STARTUPS & DINOSAURS ⟩ Bolt CEO Markus Villig on How Small Players Can Revitalize the Stagnant Western Defense Industry Arena

Interviewer: Why does location matter for a large international tech company operating in over 40 countries?

Markus Villig: Location isn't necessarily a decisive factor in whether we can attract investment, but it certainly makes capital more expensive when investors feel safer investing in the U.S. or the U.K. rather than in Estonia.

Interviewer: Yet, the Estonian Bank analyst Kaspar Oja recently tweeted that foreign investments in Estonia have actually risen, placing us ahead of Lithuania and Latvia in this regard—how do you account for that?

Markus Villig: You could say we’re on a good course over three last decades, foreign investments have been growing steadily. The real question is how much more they would have grown if there hadn’t been a war. Foreign investors expect higher returns for the additional risk.

Interviewer: When evaluating serious national defense risks, where do investors seek guidance—do they rely on media reports, or do they consult their security experts?

Markus Villig: Indeed, the media plays a significant role, but major funds rely heavily on specialized agencies for security and macroeconomic analyses. Many experts had assessed the situation before February 24, 2022, to be more favorable than it ultimately proved to be.

Interviewer: Are You still operating in the Ukrainian market today?

Markus Villig: Yes, we continued providing all services in Ukraine as of February 24, 2022, and we’re still doing so. There was also a practical aspect—several Ukrainian cities where we operate came under attack, and thousands of people who couldn’t use their own cars were able to rely on Bolt’s services.

Interviewer: So you were directly involved in the mass evacuation process?

Markus Villig: Among other things, yes. We’re the largest transportation platform in Ukraine. Tens of thousands of drivers and cars operate on our platform, and we have the experience to quickly connect people in need with transportation.

Interviewer: Was this done in cooperation with the authorities, or were you simply providing services under unusual circumstances?

Markus Villig: Mostly, it was business as usual. To some extent, we worked with the government, for example, in organizing logistics and disseminating driver contacts in certain areas.

Interviewer: Are car rentals and e-scooters still operating in Kyiv today?

Markus Villig: We don’t offer car rentals there, but our taxi service and food delivery are functioning. It’s surprisingly well recovered—after a significant drop in February 2022, volumes have almost returned to pre-war levels.

Interviewer: Have you made any organizational changes based on your experience in Ukraine?

Markus Villig: Of course, we’ve had to reorganize a lot on the ground. Ukraine has imposed restrictions on people leaving the country, and for internal company events, we’ve had to consider the movement possibilities of our Ukrainian team, including mobilization potential, as most of our employees are young. We didn’t need to change the service itself.

Bolt’s service stability in Ukraine has been supported by the consistent reliability of the telecommunications network, which has faced no major disruptions.

Interviewer: Have any Bolt drivers been ordered to the front, or have any vehicles been damaged or ended up in Russian-occupied territories?

Markus Villig: Some areas in the east where we previously operated are now under Russian occupation. We’ve disconnected these areas from our system and no longer provide services there.

Interviewer: How does Markus Villig, as a regular citizen, view this war? How have we managed so far, and what phase is the war in today?

Markus Villig: I certainly admire how well Ukrainians have organized their messaging and shaped Western public opinion. The first few months saw social media flooded with images of Ukrainian farmers towing Russian tanks with tractors, and they managed to maintain this narrative for several months. But it’s clear that the news cycle has moved on, and Western media coverage isn’t nearly what it was two years ago. Similarly, for people who aren’t directly affected by the war, there’s a point where numbness sets in.

In places like France or Spain, people clearly feel that the war is increasingly distant and less important. Interest flares up occasionally, like during the recent missile attack on a children’s hospital in Kyiv. For a few days, it’s a major topic, but then it fades again. Keeping Western voters’ interest alive is Ukraine’s biggest challenge—people have other issues to deal with, and Ukraine seems far away.

Interviewer: What has Bolt done to support Ukraine?

Markus Villig: Bolt immediately donated five million euros to Ukraine at the start of the war. It was one of the first and largest donations from a company, and we helped Ukraine while also encouraging others to do the same. Secondly, we shut down all business related to Russia and Belarus and took concrete steps to encourage others to do the same.

Our employees have also shown a lot of initiative—we’ve regularly organized fundraisers to buy drones and vehicles, and at one point, we had weekly workshops in the office where people wove protective nets for soldiers. We also donated over 50,000 euros to a children's hospital fund after the recent attack.

Interviewer: How many Ukrainian drivers have emerged in EU countries as a result of this war?

Markus Villig: Thousands, primarily in Poland. However, new laws were introduced in Poland just a few weeks ago, making it no longer sufficient to have a Ukrainian driver’s license to offer taxi services. This move has cut thousands of Ukrainian drivers out of the market. There’s a certain numbness or even resistance to how much aid can be given to Ukrainians and how much should go to locals.

If you have a clean background, a driver’s license, and access to a car, Bolt is the easiest place to start earning money. After the war began, we saw thousands of Ukrainians start driving on the Bolt platform in the border regions. Unfortunately, Poland is one of the first examples where this opportunity has been taken away from them.

