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Imagine, create, grow. Estonia is the place for ideas worth funding

About two thousand years and a couple of centuries ago, there was a place in Europe where someone believed in the existence of a higher dimension, superior to the world of humans. The so-called hyperuranion was thought to be the world of ideas – as Plato writes in one of his most famous dialogues, Phaedrus – a place indifferent to time and space. These ideas had a hierarchical structure, a quality, but they had above all a specific function: as the philosopher says, they are necessary to the existence of worldly things. Ideas as preconditions for things to happen.

Yes, you are still on e-Estonia, and we haven’t started selling philosophy encyclopedias just out of the blue. But here is one thing we have done, among the many that make our journey as an innovative country for independent minds so exciting: we have created a place where ideas come to life. We thought that Silicon Valley might feel a bit lonely from time to time, so we made Estonia one of the best startup hubs in the world by finding the perfect formula to make entrepreneurial people feel at home. Revisiting and adapting Plato’s theory to 2018, we think that opportunities and context make also a big part of the success of a disruptive idea that can bring small revolutions in different business sectors.

Startup Estonia is the governmental initiative aimed at ideas worth funding, striving to create the best ecosystem to see startups being born, grow, and turn into success stories. It’s not just a public programme: they build connections and partnerships with and between incubators, accelerators, public and private actors, and of course aspiring unicorns.

Maarika Truu, as the Head of Startup Estonia, knows exactly why foreign founders love Estonia as a place to start exciting entrepreneurial experiences: “most of them said that the country is so easily accessible, and not only in terms of geography or services but also for what regards the startup community as a whole”. The human factor definitely plays a big role in the early stages of development of a startup, and the advantages here are palpable: “our community is very open-minded. You come in, you end up in a coworking space, start talking to other entrepreneurs, you might pop in on a Skype co-founder, and everyone is really open to talking. There’s no hierarchy and no reluctance in sharing meaningful experiences. This comes with the smallness of the ecosystem, which can always be both good and bad, but for us is more of a good factor: Estonia is open and small, so you can come here and scale from here to wherever you want”.

When we meet Maarika, things are going pretty well for startups in Estonia. According to the latest mid-year reports, Christmas came early for entrepreneurs based in Tallinn – and then it just never faded away:

  • +27% growth compared to the first semester of 2017 in terms of employees who joined the existing 550 Estonian startups; raising the total headcount to 3369 people – and they’re still hiring
  • the top 20 startups account for more than half (56%) of the jobs created, with Transferwise, Taxify, Pipedrive, Monese and Starship Technologies being the top 5 talent seekers
  • we’ve just become the country with the highest number of unicorns (startup companies valued at more than a billion US dollars) per capita: the birthplace of Skype, Playtech, Transferwise, and Taxify
  • 20,8M EUR have been given to the state this year already in employment taxes, meaning that startups are also a guarantee for well and fairly paid jobs
  • overall funding of Estonian startups has already reached 245,6M EUR, falling short of only 26,5M EUR from last year’s final rate, meaning that there’s more to come and another record to break before the end of the year
  • talking about funding, the inflow of capitals has never stopped growing since 2012, seeing a steep increase (more than doubled) between 2016 and 2017, and projected at up to 350M EUR this year

Businessmen, venture capitalists, funds, you name it, they want to invest in Estonia. “We’re seeing a trend of high growth and it’s now starting faster than ever before, with the largest number of investment available in the whole Baltics, not only in Estonia. Tallinn has been showing the highest trend in raising those investments for startups, and the inflow is just not stopping: they believe in the teams and the ideas, and founders and employees have proved that those ideas are scalable and needed in the world”, as Maarika reveals. New startups and new people are finding their way here, and “this is positive for the investment capital that is actually available” Maarika says, “because funds need startups to invest in.”

Unicorns are rare beasts, but we won’t be the ones to tell you that you cannot become one. Startups that made it and startups that by now are considered companies can be an example for founders on a mission:

“having role models is really important for the youth, whether they are business owners or unicorns.

It’s a fact that unicorns are success stories, but they’re as important as SMEs. They make a big share of the overall economy, and at that point the examples maybe even in your family, where you have parents who are business owners even though they’re not unicorns. School programs are fundamental too, when young entrepreneurs go to the schools and tell students how they started,” Maarika says.

Startup Estonia knows that digital skills help, but the relations between entrepreneurship and human capital are the component that makes Estonia shine for its startup ecosystem. To keep the flow of ideas going, schools are inevitably the places to go: “the Junior Achievement Student Company programme for the secondary school is an example in this sense, and in Estonia we have a really high percentage of students who go through it. Junior Achievement even said that Estonia is one of their most successful countries; founders, young entrepreneurs, they have the possibility to learn something, adapt, change, and then they will already know how to proceed from there”, Maarika highlights.

The current situation sees Startup Estonia concentrating on the national ecosystem, looking for more harmonized paths of developments for the new-born companies here, but cooperation and partnerships are on their way with actors that can help startups scale in other markets. The list is set and open to new target-cities now more than ever, aiming to expand in Europe and Asia.

But if one eye looks at the international context, the other aims to understand more intimate dynamics that can turn someone into a founder. The human dimension of an entrepreneurial initiative seems to make a big part of all the work that the agency is putting into Estonia’s startup environment: “We’re researching into how to start giving people a startup mindset, and how to enable young talents to express their potential and grow into entrepreneurs. Currently, the startup ecosystem is based on company-specific points, you start with your company and then grow into a unicorn. I want to have a human-centered approach too, where we analyze the person behind the company, and we see what are the skills and the knowledge needed to create startups that would become unicorns in the future,” Maarika reveals. The research is ongoing and is being conducted in collaboration with a pool of independent, applied anthropologists.

Corporate capitals are not the only ingredient in the recipe. Human capital, for the personal skills and potential, and social capital, for the community and the general environment, are in no respects less crucial in making what turned Estonia into the European Silicon Valley that is today. From a certain point of view, the country can be considered a unicorn itself: it grew out of a centrally planned economy and a totalitarian political space, to become one of the hottest hubs in the world for young and innovative entrepreneurs. Things that don’t come by chance. Now we all know it – the startup heaven is a place on Earth.

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