Estonia has the highest number of unicorns per capita in Europa. Fostering an environment for these booming startups or so-called unicorns, the Estonian economic growth in the 3rd quarter of 2021 (8,6%) showcases the successful Estonian development strategy. Hence, using the pandemic situation to their advantage, Estonia continues to emphasise the importance of startups. Curious to read what economic sectors yield to most opportunities?
Estonia is the leader in unicorns per capita in Europe. With 7 unicorns, despite a population of 1.3 million people, Estonia is a breeding ground for companies valued at more than $1 billion. Currently, these 7 companies are the following ones: Skype in 2005, Playtech in 2007, TransferWise in 2015, 2018 with Bolt, Pipedrive in 2020, and in 2021 both Zego and id.me became Estonian-founded unicorns. As noticeable, the time between the rise of a unicorn is constantly decreasing. Further, looking at the sectors these companies are concerned with, the overarching trend is the connectedness with technology and communication.
This relation between breakthroughs and technology is elaborated on by Robert Müürsepp, a leading analyst at Statistics Estonia: “the economic growth was driven by construction, information and communication, real estate, and transportation and storage activities. Also manufacturing and professional, scientific and technical activities recorded positive results”. These three economic activities contribute more than 3% out of 8,6% to the GDP growth of the 3rd quarter of 2021. In comparison, the biggest decreases in terms of percentage of GDP are, as expected with the pandemic and lockdowns related to the pandemic situation, the leisure and entertainment, transport, hotels and restaurants, and clothing and footwear sectors.
Müürsepp also argued that the fall in investments (-8,8%) in the third quarter is due to smaller investments in general, yet yielded a significant increase in the investments in transportation equipment (32%) and 15,1% in other machinery and equipment. Furthermore, foreign trade continued to grow rapidly: The export and import both accounted for a growth of 17,5%, while the emphasis was on the export of service (38,9%) powered by 1) computer, 2) technical and 3) business services. In comparison to the previous quarter, the seasonally adjusted GDP grew by 0,7% and grew by 9,2% compared to the third quarter of 2020.
“We are eager to make relevant changes happen quickly. This makes Estonia a perfect testing ground for innovative solutions. As a small country we value flexibility and diversity and therefore we welcome foreign investors and talent in Estonia – together we can build a better future for everyone,” states Prime Minister Kallas concerning the ideal testing ground for the unicorns.
While the unicorns get encouraged by the Estonian government, the unique selling points of this technological country are not covered yet.
After restoring its independence in 1991, economic freedom has been highly valued in Estonia. While being ranked fifth in Europe for economic freedom, the Estonian economic environment created by the state encourages people to start and grow businesses. Moreover, Estonia has also been a steadfast global leader in tax competition for the last seven years in a row. Not only this tax system without corporate income taxes, capital taxes and property transfer taxes, makes people entrepreneurial. There is also Estonia’s advanced digitalisation which reduces the hassle and costs and, a wide range of encouraging success stories (such as Skype and Bolt), and sociological characteristics such as a developed and affordable living environment, a long and full-paid parental leave, and a welcoming and supportive startup community. Besides this, Estonia’s entrepreneurial activity is the highest in the world due to the innovative, productive and curious mindset of the Estonians. According to Atomico in “The State of European Tech 2020 report, Estonia has 865 startups per capita with a steadily growing number.
Knowing these reasons, Estonia is often seen as the leading startup-friendly country in the world. Moreover, you do not need to reside in Estonia to enjoy these benefits of the business environment. Estonia’s innovative e-Residency programme, itself referred to as a state startup, enables anyone to log into our country to establish and manage a company here, regardless of their physical location.
Even with the best business environment and the most entrepreneurial people, it is no guarantee for automatic success. With stories and information from the vibrant startup community, such as the foundation of the EU Unicorns Group to accelerate Europe’s green transformation and tech innovation, together with a little bit of luck, Estonia can be the “perfect testing ground for innovative solutions” in the words of the Prime Minister. Interestingly, Estonia maintains to further develop into a tech-savvy country focussed on digitalisation and communication. Knowing that the interest in digitalisation and tech is growing in both society and business, it is recommended to not only keep an eye on the developments but also on the (new) unicorns. While these unicorns can be beneficial contacts or partners for your existing company, the ideal business environment due to tax reasons and state encouragement make Estonia a perfect choice as the breeding ground for your next startup.
Curious about these new opportunities, or your want more information about personal advice regarding international business advice, tax situations or consolidation? Global Connect Admin B.V. can assist you with these challenges due to the rich experience and framework of connections.