In 30 years of regained freedom, Estonia has turned truly into a fairytale land with unicorns “running wildly around.” And it is not just a figure of speech, but Estonia has already 7 billion-dollar-plus market cap companies and is considered to be one of the best locations in Europe for startups.
How did Estonia come so far and are there any lessons to learn for Ukraine?
In the early 2000s, Skype happened, literally “happened,” as it was quite unexpected for Estonia to become the birthplace of the world-famous tech forerunner, and made us truly think – what should be done for it to keep on happening. And by not only thinking but by doing Estonia has already been the birthplace of billion-dollar market cap companies with the most famous unicorns Skype, Bolt, Wise (Transferwise) and Pipedrive. As well, Estonia has the most startups per capita and over 60% of entrepreneurs say that the government helps them, instead of interfering. In Silicon Valley, for example just a little over third admit the positive impact of government. As well, the capital of Estonia is ranked as the 12th biggest startup hub in Europe thanks to e-residency program, a great ecosystem and fully digital government.
Bolt’s electric scooter application.
I could go on praising but what are the lessons that might be learned looking at the success of Estonia.
- Government should interfere as little as possible. Simple taxation without exemptions; what is not prohibited is allowed and as light legislation as possible. Innovation should have maximum freedom and be regulated only in cases of constitutional and rights issues or if expected by the industry. Zero interference when not needed or asked.
- Government could only help finding and filling the gaps in the market that the private sector at that moment cannot fill. For example lack of capital, upgrading the educational systems, bringing 21-century skills to schools from STEAM to entrepreneurship, grants to educational and R&D facilities, etc.
- Private sector always knows and performs better, so the private sector should be engaged to the maximum. For example, in Estonia, the government is dedicating funds to accelerators and startups through private companies. New professionals are brought to teach in schools through private platform Edumus. Even the government VC fund that was created to fill in the gap of lack of the venture capital Arengufond was closed and assets given to management by private fund after it fulfilled its aim. There was a lack of venture capital, government-created fund, no lack of venture capital any more, okey, we will close our fund to not unnecessarily compete with the private market.
- Estonia is a fully digital country that definitely strives towards the ease of doing business. Estonia is in world Ease of Doing Business rank in 18th place (Ukraine in 64th) and in 3rd in world E-Government Index (Ukraine in 69th). E-government creates transparency, efficiency and trust. You can open a company, declare taxes and vote within minutes. Imagine the time and resources saved. Implementation of digital signature only is believed to have saved 2% of gross domestic product.
- Building a long-term sustainable company or high-growth startup that is not just from Ukraine but developed and grown in Ukraine and stays here is virtually impossible without rule of law. We can see it today. Even these few unicorns that we want to call Ukrainian have not really flourished and stayed in Ukraine while Skype still has a huge R&D center in Estonia and Bolt is headquartered and has most of the staff in Estonia and founders are living in Estonia being active in developing the community and education system. As well, 90% of the almost 500 million euros annually invested in Estonian startups is from international investors that is impossible when there is no trust in the rule of law.
- Lead by success. It is truly important to share the success stories to inspire young entrepreneurs and future entrepreneurs as well as investors. If he could do it, and I know him, maybe I can do it too. Estonia has been promoting its success stories widely in and outside of Estonia, starting from President Toomas Henrik Ilves, that was a true digital leader up startup community that proudly calls itself #Estonian Maffia, labeled so by US VC David McClure. By the way, after two decades as president, Ilves has continued to be strong in leading tech in the world and is one of 25 members of the “Real Facebook Oversight Board.” He has held a number of high-ranking information and communications technology positions in Europe and the world and is an active advisor for startups. Meanwhile, ex-Prime Minister Taavi Rõivas quit his position as a member of parliament to join an autonomous vehicles startup.
- Estonian companies have to think big from the beginning. There is virtually no home market in the country of 1.3 million people and companies have been from the very start globally oriented and thinking out of the box.
So here we are, 30 years later and as the result of long term reforms, creating an ecosystem and champing and leading the trust and vision. Having vision, sharing it, celebrating success and truly working hard for it. Lessons to be learned as well for Ukraine but everything starts with the true will and grit, readiness to work, and willingness to believe in fairytales. They may become real one day.
