short-term introduction of new types of weapons and technologies under the DIANA initiative.