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The blueprint of the Estonian start-up ecosystem’s near future

Startup Estonia

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In one of the previous articles, we suggested that Estonia’s digital success is partly attributed to trust-based networks between state, private sector, and academics in the 1990s. Recently published strategy for developing start-up ecosystem is striking the same note. White Paper by Startup Estonia, a government initiative lays the groundwork for an experimental and synergetic relationship between the state and the start-up scene.

Each country with digital aspirations has its approach for dealing with the highly unpredictable yet possibly extremely rewarding field of start-up companies. Creating an ecosystem of brains, funds, and supportive measures is a tailored job. In Estonia, the blueprint for the next seven years of development was jointly written with representatives of the start-up community. It aims to solve the ever-occurring catch-22 of innovation: for creativity, inventors have to have the independence to set their aims and choose methods; for implementation, there needs to be close cooperation with established actors.

No rest on laurels just yet

“Estonia’s start-up sector is doing very well,” reports Eve Peeterson, Head of Startup Estonia.“But we cannot rest on laurels. We engaged in state-level storytelling for creating a shared vision of our future while Startup Estonia will be acting as an intermediary for boosting cooperation between startups and state.”

According to Sten-Kristjan Saluveer, innovation strategist and entrepreneur, one of the authors of the White Paper, lists four directions for development: local-global interactions mindset, growth, diversification, and open data use.

On a global scale, Estonia is a small country. Therefore, the idea is to enable entrepreneurial attitude and action regardless of the specific location. Mr Saluveer pointed to Cleveron, a global-scale robotics innovator situated in a tiny rural town in the middle of Estonia.

The importance of state innovation funds

On a global scale, Estonia is a small country. Therefore, the idea is to enable entrepreneurial attitude and action regardless of the specific location. As a good example, Mr. Saluveer pointed to Cleveron, a global-scale robotics innovator situated in a tiny rural town in the middle of Estonia.

“We don’t have the luxury of having our Silicon Valley, a hot spot where all the brains and money gather. But we have the whole country, well connected to the global information network, where inventions can spark unexpectedly. We have to cherish that,” Mr. Saluveer stressed.

Indeed, aligning with current innovation literature, peripheries can be understood as niches – pockets of experimentation and fresh ideas. But what happens to these promising beginnings later? For boosting growth, participants agreed that in addition to supporting start-ups at their very beginning, equally important is to support scaling up after 2-3 years of operation. So, on the one hand, state innovation funds (such as EstFund or SmartCap) provide vital early-stage funding and guide direction by posing critical societal questions. On the other hand, however, the startup community has pointed to the need for knowledge transfer and scaling once a product has been developed.

Green technology, mental health, and education

“For example, sustainability and green technology are areas the state can both push investments but also reap the results,” Mr. Saluveer suggests. “In light of the European Green Deal, we see strong support for this mindset by the public sector. But in other areas, too, such as mental health or education.”

Although details of knowledge transfer mechanisms are subject to negotiations, these could include tax reliefs when scaling up solutions or a buy-in program for state enterprises. What is vital is the synergy between startups and the rest of the country’s R&D strategy. Mr. Henrik Kutberg, expert for startup policy at the Ministry of Economic Affairs, stresses that because of its small size, Estonia can benefit from cross-fertilizing research, technology, and business and bringing the participants together through intermediaries such as Startup Estonia.

Next up: science-heavy fields

“We expect that in addition to ICT-based start-up activities, we will have an increased interference with science-heavy fields, be it energy or space sector,” Mr. Kutberg says. “We are thrilled that the startup community has been so thoroughly involved in developing this strategy with us, and we are looking for prompt results in the coming years.”

In a small country like Estonia, we are accustomed to having results quickly. Nevertheless, research-intensive development takes a long time, so agreeing on the directions right away is essential. Luckily, while there might be topics where policymakers have difficulties finding a common language, increasing innovation is hardly the one.

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