A unicorn is a technology start-up that has a valuation of at least $1B, and what makes it Estonian is that the company is either established in Estonia, its co-founder is an Estonian citizen, or a significant part of its research and development is conducted in Estonia. Estonia is Europe’s leader when it comes to unicorns per capita, and the only country ahead of Estonia in the world is Israel.
Estonia’s unicorns are not isolated miracles, but the result of a wider entrepreneurial scene. Startup Estonia, a government initiative to “supercharge the Estonian start-up ecosystem” manages a database of over 1,300 companies and has recorded remarkable growth in the sector’s employment numbers, turnover, as well as investments raised, even throughout the pandemic. According to Kadri Tammai, the Head of Tehnopol Startup Incubator, the Estonian start-ups characteristically have engineers as the main founders, and hence they aim to develop disruptive solutions. “When we look at the valuation of early-stage companies, it is very reasonable in Estonia, and the teams work hard and are ambitious. This makes our ecosystem very attractive to foreign investors,” she adds.
Estonia provides a nurturing environment for founders – Estonians are generally open to novel solutions, and innovation is backed by digital governance. The latter also eases the bureacratic burden for entrepreneurs. The start-up community is active and there is support for all stages, from an idea to internationalisation. For example, Accelerate Estonia is a state-led innovation program searching for solutions to global problems. Garage48 hackathons and Prototron Fund help develop ideas into initial products. Tehnopol Startup Incubator leads technology companies through an intense growth program; and there are many more support organisations and initiatives.
Surprisingly, what contributes to the start-up scene is the size of Estonia. A small country and population are a great testbed for new solutions. It is easier to get things done as the community is tight-knit and making necessary contacts does not take a lot of effort. This is also how the first successful unicorns continue to contribute: by establishing new companies, mentoring other founders, and investing in start-ups. Estonia’s size can also be a strong motivator – as the market is limited, the start-up has to consider internationalisation from the very beginning.
Several Estonian start-ups see North America as their target market, yet they lack the contacts to enter the market and reach the first customers. Kadri Tammai suggests that this is the chance for the Estonian community in Canada and US to help out, by either sharing contacts and knowledge, or investing in early-phase start-ups.
So, who wants to raise a unicorn?