LET'S TALK ABOUT: Estonia's Startup Scene
Thursday, September 21, 2017
Earlier, we learnt a lot about the struggles of an Estonian startup that is practically still in its infancy (click here for more). But what about more established startups? How do they benefit from the Estonian work environment? I spoke with Kadi-Ingrid Lilles, Head of Communications & Community at Startup Estonia, in order to find answers to my questions. (Sander Sillavee took notes during the interview, due to the principles of journalistic carefulness.)
INTERVIEW
Hi Kadi, thank you for taking the time to meet me. Let’s start by introducing the key idea behind Startup Estonia.
Hi Kadi, thank you for taking the time to meet me. Let’s start by introducing the key idea behind Startup Estonia.
Startup Estonia is the main governmental startup support organisation in Estonia. The aim is to support the startup ecosystem to help Estonia evolve into one of the best places in the world for startups.
How do you want to achieve that?
In multiple ways. We, as Startup Estonia, help the startup community organise events, provide relevant training for startups, and work towards creating ever more startup-friendly regulations. Of course, we also want to attract foreign investors as well as educate the investors we already have in Estonia. Because the ecosystem here is still pretty young, we have a lot of first-time startup founders who will take all the help and guidance they can get. Thus, there are not too many “repeat founders” yet; and a fair number of them have a background of working for Skype.
What distinguishes you from other organisations aiming to support startups?
We see ourselves as an umbrella organisation for the whole Estonian startup community, thus not competing with any other particular organisation. As we are, first and foremost, also a governmental initiative and therefore a part of the public sector, we are in a unique position to help shape startup-friendly regulations. In a way, we act as an intermediator between the startup community, whose pains and aches we are very aware of, and the government, with which we have some leverage.
Can you give an example of how you attempt to lobby the government?
The latest example is the implementation process of the Estonian startup visa, which was realised within eleven months. Luckily, the Estonian Prime Minister at the time, Taavi Rõivas, was backing the initiative, as we witnessed a strong input and initiative from the startup community itself. The PM was very open to hear them out and tried to collaborate. He really helped to push it through the Ministry of the Interior. The initiative has now been in effect since January 2017.
Generally speaking, would you say that the government is cooperative towards startups?
Most definitely, especially when it comes to new technologies, such as autonomous driving and ride-sharing, for instance. The government actually altered the legislation in a “startup-favourable” way. Startups themselves were so motivated to take action in that matter that they didn’t need us to help with the lobbying. Just recently, I saw the former President of Estonia tweeting that a Malaysian ride-sharing company had prepared a presentation for the Malaysian government, and the title was “Be the Estonia of Asia” (laughs). Here, the government really cooperates with startups. In fairness, this approach works particularly well in small countries; you don't have much, if anything, to lose by testing out new innovative policy solutions.
Do you have a team lobbying on different issues?
Not really a team, actually. There is one main person responsible for lobby and regulation activities in our team. He is actively engaging the community in order to maintain good relationships in the key ministries; that is, the Ministry of the Interior, the Ministry of Foreign Affairs, the Ministry of Economic Affairs and Communications, and the Ministry of Justice.
As of now, how many people work at Startup Estonia?
We are a very small organisation. Currently, we have seven employees…
…including you. What were you doing before you came to Startup Estonia?
I started working with startups in university, where I studied International Business Administration. It was a practical curriculum, so there has always been this immediate proximity to startups. In the early days, I focused on social entrepreneurship. In fact, I was the founder of Estonia’s first social enterprise incubator, which really got me into the field of entrepreneurship support. So I took the opportunity to develop myself further in Silicon Valley where I worked in the venture capital (VC) field for a year. After that, I returned to Estonia to help develop the startup ecosystem here. I consider it a very impactful job.
Would you say that there is a lot of variety in your day-to-day job?
Definitely. We don’t really have a routine in that sense. As you can see, we have very interesting meetings popping up every day (laughs). For instance, tomorrow we’re hosting close executives to the prince of the United Arab Emirates. So there is a good variety of people who want to learn more about the startup environment in Estonia.
How many startups do you have in the community?
Over 400. Besides, we also have a few startup support organisations that we work with closely.
A lot of startups, even in Estonia, are struggling to find investors. A good idea is useless if you don't have someone supporting you financially. Is there a way for you to support startups in this phase?
Seed investments – that is, investments taking place at the very early stage – are quite common in Estonia. We have a sizeable business angel community, given the small size of the country: there are over 100 organised business angels. Many of them do not have a startup background themselves, which is why they are not necessarily familiar with the best practices of investing into startups. So it is crucial to educate them.
How can startups help themselves?
Through crowdfunding, for instance. There are several Estonian startups that offer crowdfunding platforms as a service to other Estonian startups. The most promising initiative is called Funderbeam. This company offers instant liquidity to people investing into startups, thus getting more people interested in investing and trying it out themselves.
To what extent are you working together with other public sector organisations trying to attract foreign investments into Estonia?
The main organisation for these activities is Enterprise Estonia. Although they are mostly focusing on larger investments, they also get enquiries about investing into technology companies and startups; they usually direct those requests to us.
