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How Estonia Became a Startup Hub

Updated: Jul 2

Thanks to its push towards digitalizing business services, Estonia has become an attractive hub for entrepreneurs, IT professionals, and digital nomads in just a few decades. Thanks to a supportive business ecosystem, Estonia is the birthplace of many successful startups, including Wise (formerly known as TransferWise), Skype, Pipedrive, and Bolt. In this article, learn how Estonia’s focus on innovation is present in all aspects of its economy, from its transparent tax system to its comprehensive support for startup and immigrant workers. 

Education is one of the Estonian keys to success

The emphasis that the Estonian government has put on education has created a steady supply of highly competent human resources. According to the 2022 PISA Survey results, Estonia is currently one of the top countries in education, excelling particularly in science, technology, engineering, and mathematics (STEM) subjects. This solid educational foundation has equipped its workforce with skills critical for establishing and growing digital, technology, and science-based companies. 

Universities also play a crucial role in the Estonian business ecosystem, as many offer high-quality business programs, internship opportunities with early startups, and industry events. Thus, by the time graduation comes, students already have real-world experience and connections. The best part? Higher education is affordable, allowing students to focus on their careers, with many becoming entrepreneurs early.

How the Estonian government turns to make business easier

One of the highlights of doing business in Estonia is its highly efficient and user-friendly digital tax system. Businesses of all sizes can file their taxes online in just a few minutes. Thus, the system minimizes the administrative load while facilitating compliance, ensuring that entrepreneurs can focus more on solving day-to-day issues than on filling up paperwork. 

The digitalization of business activities in Estonia covers more than taxes. Starting a business in Estonia can be done online and takes just a few hours, thus encouraging potential entrepreneurs to start their business ventures. From Day 1, Estonian companies have access to a wide array of web services for public procurement, contract management, and administration of employee benefits. 

Foreign entrepreneurs can even enter the Estonian business ecosystem from abroad by leveraging the capabilities of the e-residency. This digital residence program enables entrepreneurs worldwide to open companies in Estonia online. The system, which works through ID cards and encrypted signatures, allows businesses to access banking services and sign documents digitally, regardless of the location from which the service is accessed. 

A supportive network of entrepreneurs

New and established companies can easily access a variety of incubators and accelerators in Estonia, such as Tehnopol and Startup Wise Guys. These institutions offer a wide range of support services, including funding guidance, networking events, expert mentorship, business facilities, and know-how. Backed by former startup founders, angel investors, and the government, these organizations help businesses grow faster and increase their chances for success.

In addition, Estonia is a paradise for early startups since it has affordable co-working spaces such as Lift99, Palo Alto Club, and Workland. These spaces help founders connect, collaborate, and discuss their ideas. Networking is also easier in Estonia, as it has a busy calendar of events focused on business and innovation, including high-profile conferences such as Latitude59, GreenEST, Nordic Business Forum, and STARTUp Day.

Estonia's economy includes a substantial venture capital and angel investor ecosystem and currently has the highest number of funded startups per capita. The country has a considerable number of investors willing to fund early startups since many of them have been part of one at some point. The Estonian government also offers other funding opportunities for research and commercial purposes. This lowers the entry barriers for new entrepreneurs since it reduces the time it takes for a new venture to reach the market. 

The future of the Estonian business ecosystem

One of Estonia's strengths is that it is a future-forward country that appreciates the value of strategic planning. For example, the government is already readying for the impact of AI in all aspects of life. Looking ahead, the government has drafted a plan titled “Estonia 2035,” which includes five long-term goals that were agreed upon during discussions involving over 17,000 citizens. The goals are further broken down into specific objectives. For example, Estonia aims to open 500 deep tech companies by 2030. 

By planning ahead, the Estonian government is able to engage institutions early and create key actions to achieve the strategic goals it has set. The proof of this push towards innovation can be seen in the expansive growth of the Estonian economy and the sheer number of companies that have opened their doors in this Baltic country.

Estonia's transformation into a prime business location is remarkable. Here, aspiring entrepreneurs can find effective government support, highly qualified human resources, and a vibrant startup community. As the country continues to promote innovation, the future looks bright for companies that choose this country as their home.

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