E-Stonia: The Most Digitally Advanced Startup Ecosystem In The World

Estonia, a small Baltic country whose citizens continue to worry about Russian conflict, continues to push aggressive business reforms with a bright outlook. The country is a Heritage Foundation case study on what free market reforms can do for a country which distributed food stamps to its population less than two decades ago.

My first visit to Tallinn was in May 2018. After spending eight years in India, I wanted to come back to Europe to focus on my business connections here. Looking for a new European base, I was initially drawn to this remote North Eastern country with its thriving startup ecosystem. The country, with a population of 1.3 million people, is the birthplace of unicorn Skype. Estonia currently has four tech unicorns: Playtech, Taxify, Transferwise, and Skype.

After experiencing Estonia’s mega-efficient digitized bureaucracy, I decided to set up a company. Registering a private limited company is possible with €2,500 starting capital, with an entirely online process if you work with certain service providers such as LeapIn. The process of setting up my Private Limited entity took less than 24 hours.

Tallinn is captivating. A small city, spacious and clean, at the centre of Estonia’s startup ecosystem, it has been noted as one of Europe’s foremost digital cities with more startups per capita than any other city. After gaining independence from the Soviet Union in 1991, five years later Estonia created the “Tiger’s Leap” programme which invested in computer and IT infrastructure. 

Estonia has shunned any claims that Skype was a once-off stroke of luck, and is now poised to repeat the story with a continuous stream of accelerating startups such as Bolt (taxi-hailing), Veriff (leaders in identity verification in banking), and Pipedrive (a SaaS company with reach as far away as Latin America). The President of Estonia, Kersti Kaljulaid, last year promoted the country as a top destination for innovation and entrepreneurship in a series of tweets.

One of the most fascinating aspects of Estonia’s innovation-driven economy is not its mega successful startup companies, but its efforts to create cross border integration beyond Estonia. Founder of Pipedrive, Ragnar Sass, has spearheaded these efforts. Sass is also the founder of Lift99, a coworking hub and network of startup founders. Looking to expand from Estonia onto the global market, Sass launched Lift99 in Kiev, Ukraine, in March 2019. The network introduced their F2F mobile app, where founders as far away as Sri Lanka can get involved remotely. 

Lift99 is not the only project focused on smashing boundaries. Investor and trading platform startup Funderbeam launched in Estonia in 2013, and is now located in Denmark, Croatia, Singapore and the UK as of 2019. In the summer of 2018, Funderbeam established its presence in Croatia through a partnership with the Zagreb Stock Exchange. This summer they will also partner with the North Macedonian Stock Exchange. 

Estonia’s basic philosophy of integration and survival has been key to its success in recent years. The three Baltic states (Estonia, Latvia and Lithuania) acted as a unified region to achieve NATO and EU membership. Now, Estonia is seeking further integration opportunities with the rest of Eastern Europe and beyond. I am yet to experience a country that is so dedicated to empowering innovation, out of determination, commitment, and unity. 

This small Baltic country has its true appreciation for technology and innovation, viewing it as the only way forward for an area with few natural resources to fall back on. Since its independence, Estonia has taken several steps to change its destiny, from its E-residency programme to the Startup Visa programme. As of February 2019, there were 550 startups in Estonia from a range of sectors. 2018 statistics from the Estonian Tax and Customs Board show the following interesting trends:

• An annual growth of 26% in the number of people employed by Estonian startups (up to 3763 from 2981 in 2017)
• 62% of new jobs created in 2018 were created by the top 20 Estonian startups
  • Transferwise + 239 jobs
  • Taxify +92 jobs
  • Monese +57 jobs 
  • Veriff +54 jobs (490% increase in employee growth in Estonian office)
  • Pipedrive +53 jobs
• Investments into startups in 2018 exceeded €300 million (€328 million).

How did Estonia manage to change its traditions and thinking so quickly to ensure the birth of such an efficient, open, and innovation-driven economy? I often ask locals about this and some of the responses are intriguing. Some claim, unlike other post-communist regimes, younger technocrats took over the direction of the country. The “Tiger’s Leap” programming scheme in 1996, follower by the Look@World Foundation partnership between public and private companies, have both raised awareness of the importance of a digital economy and IT infrastructure. Hence my theory, Estonia has become startup paradise and is showing no signs of slowing down.