--- title: "Estonia criticised over €261 million in idle venture funds" id: "90384" type: "post" slug: "estonia-criticised-over-e261-million-in-idle-venture-funds" published_at: "2026-10-07T22:08:59+00:00" modified_at: "2026-10-07T22:09:23+00:00" url: "https://estonianworld.com/business/estonia-criticised-over-e261-million-in-idle-venture-funds/" markdown_url: "https://estonianworld.com/business/estonia-criticised-over-e261-million-in-idle-venture-funds.md" excerpt: "Estonia transferred hundreds of millions of euros to state-backed venture capital funds before the money could be invested, leaving €261 million on deposit even as […]" taxonomy_category: - "Business" publisher: "Estonian World" language: "en-GB" author: "Sten Hankewitz" author_url: "https://estonianworld.com/author/stenhankewitz/" --- # Estonia criticised over €261 million in idle venture funds ![The government office building housing Estonia’s economy ministry in Tallinn. Photo by the economy ministry.](https://estonianworld.com/wp-content/uploads/2026/10/487733403_1092144952954731_7849090901664567773_n-1024x665.jpg) The government office building housing Estonia’s economy ministry in Tallinn. Photo by the economy ministry. By [Sten Hankewitz](https://estonianworld.com/author/stenhankewitz/) · October 7, 2026 · [Business](https://estonianworld.com/category/business/) · 3 minutes of reading **Estonia transferred hundreds of millions of euros to state-backed venture capital funds before the money could be invested, leaving €261 million on deposit even as the finance ministry borrowed to cover day-to-day spending, the National Audit Office has found.** Almost €466 million has been allocated from the state budget to funds managed by SmartCap, a subsidiary of the Estonian Business and Innovation Agency. The audit office said the size and timing of the transfers had not been matched to the funds’ investment needs. By the end of 2025, SmartCap’s portfolio included investments in 17 companies and 16 sub-funds. Investment agreements totalled €230.4 million, of which €119.5 million had been paid out. A further €261 million remained available for future investments and expenses, mostly in fixed-term deposits. Although the deposits earned interest, the finance ministry was issuing short-term bonds to meet the State Treasury’s routine spending needs. Management fees were also being paid on the undeployed money. “This approach is not responsible,” said Janar Holm, Estonia’s auditor-general. He said state support for the venture capital market could be justified, but budget funds should not remain idle while the government borrowed to finance its daily operations. [https://estonianworld.com/wp-content/uploads/2026/10/aFEP_6051-scaled-1.jpg](https://estonianworld.com/wp-content/uploads/2026/10/aFEP_6051-scaled-1.jpg) Estonia’s auditor-general, Janar Holm, addressing the country’s parliament. Photo: Riigikogu. SmartCap told auditors that venture capital investments could take several years to arrange because hundreds of potential projects might have to be examined before a deal was reached. The audit office said that, under the usual venture capital model, investors provide money only when it is needed to meet an agreed commitment. In SmartCap’s case, the state had transferred funds before investment opportunities had been identified. ### Vague targets and blurred responsibilities SmartCap’s funds are intended to improve access to capital for innovative companies, develop green technologies and strengthen Estonia’s defence industry. However, auditors found that no measurable targets or deadlines had been set. The lack of clear objectives made it difficult to judge whether earlier investments had achieved their purpose or whether SmartCap had performed effectively, the report said. [https://estonianworld.com/wp-content/uploads/2026/02/GsbDpR5XAAAqGGf.jpg](https://estonianworld.com/wp-content/uploads/2026/02/GsbDpR5XAAAqGGf.jpg) SmartCap Defence Fund has invested in Frankenburg Technologies. Photo: Frankenburg Technologies, the image is illustrative. Auditors also criticised the concentration of responsibilities within the economy ministry, which acts as policymaker, investor and supervisor of the funding agreements. This created overlapping roles and reduced the transparency of decision-making. Investment rules were spread across several documents and were largely confidential. The audit office accepted that some information constituted trade secrets but said other material could be published because the funds invested taxpayers’ money. The documents presented to the government had also failed to give a balanced account of the funds’ financial position, risks, costs and possible effects on the state budget. They tended to emphasise failures in Estonia’s venture capital market and the expected benefits of intervention, while giving less attention to alternatives and financial risks. More than half the value of SmartCap’s investment commitments has been allocated to foreign fund managers. The strategy assumes that these sub-funds will eventually invest more in Estonia than SmartCap initially committed. In his response to the audit, the then economy minister, Erkki Keldo, said the ministry had improved its reporting and begun assessing the impact of the state’s venture and private capital investments. The ministry is also considering placing SmartCap’s available funds with the State Treasury and plans to revise the company’s governance model to clarify roles and responsibilities. ## About The Author ![Avatar photo](https://estonianworld.com/wp-content/uploads/local-avatars/15/1707599474-bpfull-100x100.jpg) [Sten Hankewitz](https://estonianworld.com/author/stenhankewitz/) Sten Hankewitz is a lifelong journalist and the Executive Editor at Estonian World. Having lived in Estonia, Spain, the UK and all around the US, he now resides in the White Mountains of New Hampshire. He loves to write and besides working at Estonian World, he [writes books](https://estonianworld.com/culture/the-grand-illusion-estonian-worlds-sten-hankewitz-publishes-a-novel-about-growing-up-in-the-soviet-union/) and contributes to other outlets. He has strong convictions and shows them unashamedly. You can follow Sten on [Threads](https://www.threads.net/@stenhankewitz) , [X](https://twitter.com/stenhankewitz) and [Facebook](https://www.facebook.com/shankewitz/) . You can also [email him](mailto:sten@estonianworld.com) .