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20 I Companies & Markets bne June 2021
ment community. Skype’s success spurred the emergence
of the next wave of entrepreneurs who had had experience of a unicorn, as well as a whole generation of angel investors with a tech entrepreneurship background. Estonia went
on to generate Playtech gambling and trading software, Transferwise international money transfers, and Bolt,
the taxi platform.
“Combined with Estonia’s very clear strategy towards e-governance and promoting startup culture, it was a win-win that is hard to catch up with – I mean for Lithuania and Latvia,” says Bojare of Startup Wise Guys, which was itself founded in 2012 in Estonia, and has now invested in more than 185 early stage startups with founders from more than 40 countries.
Bojare points out that Estonia’s commitment to tech startups is shown by the fact that two onetime presidents are deeply involved in the ecosystem: former president Toomas Hendrik Ilves and current president Kerste Kaljulaid.
She admits that Estonia is over-hyped, but this is another factor in its success. “Estonians are also master marketers and in a way that they have created a self-fulfilling prophecy, where sometimes the reality has to catch up to the hype,” Bojare says.
“Combined with Estonia’s very clear strategy towards e-governance and promoting startup culture, it was a win-win that is hard to catch up with
– I mean for Lithuania and Latvia”
Yet Lithuania is now breathing down Estonia’s neck. Lithuania has had the biggest growth jump in new startups during 2019 -2020, whereas Latvia really picked up the pace in November 2020, according to Agne Randyte from Versli Lietuva (Enter- prise Lithuania), the Lithuanian business promotion agency.
According to Enterprise Lithuania, the country’s startup eco- system now matches that of Estonia: there are 1,043 startups in Lithuania, compared to 1,121 startups in Estonia and 400 plus in Latvia. Randyte lists incubator Tesonet, digihealth startup Kilo Health, mobility services platform Trafi, 3D design company CGTrader, and microfluid tech company Droplet Genomics as names to look out for in the future.
“Estonia is famous for its digitalization, especially in the govern- mental sector. It is very easy to get an e-residency or open a new company,” says Sarune Smalakyte, head of the Rockit fintech and sustainable innovation centre in Vilnius. “No one doubts that Estonia is famous for its unicorns like Bolt or Pipedrive, but Lithuania has always been spotted with such startups as Vinted or [money transfer company] TransferGo,” she says.
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“Lithuania is now one of the biggest fintech hubs in the world, with a ranking of four (competing with hubs like the USA, Singapore, and UK) and this is our key area,” she says. Smalakyte picks out up and coming startups Ondato, which offers know-your-customer solutions, and financial research company StockInvest.us as top fintech hopes.
She also points out that the other Baltic states share many of the same advantages as Estonia.
“Most investors agree that the business infrastructure, tax regulations, and talent availability are quite similar across
the Baltics,” she says.“An innovation-friendly environment, the strong performance of the regulatory system, the talent pool, and ease of doing business are among the strongest innovation dimensions for both Latvia and Lithuania,” says Smalakyte. “What is more, acceleration programmes, collaborations between corporations and startups, the business angels network, and VC funds also play a big role in startup boosting in the whole region.”
Ivan Ladan, Founding CEO Marine Digital, a startup that originated in Riga, says that both Lithuania and Latvia have made a lot to progress in building a better environment for young companies to start a business.
“It might be so that Estonia has started these activities a bit earlier and established cooperation within the local ecosystem between the government, corporate business, and IT/industry entrepreneurs, while in Lithuania and Latvia these processes are still on the way to a great balance,” he says.
Bojare of Startup Wise Guys says Latvia and Lithuania have their own advantages too.
“If we look at Latvia specifically, its stronghold is what I like to call ‘heavy industries’ such as drones, hardware, robotics, biotech, medtech, deeptech. Also its recently passed employee stock option regulation puts it in a favourable position for founders looking for a good base in Europe,” Bojare says.
She also points out that both Latvia and Lithuania reacted very fast in reaction to the political crisis in neighbouring Belarus by welcoming tech migrants, which is already showing up in the startup numbers.
Think global
But the Baltic states are also coming face to face with severe constraints because of the size of their economies and their limited talent pools, which have become even smaller as the local superstars such as Wise (formerly Transferwise), Bolt, Vinted, Printify and others grow.
“The local market is small and there should be no illusion about a breakeven on the local markets,” says Ladan of Marine Digital. “Also, as not all industries are represented in the Baltics, one has to do the research in-depth before starting a project and locating it in a particular place, as an example Lithuania has the edge for fintech projects, Latvia has the edge