Sweden’s Defence Tech Surge: How Startups Are Powering a New Security Industry

The Swedish defence and security industry is still very much on the rise. Once seen as a specialised domain dominated by long-established giants, the sector is now undergoing one of the fastest expansions in modern Swedish industrial history, fuelled by geopolitical instability, NATO accession, and a new wave of tech-driven startups entering the market.

“The perception of defence has changed, in society, in banking and among investors,” says Madelene Rydén, Director of Defence at Swedish Security & Defence Industry Association (SOFF). “Defence is increasingly seen as a part of sustainability today, something that contributes to stability and security.”

Between 2023 and 2024, the industry grew by 55 percent, reaching SEK 100 billion in total turnover. According to Madelene Rydén, Sweden’s momentum is no coincidence:

“Sweden has a real technological edge. During our years of neutrality, we built both depth and breadth in our national capabilities.”

Case Example: Airolit Aiming for NATO

Amid this transformation, Swedish drone company Airolit stands out as one of the small players aiming high. The company has publicly expressed ambitions to enter NATO programmes and international procurement channels — part of a broader trend where dual-use drone, sensor, and AI companies are adapting their products for defence needs.

“The next step is Europe, especially the other NATO member states. Within five years, Airolit will continue to be a market leader, but in even more markets, and a company to truly look up to in our niche,” says Claes Kjölhede, CEO of Airolit.

Airolit’s international push has also been supported by EKN, the Swedish Export Credit Agency, which has helped the company obtain bank financing as it prepares to scale into more regulated and security-sensitive markets.

NATO Redrawing the Playing Field

The NATO membership opens doors, but also brings complexity.

“There are many new opportunities available through NATO, with several procurement frameworks,” says Madelene Rydén. “But we have an information journey ahead of us. There is significant capital to tap into, yet the administrative burden within NATO and the EU is heavy.”

Rydén emphasises that defence is not an industry one can simply “jump into.”

“It’s a completely different market with completely different rules. Companies must enter with the right expectations and a lot of knowledge,” she says.

Key challenges include: Extensive regulation, long procurement cycles, high compliance demands, and the need for established defence partnerships, something that SOFF has highlighted before and is pushing toward policymakers as well as companies.

“We need faster processes. At SOFF, we’re advocating reforms to simplify procurement, security protection, and export while keeping the system legally sound,” says Rydén, and continues:

“My advice is to understand the regulations thoroughly and know what rules apply to your product or service. Export is crucial, but it adds another regulatory layer. And partner early with companies and organisations that have been in the sector for a long time.”

Financing: From Barrier to Opportunity

The financing climate has also improved markedly.

“Banks have a completely different attitude today,” says Rydén. “They’re learning more about the sector and becoming more interested. Weapons and ammunition are still sensitive areas, but overall the shift is clear.”

But with investor interest rising sharply, another challenge emerges:

“Companies are getting a lot of outreach. They need to carefully choose who they partner with. The money is there, but finding the right processes and investors is key.”

The Road Ahead: More SMEs Inside the Defence System

Looking five years ahead, Rydén hopes Sweden will have evolved its procurement systems to better support smaller firms.

“I hope we continue to grow and that we develop new processes together with the authorities. We still need traditional procurement, but we also need new models that allow smaller companies to take part in the business. We need new ways of working to manage the ongoing build-up.”

For Airolit — and many other of Sweden’s rising startups connected to defence and security — this build-up is both a challenge and an unprecedented opportunity.

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About EKN:
EKN is a Swedish government agency that reduces payment risks and facilitates financing in export transactions. With EKN’s guarantees, Swedish companies can offer customers attractive credit terms and gain easier access to funding from their bank. EKN supports companies of all sizes — including suppliers to exporting companies.

About SOFF:
SOFF is the Swedish security and defence industry association, representing companies that develop the technologies, systems, and services that strengthen Sweden’s national readiness and international competitiveness. Through policy work, collaboration, and industry coordination, SOFF helps its members navigate procurement processes, drive innovation, and contribute to a resilient and secure society.

About Airolit:
Founded: 2017
Location: Gothenburg
Employees: 20+