Success breeds success: How a country’s startups raised a billion dollars in just 10 months


Estonia continues to set investment records, despite being a country with only 1.3 million people.

Photo: Walter Bibikow / Getty

In the early 2000s, the Estonian software engineers Ahti Heinla, Jaan Tallinn, Priit Kasesalu and Toivo Annus teamed up with the Swedish entrepreneur Niklas Zennström and the Danish entrepreneur Janus Friis and built the VoIP telecommunications service Skype. After quickly achieving international success, the company was sold to eBay in 2005 for $ 2.6 billion, giving the Estonian technology scene its first unicorn.

Even with the ongoing coronavirus crisis, Estonian tech startups managed to raise over 1 billion. USD in funding in the first 10 months of 2021: double the previous record for the whole of 2020.

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The mobility company Bolt has been by far the largest recipient of support. The company started eight years ago as a small ride-sharing app and now offers vehicles for rent, micro-mobility and food delivery in Europe, Latin America, Asia and Africa. It received € 20 million from the World Bank IFC in March and € 600 million from investors in August to launch its new 15-minute grocery delivery service in 10 European markets.

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Although Bolt’s contribution accounts for the bulk of investment, Estonia continues to produce promising startups at high speed. In a country of 1.3 million people, more than 30 startups have closed investment rounds of over one million euros in the first 10 months of this year, with AI-based customer service platform Glia (64 million euros), identity verification platform Veriff (58 million euros). ), and ultra-capacitor manufacturer Skeleton Technologies (EUR 29 million) ranks second, third and fourth.

So what’s the secret behind Estonia’s startup success?

“Most of the year the weather is so bad and it’s dark outside, so what else would you do but write code in a cave?” joker Madis Lehtmets, CEO and co-founder of construction software startup Remato, which raised € 1.4 million. in August.

Aside from jokes, Lehtmets says that esters are a hard-working and robust people and pretty much quiet introverts. “We do not make friends or form communities so easily, but when we do, the connection is much deeper and stronger. You can see it from our start-up ecosystem … I think technology has given our people a medium to shine.”

Skype effect

When looking at the development of the local tech scene, it is difficult to overestimate the effect Skype has had.

In addition to the money that sales in 2005 added to the country’s technological ecosystem, Estonia remained the platform’s main development center for several years, giving thousands of Estonians the experience of building world – class technology into a large multinational company.

Many Skype alumni subsequently set up their own companies, attracting further investment to Estonia’s technology industry. Taavet Hinrikus – Skype’s very first employee – co-founded TransferWise (now Wise), a multi-billion euro company now listed on the London Stock Exchange. The CRM platform Pipedrive, which was valued at around DKK 1.5 billion. USD in 2020 after receiving a majority investment from Vista Equity Partners, was co-founded by former Skype employee Martin Tajur.

Martin Villig is another former Skype employee. He went on to found Bolt, which was valued at about $ 4.75 billion. USD in its most recent investment round in August 2021.

These and other companies founded by former Skype employees have employed thousands of people in Estonia and have provided valuable experience to the next wave of start-up entrepreneurs. In the process, a lot of money has been reinvested in Estonia’s technological ecosystem.

“There’s the virtuous cycle after the Skype effect, with more capital in the market from the founders, which has had a successful exit and gives a boost to new companies coming up,” says Taavi Madiberk, CEO and co-founder of Skeleton Technologies, which is one of the most promising startups in Estonia and Europe’s largest manufacturer of ultra-capacitors.

“There is a lot of solidarity and closeness in Estonia’s technological ecosystem, with a lot of founders willing to give back and make the ecosystem grow.”

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The situation in Estonia was completely different when Madiberk first tried to raise funds for Skeleton Technologies in 2013. First, he says that financing for tech companies has become significantly better and more accessible globally.

Lehtmets, who collaborated with a number of local startups before co-founding Remato in 2018, agrees, adding that success stories have helped put Estonia on the map in the global VC and startup scene, while at the same time has removed much of the dependence on overseas investors: “Our The local investor community has grown very fast, and for an early startup you do not need to raise capital from abroad – there is enough money at home.”

That is not to say that fundraising has become less stressful: Lehtmets remembers his own experience of running races for Remato in the first half of 2021 and reached out to over 100 investors in total: “I sent out emails, reached out to old contacts , used all available intros and booked the first three to four weeks closely with about 60 investor calls.I think my record was nine calls in one day, although I do not recommend it – I started to lose track of what I already have talked about during the last calls that day. “

Success breeds success

Estonia’s success stories have not only attracted traditional investors to its startup scene, but have also created an important pool of capital to be invested.

According to statistics from the Estonian startup hackathon organization Garage48, in the first 10 months of 2021, local investors have injected more than € 42 million into local startups. In comparison, the figure for the whole of 2021 was € 31 million.

Mari Hanikat, Garage48’s CEO, points out the historical context behind the country’s close tech community. “The Soviet background has pressured many of the entrepreneurs born in the 80s to do their own thing to achieve success instead of pursuing a more traditional career path and becoming a permanent job in a more corporate environment, “Hanikat tells ZDNet.

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Given the speed with which new, high-potential startups are emerging in Estonia, both Madiberk and Lehtmets are confident that this year’s investment record will be broken.

But while it may not be the same challenge as it once was, finding money does make finding talent. “It’s always hard to find top talent locally, and there’s fierce competition among tech companies,” says Madiberk.

“We have been working on internal initiatives, such as the Skeleton Academy, to help our employees gain new skills because upskilling is the key today.”

Garage48’s Hanikat believes that there is a huge untapped potential in Estonia’s technical workforce, especially as it is still male-dominated. According to data collected by Statistics Estonia and Estonian Startup Database, only one-fifth of the country’s startups are founded by women, and only one-third of startup employees are women.

“We need more inclusion. It’s very exciting to see more female founders, but the relationship is still very small,” says Hanikat.

“The startup community has come a long way over the last 10 years, but there is still a very long way to go to empower more female founders.”

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