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published 20 May 2015 by Manon Pierre in Estonia 4 minutes 27 seconds to read

Zoom in on Estonia's startup scene

Touted for its tech-savvy government and strong entrepreneurial drive, the tiny Baltic state is progressively appearing on the radar of investors and media alike. We looked at the players, initiatives and events that up Estonia's game.

EIT ICT Labs Country Insights

"If I see a company coming out of Estonia I am reasonably assured that it will be executed well. For its size, Estonia is generating more high quality startups than you would expect,” said Naval Ravikant, Founder of AngelList, a couple of years ago. His famous quote reflects the hype that has been surrounding the Estonian startup scene in recent years, with big names such as Skype and TransferWise helping it gain momentum. 

A vibrant ecosystem

Thanks to simplified registration procedures, which can be completed online in a few minutes, and hardly any demands for financial resources, the overall business activity in Estonia is relatively high. The country is even said to have the world’s highest number of startups per capita. Mari Vavulski, Head of Startup Estonia, believes that innovation and the smart use of scarce resources are the only way for a small country, with a population of just 1.3 million, to compete, hence Estonia's great entrepreneurship spirit.

Estonian startups do have some figures to boast. They have attracted 70.8 million euros in investments in 2014, and have already amassed another 55 million euros this year alone, including the 48 million poured into TransferWise by a number of foreign investors including Richard Branson and the 4.5 million that US fund Valinor put into Bondora. Vavulski also points out that, according to EY and the University of Cambridge, Estonia is second after the UK in euros invested per capita through new alternative funding solutions.

Shining in tech and ICT

In addition to many startups concentrated in specific IT/mobile/software solutions such as Grabcad, Vitalfields and SignWise, Estonia is prominent in FinTech, where TransferWise leads the pack and Fortumo and Erply follow. Vavulski underlines the strong scene for Development Support Tools as well, citing Plumbr (which detects java memory leaks), Zeroturnaround (JRebel java development tool), and Testlio (community of mobile testers). The 10 best startups listed by #estonianmafia, a Twitter hashtag denoting the new generation of Estonian startups, also include Cloutex, Planet OS, dating service Flirtic, search engine Teleport, Lingvist and famous Taxify.

The young companies can count on a lot of support by the Garage48 initiative, accelerators Startup Wise Guys and Buildit, and the largest incubator - Tehnopol. Top-notch local investors include EstBan (Estonian Business Angel Network), EstVCA (Estonain Private Equity and Venture Capital), Ambient Sound Investments (founded by four Skype investors) and SmartCap (Estonian Development Fund). 

Challenges

The country's tech cluster is still far from becoming a European Silicon Valley. As many ex-Soviet countries, Estonia continues to face serious challenges on multiple levels. According to Vavulski, sophistication remains an issue, especially inside the old industries, followed by the scarce pool of technical talent.

Estonia does not necessarily need more entrepreneus: it needs better, innovative and growth-oriented entrepreneurs

“While Estonia is known to produce a disproportionate number of innovative startups per capita, the majority of entrepreneurial businesses are not very sophisticated and are stuck in subcontracting activities,” she says.

Given the small domestic market, local companies with growth ambition need to go beyond the country’s borders. Kosher Dev’s co-founder Jevgeni Levin explained that getting access to external funding often implies reaching out to UK or US startup groups, which is a difficult process.

 “To harness the great potential of entrepreneurship and innovation, Estonia does not necessarily need more entrepreneurs: it needs better, innovative and growth-oriented entrepreneurs," Vavulski adds.

Maximising existing potential

To help enhance growth perspective and to boost the region among international investors, EIT ICT Labs are intensifying their activities in the country. The pan-European innovation organisation seeks to establish long-lasting relationships with the Estonian community by inviting startup hubs to work closer with them and encouraging local startups to become part of their Business Development Accelerator and to apply for Idea Challenge. To promote the opportunities created by the startup contest, EIT ICT Labs participated in Latitute59 with five experts in Tallinn last week, and co-hosted a meetup with Garage48. Plans also include reinforcing cross-border partnerships by welcoming more students from Estonia in the EIT ICT Labs education programs, with the application window open right now.

“For instance, our colleagues from neighbouring Finland are currently working on new projects to reach out to Estonia, because our academic partner Aalto University is active already,” explains Oliver Bey, Innovation Manager at EIT ICT Labs and responsible for reaching out to the startup community in CEE.

Highlights of Latitude59

Very active, the Estonian startup scene organises a whole panel of events throughout the year, from small weekly seminars to Latitude59, its largest annual conference which took place in Tallinn on 14-15 May. Organised jointly by Enterprise Estonia Investment Agency and the EstonianMafia, this landmark tech meetup turned eight this year and has grown as strong as the Nordic-Baltic startup scene, according to Annika Ljaš from the Estonian Investment Agency. Sold-out for the second year in a row, the event welcomed about 1,000 participants last week from all over the EU and beyond. More than 50 foreign speakers including Google’s Chief Internet Evangelist, Vint Cerf, and renowned investor Tim Draper participated in the conference. FinTech & Hardware Evolution were among the hot topics discussed this year along with the country's new e-Residency policy that was launched on 13 May. 

This story is brought to you in partnership with EIT ICT Labs.

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