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18 November 2019

Meet the Estonian Mafia

Some weeks ago, I got the chance to join a group of entrepreneurs in the capital of Estonia: Tallinn. Let me guess your first reaction: an ex-soviet country somewhere in the Baltics, probably not listed as your top choice for a weekend getaway. Well that’s where you’d be wrong. Estonia has one of the highest rates of start-ups per capita in Europe and is often recognized as the most digitally advanced nation in the world. And, to top it all, it’s a pretty great city to visit: full of history, friendly people and a great gastronomic scene. Let me share some key takeaways of one week in Tallinn.

Let’s first take a little step back in history. Estonia won its independence as soon as the Soviet Union started falling apart back in 1991. The country took advantage of this new start, threw away its legacy and started to build up an entire new digital administration. All citizens have a Digital Identity Card from birth, allowing them to access public services like transportation, medical records and online voting. Privacy as a blocking factor? Not in Estonia. The government is seen as a trusted partner and every citizen can trace which personal data has been consulted by any institution. Transparency is key.

The Skype effect  

This background of a high-tech, digital society with low tax rates has made Estonia the Silicon Valley of Europe. The real success of Estonia’s start-up scene started in 2003 with Skype, which was built and developed in Estonia. In the meantime, this first Estonian Unicorn has been taken over by Microsoft. We visited the original Skype offices, today still being used for some development activities. To be honest, however, the fast and dynamic vibe of the start-up has given way to a more corporate and structured culture. It proves the difficulty for corporates to act like a start-up, it just isn’t in their DNA.

Whatever, the success of Skype had an enormous impact on Estonia’s local start-up ecosystem. The government gave a kick start to the country’s attractiveness by taking multiple initiatives, such as making it possible to open a bank account without physically going to the bank or being in Estonia. While some countries are building walls, Estonia is welcoming foreigners with open arms. In 2017; the country launched the Start-up Visa, a programme to attract non-EU talents and entrepreneurs. This year, Estonia will be the first country in the world to issue a “digital nomad visa”. The visa will allow digital nomads to live and work in Estonia for up to one year.

Start-ups in Estonia raised a record of nearly €330M in investments in 2018. Today, there are 23 members in the Estonian Mafia, a nickname grouping Estonian start-ups with a revenue growth of between 80%-100% per year, €3M+ euro revenue (or €5M+ funding) and +€100K taxes paid per quarter to the government. During our trip, we visited some of the leading members.

TransferWise

One of them is TransferWise, recently named as the most valuable fintech start-up in Europe. TransferWise has built a solution that allows people to send money abroad using the real exchange rates. TransferWise has disrupted the market for currency exchange and cross border transfers with transparent pricing, challenging the fees and additional rates charged by traditional banks. Their recipe for success? Mission driven, common values, autonomous teams with own KPIs, decisions made close to customers and, above all, moving fast by taking smart risks.

Starship

Another interesting start-up to follow: Starship. The company was launched in 2014 by Skype co-founders, Ahti Heinla and Janus Friis. Their mission is to build the world’s best local on-demand delivery service. 

Estonia: local start-up ecosystem Starship

They are using a network of self-driving robots that are ready to solve the last-mile delivery challenge. Today, the robots are commercially active at some US university campuses and small cities in Europe. Starship is ambitious and is planning to roll out the service across more cities very soon.

Veriff

A last one worth mentioning is Veriff. This start-up has developed a way to verify people’s identity by combining all possible ID technologies (including facial recognition, social ID, device ID, and optical character recognition). By doing this they can conclude if a person is who they claim to be based on provided data. It a promising value proposition in today’s world of (deep) fake news.

Small in size, big in impact 

Along with start-ups, we also visited a few incubators, home to some of the members of the Estonian Mafia. Technopolis provides a broad range of services for start-ups in the field of GreenTech, HealthTech and smart city. Lift99 brings together start-ups, founders and investors in their hubs in Tallinn and Kiev.

One theme that runs like a thread through all our visits: people in Estonia are extremely proud of what they have achieved and of what is possible in their tiny country. An important lesson a lot of countries, Belgium for one, can learn from. Let’s start thinking more like a start-up, just like Estonia. Small in size, big in impact.

Thanks again to ETION for organising this inspirational trip to the “hotspot of digital transformation”.

#EsstonianMafia Wall of Fame

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