Interviewer: Have you had to block anyone's Bolt account due to issues related to personal views?

Markus Villig: I can’t recall any specific cases immediately. There have been isolated incidents where a customer and driver have clashed, perhaps over language issues—someone speaks or refuses to speak Russian. Emotions run high between Ukrainians and Russians, and arguments do occur.

Interviewer: To summarize the first third of our conversation, is it fair to say that, paradoxically, even in a country as embroiled in war as Ukraine, a tech-dependent service like Bolt can recover very quickly, even during the conflict?

Markus Villig: Yes, absolutely. After two years, we’re almost back to pre-war levels in terms of business. For transportation services, this is somewhat logical, but the fact that food delivery is also nearly back to pre-war levels shows that life in Ukraine continues to some extent on a normal course. Restaurants are open, and people still need to eat.

Mobilization has, of course, caused complications—a lot of men have disappeared from the market, so there are fewer drivers and couriers today than before, but there’s a strong demand for the service. In Ukraine, women are somewhat filling this market gap.

Interviewer: In Estonia, and likely across Europe, there are periodic public debates on the interplay between macroeconomics and national defense. Does openly discussing military threats harm the economy, or could raising alarms about these threats actually yield some macroeconomic advantages? How should we begin to untangle this chicken-and-egg dilemma between war and economic attractiveness?

Markus Villig: From a macro perspective, Estonia’s competitive advantage isn’t natural resources. We need highly skilled human capital and foreign investments. Bolt is perhaps the best example of this. We’ve brought more top specialists to Estonia and raised more money than any other company—over a billion euros in total. We have a good sense of how things have changed over the past three years.

Undoubtedly, it has become more challenging to attract foreign investments to Estonia since the war began, and the cost of capital has also increased. Estonia needs to take steps to strengthen its defense, and the more steps we take in this field, the better it is for the foreign investments and the cost of capital.

On one hand, it is vital to focus on concrete actions—such as the weapon systems we acquire and the extent of our investment in defense personnel and resources. On the other hand, shaping perception is equally important—ensuring that people abroad recognize Estonia’s serious commitment to its defense. Countries like Finland, South Korea, and Israel have successfully cultivated this image.

These nations are widely believed to possess the necessary readiness and mindset for defense, without being seen as overly threatened. The more effort we invest in both substantive measures and strategic communication, the stronger our position will be.

When we look at democracies today with the most dangerous neighbors—like Israel and South Korea—they invest heavily in building up defense capabilities, but they also talk about the threat very openly and boldly. Today, most people wouldn’t place South Korea among high-risk countries. The lesson for me is that we need to put real money into defense, but we also need to talk about it openly and positively.

The third aspect is how much to develop the local defense industry. The ability to purchase expensive weapon systems from companies like Lockheed Martin is undoubtedly important, but equally important is the question of whether a country can allocate a significant percentage of its defense budget to developing local industrial capabilities.

If a considerable number of locals benefit economically from the defense sector, support for it will naturally be much higher. If people see money going to American defense contractors without addressing the local aspect, public support for defense spending could diminish.

Interviewer: Does Bolt plan to offer any defense services based on its experience in Ukraine?

Markus Villig: Software engineers are generalists. They can build any system, whether it’s a transport dispatch system or software for controlling a spacecraft. From a purely business perspective, the defense sector doesn’t align with our current model. However, some of our former employees have joined defense technology companies over the past two years.

Interviewer: There’s been talk for years that Estonia should buy locally, but it’s often countered by saying that we should buy what’s cheaper and quality-wise appropriate, and that fixed purchase obligations actually create stagnation in the industry because survival is guaranteed by the state. What do you think the Estonian defense industry should focus on producing?

Markus Villig: When it comes to conventional munitions, which have been made for decades, today’s producers can make them with good quality and at a much lower cost than we can in Estonia. In such cases, there’s no point in trying to replicate things at a higher cost.

However, there is a point to paying, say, ten percent more if it brings tax revenue and other benefits to the national economy overall. In that case, a ten percent more expensive Estonian shell might actually be cheaper for society in the long run. That’s just an example; the calculations need to be done, but this aspect should be considered in the discussion.

Interviewer: What’s your take on the state of the Western defense industry?

Markus Villig: The sector has been in stagnation, the last thirty to forty years haven’t been the best for attracting top talent, and there’s been little innovation. Now there’s a kind of renaissance happening, with new companies entering the market.

There are definitely several niches where it’s possible to build something significant with just a few million euros, whether it’s communication systems, targeting systems, or even missiles or drones. It’s possible to create remarkable products within a few years.

Interviewer: What underlying factors contribute to the stagnation of the Western defense industrial complex?

Markus Villig: European defense companies haven’t been able to increase their research and development budgets. When comparing the budgets from the 1980s to today, most are significantly smaller in real terms. The U.S. defense budget during the Cold War was twice as large as it is today in relation to GDP. There was more money allocated to defense sector back then, and people were more motivated to work there. Today, there’s neither the money nor the motivation—a young engineer finds it much more attractive to work for Facebook.

