Uncertainty drives tech development: the growth of dual-use and defence innovations

The defence sector is experiencing a renaissance. As superpower rivalry is escalating, and disputes have turned to armed conflict, nations are re-evaluating their strategic positions and investing heavily in deterrence capabilities. This creates the immense need for financing innovation and new solutions in this sector.

As we see shifts toward regional fragmentation and decoupling, alliances are becoming not just political or economic, but technological and strategic as well. With countries grouping into exclusive blocs, businesses must now carefully choose their partners for market access, resilience, and alignment with national interests. The question of trust and alignment is no longer a rhetorical one – it determines your license to operate. As Charly Salonius-Pasternak, CEO of Nordic West Office, notes: “Friendshoring might still be a buzzword, but in this era of geopolitical competition and shifting networks, who really are your friends?”

Uncertainty and regional fragmentation seem to define our time. This creates an urgency to innovate in defence tech – and who better to do it than private businesses and startups? As a result, businesses in this moment find their innovations and decisions shaping the geopolitical landscape ever more directly.

Today, we need more military preparedness than in decades. Technological solutions are developing rapidly, and in parallel, military requirements have evolved in fundamental ways. Innovations are now being developed not only by traditional heavy industry players in defence, but also by start-ups and innovators outside the traditional defence ecosystem. This so-called sector of “new defence” is growing fast.

But what if the world becomes more peaceful, and we no longer need as much military technology as we might think? As Inka Mero, Founder and Managing Partner at Voima Ventures, points out, dual-use technologies – innovations that can be applied in both civilian and military contexts – help address the question of uncertain future developments. If we do enter a new era of peace and globalization, these technologies will serve us in other, non-defence ways. 

Anne Horttanainen, CEO of the Finnish Venture Capital Association, echoes this view by noting that: “The biggest opportunities are in dual-use technologies that combine security needs with broad commercial markets”. She highlights Finland’s strength in these technologies, thanks to deep expertise in high-trust sectors like AI, space, quantum, and cybersecurity, where civilian innovation naturally overlaps with defence needs. A strong start-up ecosystem, combined with strategic public-private collaboration, enables rapid scaling of technologies that serve both markets. But having the right technology is just the beginning. To truly succeed, companies must understand the landscape they’re entering.

One crucial thing to note is that the defence sector has its own dynamics that investors need to understand. Success in dual-use innovation demands more than funding, says Klaus Ilmonen, Partner at Hannes Snellman law firm. It requires investors and board members who understand the sector’s nuances, from regulatory constraints to buyers’ procurement cycles. Investors should be able to bring strategic value, sectoral expertise, and the ability to navigate a complex geopolitical landscape, and they cannot bring reputational harm in a politically sensitive sector.

The ability to calibrate strategic alignments and geopolitical awareness to maximize benefits is crucial. Dual-use aspects in technologies have been under-communicated, meaning that companies have tended to emphasize their commercial applications even as they quietly serve military needs. Fortunately, Inka Mero sees that this dynamic is shifting. Today, visibility in the defence segment is increasingly seen as a competitive advantage – both for attracting capital and for recruiting talent.

Nevertheless, even with the right investors, the path forward is far from simple. Dual-use ventures face a regulatory landscape that demands precision from day one. Navigating regulations and compliance is critical from the very beginning, and missteps can permanently damage a company’s defence sector profile.

Dual-use tech companies must manage survival in a playground of strict and complex regulatory requirements and traditional government procurement processes. Normal startups working in less sensitive fields often operate under the radar, moving fast and fixing issues as they arise while growing the business. For them, early missteps – like gaps in compliance or unclear IP ownership – can possibly be corrected later. In defence, however, such mistakes can be fatal.

If a company has accepted investment from a restricted source or failed to secure its intellectual property, it may be permanently disqualified from the market, Klaus Ilmonen warns. A lack of due diligence, like accepting investment without sufficient scrutiny of the investor, can severely limit a startup’s future opportunities in other markets. Finding the right partners with a deep understanding of the regulatory landscape, defence sector ecosystem, and geopolitical sensitivities, can help founders chart a safe course through this high-stakes terrain.

With enormously rapid technological development both on and off the battlefield, it is almost impossible to predict where new solutions will emerge from. Moreover, in some cases, companies may not even be aware of the potential dual-use applications of their products. At the same time, those applications can increase the investability of early-stage initiatives.

Therefore, it is important to establish networks with the right experts to help find paths from innovation to sales and to develop business models adapted to the dynamics of the sector – it is all about knowing how to navigate the terrain, from regulation to investor alignment, market risks and geopolitical awareness. Mastering the game of strategic adaptation in a shifting global landscape is one of the most crucial requirements for navigating complexity with confidence.

Text and interviews by Darya Koroleva, Nordic West Office