Estonia owes much of its economic success and international fame to startups — and its tech ecosystem more generally — but, like elsewhere in the world, the former has been hit hard by the economic turmoil of recent months.
And despite the sector’s importance to Estonia, the country has no plans to step in and prop it up, Tiit Riisalo, minister of economic affairs and information technology, who oversees the country’s startup sector, told reporters in Tallinn.
“I wouldn't say Estonia is a wild west, but it's a true market economy. This is part of our success story” he says.
“This is not just an excuse: I really believe that companies or entrepreneurs [...] know best how to do it. Sometimes you win, sometimes you lose. Our role, as a country, is to provide these people with normal unemployment benefits, help them to find new places to work and so on.”
There is no panic.
While the EU and some other countries, such as Germany and France, have suggested that they would subsidise some of Europe’s most innovative companies to help them become globally competitive, Estonia will not, Riisalo says.
“There is no plan for major intervention in which we are throwing billions to create chip factories somewhere — we just can’t do it,” he says, referring to the EU’s new rules to subsidise semiconductor companies in Europe.
He also notes that he sees a “frightening tendency” across the EU “to throw money here and there” to help companies in the face of challenges such as the pandemic and the war – and that Estonia won’t follow this path.
Home to unicorns such as Wise, Bolt, Veriff and Pipedrive, Estonia has long been considered one of Europe’s most successful startup ecosystems.
With roughly 1.3m inhabitants (similar to the population of Brussels or Birmingham) and around 1,500 startups, it beats all other European countries when it comes to the number of startups, unicorns and VC investment per capita.
But the economic slowdown is taking a toll on the country’s startup scene: Estonian startups have raised $113m since the beginning of this year, in comparison to $1.3bn last year and $999m in 2021, according to Dealroom, although the 2022 and 2021 figures are skewed by massive raises by mobility startup Bolt.
Riisalo says that the government is currently speaking to startups about how to weather the crisis, but “there is no panic”.
”There is not a major wave of bankruptcies that we are waiting for in the Estonian startup ecosystem,” he says.
He adds that the government helps the community with “opening doors” and introducing favourable legislation.
Riisalo also says that the government wants “to continue with this same trajectory” in its engagement in the IT sector: it wants to update all its digital policies and create new ones, including new AI and cyber strategies, a plan for data and language storage, and preparation for the quantum leap.
“We are ready to actually kickstart with a new iteration of Estonia, or Estonia 2.0,” he says.