Frankenburg Technologies, an Estonian defence startup, has raised EUR 30 million in a Series A round to scale production of its guided missile systems. The round was led by NATO Innovation Fund, the alliance's dedicated venture capital arm, with participation from Indus Capital (a London-based defence-focused fund), Estonian state investment vehicle SmartCap, and several undisclosed strategic investors. It is one of the largest early-stage defence tech rounds in European history.

Three years ago, a European startup raising venture capital to build missiles would have been nearly unthinkable. Defence was the province of legacy contractors: Rheinmetall, MBDA, Saab, BAE Systems. Venture capitalists avoided the sector for a combination of ethical, regulatory, and practical reasons. That world is gone. The ammunition shortages exposed by the Ukraine conflict, the realization that European weapons stockpiles had been drawn down to dangerously low levels, and the political mandate to rearm have created a new market and a new class of investor willing to fund it.

Frankenburg is not building intercontinental ballistic missiles or fighter jets. The company focuses on what the defence industry calls precision-guided munitions in the small-to-medium category: anti-armor missiles, loitering munitions, and portable air defence interceptors. These are the weapons that have proved decisive in Ukraine and that NATO militaries are desperately short of.

The company's technical approach emphasizes modularity and manufacturability. Its core product platform uses a common guidance system, based on a combination of GPS-aided inertial navigation and terminal-phase imaging, that can be integrated into different warhead and propulsion configurations. This modular architecture means Frankenburg can produce multiple weapon types on the same manufacturing line, reducing capital expenditure and increasing production flexibility.

Frankenburg was founded in 2023 by a team that includes former Estonian Defence Forces officers, engineers from MBDA, the European missile consortium, and manufacturing specialists from the automotive industry. The founders argue that the biggest bottleneck in European weapons production is not technology but manufacturing methodology. Frankenburg wants to apply automotive-style lean manufacturing to missile production, dramatically reducing unit costs and increasing production rates.

The Series A funding will go primarily toward building Frankenburg's first production facility near Tallinn. The company has secured a site in the Rae industrial park, roughly 15 kilometers south of the Estonian capital, where it plans to install an automated assembly line capable of producing up to 5,000 guided munitions per year at full capacity. That number is significant: it would make Frankenburg one of the highest-volume guided weapons producers in Europe within two years of breaking ground.

The production target reflects a specific market reality. NATO countries collectively need to replenish and expand their guided munitions stockpiles by hundreds of thousands of units. Legacy manufacturers are scaling up, but their production increases are measured in hundreds or low thousands of additional units per year. The gap between what NATO needs and what existing manufacturers can deliver is Frankenburg's business opportunity.

The company has letters of intent from three NATO member states for initial production runs. Estonia's own Ministry of Defence has publicly confirmed that it intends to be an early customer, consistent with the country's strategy of supporting domestic defence industry development.

Note: Figures represent most recent publicly disclosed rounds. Several companies operate with limited public disclosure due to the sensitive nature of their products.

Estonia, a country of 1.3 million people, has emerged as a disproportionately important hub for European defence technology. Milrem Robotics, the autonomous ground vehicle maker, is Estonian. Several drone and electronic warfare startups are based in Tallinn. The country's NATO Cooperative Cyber Defence Centre of Excellence has attracted defence-focused technologists from across the alliance.

The reasons are partly geographic and partly cultural. Estonia shares a land border with Russia and has maintained a clear-eyed assessment of the security threat for decades. The country's mandatory military service means a large percentage of the technical workforce has direct military experience. And Estonia's digital-first governance model has created a regulatory environment that is more agile than larger European countries. The same culture of technological ambition that drives Nordic tech investment in energy and computing extends into defence.

The government has actively cultivated defence tech as an economic development strategy. SmartCap has a dedicated defence technology allocation. The Estonian Defence Investment Centre has established streamlined procurement processes for domestic startups. And the country's NATO membership provides market access to alliance partners that a small country could not otherwise reach.

Let us be direct about what investors are funding here. Frankenburg makes weapons. The guided missiles it produces are designed to destroy armored vehicles and the people inside them. The ethical debate about venture capital flowing into weapons manufacturing is real and ongoing, and investors on both sides of the question have strong views.

The NATO Innovation Fund, Frankenburg's lead investor, was established specifically to address the alliance's technology gap and has a mandate that explicitly includes lethal systems. For commercial investors like Indus Capital, the thesis is straightforward: European defence spending is entering a sustained upcycle driven by the most serious security threat the continent has faced since the Cold War.

Frankenburg's EUR 30 million is a small amount in the context of European defence budgets that now exceed EUR 300 billion annually and are growing at double-digit rates. But it represents something larger: the moment Europe's startup ecosystem decided that defence manufacturing was a legitimate venture-backed category. That decision, once made, does not get unmade easily.