Interviewer: Are you saying the defense industry need a "Bolt effect," where there are fewer regulations and barriers to entry, similar to what Bolt’s taxi drivers experience? Could we see some opening up in the overprotected European defense market, at least within the EU?

Markus Villig: Over the past year, I’ve met with dozens of different defense companies, both large and small. The common message from everyone is that the procurement process simply doesn’t work—it’s ultra-conservative and favors ordering only from existing large framework contracts.

It’s incredibly difficult for a new player to enter the market. On the one hand, it’s logical that in the defense sector, where buyers want a highly reliable product, they’re reluctant to take risks with a new startup.

But it would make sense to allocate, say, five percent of the budget for experimental products, allowing new solutions to be tested and new companies to enter the market. This is currently deficient in Europe, but it is more effectively organized in the U.S.

Interviewer: So, there’s no government-funded sandbox where some development and experimentation could be done in the interests of national defense?

Markus Villig: Exactly, because innovation often comes from small teams that need a platform to test a specific new idea. Most of them may not work, but maybe one out of ten will come up with a product that has potential and is interesting.

Interviewer: How does this align with Bolt’s own extensive and fast growth model? Do you even have any significant competitors in Europe?

Markus Villig: Bolt’s need for rapid growth stems from the specific dynamics of our sector. Some sectors have many players even after twenty years, while others consolidate quickly for structural reasons. The best example is search engines.

Google came and dominated the entire market within five years. Over the past twenty years, Google has had virtually no competition and is in a completely monopolistic position. In our sector, there’s definitely no monopoly—there are several serious competitors, with Uber being the largest, but there are still dozens of players in the market. There’s no sign of competition disappearing here.

Returning to defense: the global market is relatively consolidated, with five major players controlling around 80 percent of the market. In Europe, the situation is even worse for new entrants. Local players take up a significant portion of the market, and because they’re so comfortable and the barriers to entry are so high, they have no incentive to take risks with innovation. Their position in the market is already secure.

Interviewer: But at the same time, you mentioned that Estonia needs to develop its local defense industry. How does this align with the argument for opening up the market while supporting local production?

Markus Villig: The advantage of Estonian companies is that, coming from a small country, they’re used to thinking big—no one would likely develop a product just for their own market. The Estonian defense industry fund is a step in the right direction, allowing small players to receive government funding to develop innovative products. The government, in turn, gains oversight and confidence in the solutions under development, which can later be tested in the field.

Interviewer: Does Bolt keep an eye on unmanned systems development in the Ukraine war? They’re making a significant impact there. When will robot drones become food couriers?

Markus Villig: We’re actively keeping an eye on both aerial and ground drones, like Estonian Starship’s delivery robots. Current drone solutions aren’t ready for widespread commercial use yet; there’s still work to be done on quality and cost.

For example, with aerial drones, it’s necessary to address who will maintain them when thousands are flying simultaneously and operating hundreds of times a day. Today, no one has yet brought such a product to market. But within ten years, there will undoubtedly be a niche for this product. It also requires solving air traffic control and ground safety issues.

Interviewer: Am I exaggerating if I speculate that the cheap robotics making waves in Ukraine’s airspace might not be adopted by the heavily protected Western defense markets? Could cheaper solutions be excluded from the market because they wouldn’t be as profitable?

Markus Villig: That’s certainly one aspect, but there are three broader effects to consider. The first is a paradigm shift. For the past few decades, the focus has been on highly expensive expert systems.

Take the F-35 fighter jets, for example—one plane costs $120 million and must be extremely reliable. On the other hand, for the same amount of money, you can build 40,000 drones, most of which might not work without affecting the overall combat effectiveness. A paradigm shift as significant as what’s happening in the Ukraine-Russia war takes years to fully sink in.

The second is the protectionist aspect. Today, for understandable reasons, local producers are often preferred. As we discussed earlier, governments are often willing to pay 20-30 percent more to local producers because they know it ensures supply chain security, creates jobs, and gives politicians credit.

The third is the high barrier to entry for small players. If you are small, then even if you’ve developed an exceptional product on the battlefield of Ukraine, it may not be taken seriously, and you’ll struggle to participate in procurements, regardless of where you're from.

Interviewer: Will it ever be possible for the defense industry to achieve a newer economic model, different from the current one, where companies would have a reason to fully fund their own research and development from start to finish, making the risk worthwhile?

Markus Villig: As long as governments hold a monopoly over all military activities, pure market logic doesn’t apply. However, the fact that the state is your only customer doesn’t mean that the defense industry sector has to be poorly managed or that companies should operate inefficiently and waste taxpayers’ money.

At the same time, over the past five years, there have been several concrete examples of how it is possible to enter the market. One of them is the defense company Helsing, which offers artificial intelligence solutions and recently raised 500 million euros from investors.

Helsing is a purely European initiative that has already made successful deals in Germany, Sweden, and Estonia. Entering the defense industry market is challenging, but if you have a competent enough team and a good enough product, it can be done.