Unicorn capital

Estonia leaves tech strugglers to market forces

Tallinn by Beau Swierstra
Tallinn is home to a number of unicorns (pic by Beau Swierstra)

One of Europe’s most enterprising IT countries will not prop up struggling companies and is focused on the next stage of its development.

Estonia, which has earned a reputation for creating tech unicorns, has not been immune to the downturn and has been hit hard by the economic turmoil of recent months. 

But despite the sector’s importance to the Baltic state, the government will not intervene with subsidies for struggling companies.

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.

“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.” 

Other countries, such as Germany and France, are considering moves to support sdome of Europe’s most innovative companies, but Riisalo said this is not in Estonia’s plans, nor is it able to provide the required scale of subsidies. 

“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 said, referring to the EU’s new rules to subsidise semiconductor companies in Europe. 

The website Sifted said 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. 

With roughly 1.3m inhabitants (similar to the population of Brussels or Birmingham) and around 1,500 startups, Estonia beats all other European countries when it comes to the number of startups, unicorns and VC investment per capita. 

It is home to unicorns such as Wise, Bolt, Veriff and Pipedrive, and has long been considered one of Europe’s most successful startup ecosystems. 

However, Dealroom reports that the global slowdown is taking a toll on the country’s startup scene: Estonian startups have raised $113m since the beginning of this year, compared to $1.3bn last year and $999m in 2021. It notes that the 2022 and 2021 figures are skewed by significant funds raised by mobility startup Bolt. 

Mr Riisalo said the government is speaking to startups about how to weather the crisis, but “there is no panic” and no threat of a wave of failures.

Riisalo also said that the government wants “to continue with this same trajectory” in its engagement in the IT sector and wants to update all its digital policies and create new ones. 

“We are ready to actually kickstart with a new iteration of Estonia, or Estonia 2.0,” he said. 

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