WHY THE BALTICS ARE BECOMING THE HOTTEST STARTUP REGION IN EUROPE

 

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Why the Baltics are becoming the hottest startup region in Europe

A decade ago, the startup ecosystems of the three Baltic countries – Lithuania, Latvia and Estonia – barely existed. Today, the region boasts at least 6 unicorns, some 2500 startups, and frequently tops the rankings for Europe’s most startup-friendly countries.

Still, the Baltic startup scene has plenty of room for growth. Keen to benefit from the region’s business-friendly regulation and tech-savvy talent, founders from countries as close as Belarus and as distant as Australia are choosing to build their startups here. Let’s look into the reasons why in a bit more detail.

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Europe’s hottest startup nations

Having displayed impressive momentum over the last 10 years, the Baltic startup scene has thrived even in the face of the pandemic. The investment data we recently compiled for the Baltic Startup Scene Report 2020 shows that startup funding has rebounded after a slump in 2019, with the Baltics attracting five times more funding per capita than other countries in Central and Eastern Europe. And investors show no signs of slowing down – Latvia’s Printify just closed an eye-watering $45M Series A, while Lithuanian Interactio closed its own $30M Series A earlier this year.

I believe that the resilience of Baltic startups comes down to a couple of factors. First, with 6 million inhabitants, the region’s smallness necessitates international growth. Limited local markets require that you think globally from day one. There’s also the agility that comes with small size, allowing businesses to move faster and adapt more easily. This “power of small” was evident in the speed with which the Baltics adapted to working remotely during the first wave of COVID-19, launching the Hack the Crisis initiative that turned into a global movement.

The Baltic startup scene also capitalized on the early success of such ventures as Skype. In Estonia, Skype was the catalyst that brought money into the country’s startup ecosystem, establishing an investment community and giving Estonia’s tech entrepreneurs the funds to build the next wave of smart enterprises. The country now has more than 1000 startups as well as the highest unicorn-per-capita ratio in Europe, if not the world.

It also should not be overlooked that the transition to market (as opposed to planned) economies was relatively recent in the Baltics, and the hunger for economic progress has been a palpable driver of how fast the Baltics have been moving ahead. And while the region is still catching up to the funding numbers of places with a different economic heritage – say, Scandinavia – the Baltics keep up with or lead global startup trends. For instance, sustainability and fintech are increasingly in focus, with Baltic startups like Planet42, Nordigen, Jeff App, and Ondato making waves and revenues.

Why non-EU founders are moving here

The reasons why non-European tech entrepreneurs choose to headquarter their startups in the Baltics are plentiful. But the key one is that the region is probably the best gateway to the EU market, given the cost of living and ease of doing business here. The affordability and favourable government policies are complemented by English-speaking tech talent, great network coverage and e-services, and active, welcoming startup communities. In relatively small startup ecosystems like the Baltics, it’s easy to get to know people, connect, hire, and be hired, especially with the majority of tech community events happening in English.

The Baltics are also growing increasingly more international. This is not surprising given how well connected the Baltic capitals are to Europe – especially Riga. While the geographical location makes business travel easy, the Baltic startup visa programmes give entrepreneurs special access to streamlined migration procedures. 

More than that, non-European founders don’t even have to come to the Baltics to start their EU-based startups. With Estonia’s e-Residency, entrepreneurs from all over the world can start a company and manage their business from anywhere, entirely online. This year, Lithuania has also adopted a similar system.

All this is reflected in the applications we’ve received for our accelerator programs over time – the applicant pool, which started with a focus on Central and Eastern Europe and has since expanded to attract global startups from India, Africa, Latin America, the US, and even Australia. Let’s hope this mutually beneficial relationship continues, and international founders – by using the Baltics as a launchpad – will help the local startup communities flourish.

About Zane

Zane Bojāre is Head of Marketing and Communications of Startup Wise Guys, Europe’s busiest startup accelerator and most active investment fund. Prior to directing the public communications of SWG, Zane founded a social enterprise providing employment for senior citizens and contributing to sustainable design. She has extensive experience in PR and is also the co-creator at Riga TechGirls. Zane and her family split their time between Riga and Madrid.