How Estonia became the top startup nation

Sander Nõmmik
Author Sander Nõmmik

On August 29, 2003, six people from Estonia, Sweden and Denmark launched a new product in Tallinn. On its first day, 10,000 people downloaded it. Few months later, it had a million users. Twelve years later, it is used by 300 million connected users around the world. The product is called Skype.

Estonia’s startup success started with Skype in 2003. Although the initiative to set up Skype came from two Scandinavian entrepreneurs, its software was written by three Estonian developers – schoolmates Ahti Heinla, Priit Kasesalu, and Jaan Tallinn. This was the first time that a truly global multinational startup was being created and nurtured from this relatively small country and therefore it had an enormous impact on the Estonian startup ecosystem – fast forward twelve years and Estonia is the world’s top startup nation.

In fact, sometimes it seems new Estonian startups pop up like mushrooms after the rain. The country currently has approximately 350 startups – one per every 3,700 citizens – and the number is ever-increasing.

As Taavet Hinrikus, Skype’s very first employee and now a serial entrepreneur, who runs his own successful startup – the money transfer firm, TransferWise, with offices in Tallinn, London and New York – explains, “By creating, having, and maintaining Skype in Tallinn, we gained a great insight into how to launch a great global product, and it created a feeling that we can create big things in a small place.”

This new startup with global ambitions became a base for learning new skills and inspiring new ideas. It also helped create a new philosophy and can-do attitude for aspiring Estonian tech-entrepreneurs. As the former head of Skype Estonia, Sten Tamkivi, explains, “We came to believe that being small is an advantage: It’s not about manpower, it’s about finding creative, effective, and innovative solutions to a problem. Being small is not a disadvantage; it just means that you need to think about exporting products right from the beginning.”

The question, “What do I have to contribute to the big diverse world?” is incorporated deep in the DNA of Estonian startup firms. This phenomenon has paved the way for a number of globally successful Estonian startups, such as the aforementioned TransferWise, which last year raised a combined $58 million USD in investments from the Silicon Valley-based American venture capital firm Andreessen Horowitz, Sir Richard Branson, and PayPal cofounder Peter Thiel. Then there are customer management software firm Pipedrive, the international mobile payment provider Fortumo, game developer Creative Mobile, retail point of sale software and inventory management system ERPLY, and the “Facebook for engineers,” GrabCAD.

GrabCAD, an online platform where engineering teams manage, view, and share CAD files, has about 1.8 million users and was sold last year for a cool $100 million USD to the US-Israeli provider of 3D printing solutions, Stratasys Ltd. “Estonia is quickly becoming a place that people know about. One of our investors has compared Estonian startups with Swiss army knives because they both guarantee quality. I agree with him and that image is also catching on in Silicon Valley, as well as in Boston and New York,” GrabCAD founder Hardi Meybaum said recently.

There is also a constant flow of news of Estonian startups in early stage rounds getting $1 million+ USD in funding internationally – and some companies are barely few months old at the time. Recent startups that have raised money, include the P2P lending service Bondora ($5 million USD), the relocation help platform Teleport ($2.5 million USD), and the taxi app Taxify ($1.5 million USD).

The startup entrepreneurs have a strong support system – comprising more than 180 companies, as well as the Tallinn University of Technology and IT College, the Tallinn Science Park Tehnopol bring together science and entrepreneurship, with supporting laboratory and leisure space, five active science R&D centers, and two biotechnology and mechatronics laboratories. The Tartu Science Park is the innovation engine of southern Estonia, with a mission to nurture startup companies into global businesses. It provides startup companies with services and a supporting environment for sharing ideas and finding solutions in collaboration with other entrepreneurs and experts.

At an ever-increasing pace, the Garage48 hackathons bring together computer programmers, graphic designers, interface designers and project managers, who collaborate intensively on software projects within 48 hours over one weekend. The aim of the event is to set up working firms by the end of the weekend. The foundation behind Garage48 also runs a spacious and funky hub in the center of Tallinn. The hub has become an inspirational space for startups and creative, tech, and entrepreneurial people from Tallinn and elsewhere in the world. The working language at the hub is English and international members are always welcome.

And this is just the beginning. By the end of the decade, the number of Estonian startups could reach into the thousands – which is why there is a need in Estonia for significantly more people with a technical background!

You can read more about Estonian startups in Estonian World.