Why do you think foreign investors are interested in Estonian startups?
One of the many reasons is that we already have quite a few startup success stories, such as Skype, GrabCAD, Teleport, etc. These companies contributed toward the growing interest of investors in other Estonian startups.
What is the most successful Estonian startup at the moment?
Definitely TransferWise. It’s a peer-to-peer money transfer startup, and has been evaluated for over a billion dollars. Their investors include people like Richard Branson and VC companies like Andreessen Horowitz, which are the top investors in the whole world. These type of investors, thanks to TransferWise, are also paying visits to Estonia, and have an increased interest in Estonian startups.
Consequently, you should observe increased numbers of foreigners starting to work in Estonia, right?
Yes, we see more and more foreign startup employees as well as startup founders being relocated to Estonia. There are several reasons for this trend. One of them, as already mentioned, is the implementation of the startup visa. Most of the startup visa programmes around the world are targeting startup founders, but the Estonian programme is also making it easy for startup employees from non-EU countries to come to Estonia. The programme is particularly popular among Ukrainians, the Turkish, and Indians. But we’ve had applications from over 40 different countries, including African states and the US. Another reason is that there are many governmental initiatives, such as Work in Estonia, that are targeting ICT talents from all over the world.
Is the Estonian language a prerequisite in startups here?
No. The working language in Estonian startups is English, because the market inside Estonia is so small that you have to be global from day one. You have to build an international product and go beyond the Estonian borders; you can’t build a startup for a market of one million people.
You mentioned the small size of the country. Do you think it’s easier to make connections?
Yes. You might have heard of the term “Estonian Mafia,” referring to the Estonian startup ecosystem. Six years ago, US investor Dave McClure saw that the Estonian startups that came to Silicon Valley were really sticking together, which is why he jokingly called them the Estonian Mafia. This kind of camaraderie and willingness to help each other out, I believe, characterises the Estonian startup community very well. Because, in terms of bare numbers, we don't have too many startups, it allows the existing startups to not be direct competitors. Thus, they are even more motivated to support each other and provide each other with connections.
Is there anything you would like to achieve by 2020?
Of course. Since we are backed by the European Union – more specifically, the Regional Development Fund – we do have a „best before date“, so to say. In that sense, Startup Estonia is a unique association: all of our activities are strategically planned until the year 2020. We actively communicate that we only last until that year; hence, we have specific goals. By 2020, we want the startup community to become self-sustainable, so that it wouldn't need us anymore.
Are there any numerical goals as well?
We want to hit the number of 1,000 startups in Estonia. This requires aggressive growth inside the country as well as bringing in foreign founders. Though this may sound ambitious, you must keep in mind that the number of Estonian startup founders has been growing rapidly. In Estonia, the term “startup” was not even known ten years ago. Growing from zero startups to a little over 400 within ten years is quite remarkable.
How does e-Estonia, the concept of a digital nation, help you in your everyday work?
It is something so convenient that we cannot really imagine having it another way. If we went back to doing signatures on paper, for instance, Estonians would realise how much more inconvenient it is. These troubles are kicking in when we are dealing with partners from abroad, and we need to start printing, scanning, signing documents manually, and – God forbid – sending a fax. The government actually published a statistic on how much time on average is saved through digital procedures: five working days a year.
I talked to a startup founder two days ago and he told me about the hassle of starting a company in Germany.
I can imagine. The fastest anyone has set up a company in Estonia was 18 minutes.
If you could name one argument for coming to Estonia, what would it be?
The ease of doing business, which includes the favourable tax environment, the simple interaction with the government, and, of course, the existence of a digital nation.
How do Estonian startups encourage a healthy work-life balance?
Most startups here promote working from the distance. Personally, I spent one-fifth of last year working from the States. This type of flexibility and people-friendly work environment is key.
Are there any workplace innovations taking place?
A trend that one Estonian startup has invented is the concept of “jobbaticals,” which is also the name of the startup. You spend half a year to a year abroad working for a different company. Thus, by living in another country, you are pulling yourself out of your comfort zone, but are still able to do what you like professionally. Jobbatical is trying to bring international talents to Estonia, but also to other countries all around the world.
How do startups differ from more traditional companies?
In Estonian companies in general, especially compared to German ones, the level of hierarchy is lower. Starting from the Estonian government to the corporations, the power structure is rather flat. It’s fairly easy to access the main person in charge of any organisation – even the Prime Minister.
Starship, one of Estonia’s most promising startups, is the reason why there are delivery robots cruising the sidewalks of Estonia. Do you think Estonians have developed a high tolerance for robots?
Yes. Getting used to those robots has been a natural process, because they have taken over the city neighbourhood by neighbourhood. Handlers were initially walking next to the robots and were talking to interested people about them. So, in a way, it was a personal experience of getting to know the robots. It’s still making national news, though. A week or two ago, there was an incident where a drunk person on the street started to beat the robot, but other people around came to the robot’s rescue. These types of stories happen (laughs). Generally speaking, however, Estonians are embracing those robots and innovations.
I think that’s a good way of putting it. Kadi, thank you very much for the interview and all the best for the future!
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