Borders are increasingly irrelevant in global business, so it behooves The Dish Daily to expand its horizons to foreign shores. Today marks the first of a series of articles on the technology scene in Estonia, a northern European country well-positioned as a tech powerhouse.
Together the three Baltic countries and five Nordic nations have formed an innovative region already surging ahead in the global tech race. Collectively the area has brought to the fore Skype, Nokia, Ericsson, Kazaa, MySQL and many other tech stars.
The hash-tag #Estonianmafia was coined by uber angel and 500 Startups founder Dave Mcclure (the man behind the hustler + hacker + designer paradigm) at 2011 Seedcamp finals in London when he noticed that four of the 20 competing teams were from Estonia.
So what makes this country of just 1.3 million people such a startup haven?
“It starts at re-independence (in 1991),” said former Skype executive Sten Tamkvi, an MSx fellow at the Stanford Graduate School of Business. “Throughout the Soviet occupation, Estonians developed an informal entrepreneurial culture to get around the restrictions of communism,” he said. “A beneficial side-effect of the occupation was the Soviet emphasis on hard sciences, (computer science) and engineering.”
By the time Estonia came out from behind the Iron Curtain, the basic building blocks for a tech savvy nation were in place. Estonian politicians leveraged this to move the country rapidly into the European Union, while investing heavily in telecommunications and tech education.
Today, Estonia leads the world in local Internet speeds and is the first country to have a nationwide charging grid for electric cars (no visa required to visit Estonia, Elon Musk!).
Demographics also played a role in the country’s tech renaissance. The void left by the departure of entrenched communist officials was filled by younger, tech-savvy politicians, including Estonia’s current president, Toomas Hendrik Ilves who learned to program at the age of 13 and has promoted the country’s information technology infrastructure for more than two decades.
Then there was Skype. Founded by Nordic businessmen Niklas Zennstrom and Janus Friis along with four Estonian programmers (Ahti Heinla, Priit Kasesalu, Jaan Tallinn and Toivo Annus) the voice-over-IP service revolutionized the way the world communicates. Skype’s acquisition by Ebay for $2.6 billion, followed by its sale to Microsoft for $8.5 billion, brought both the influx of cash and the opportunities Estonian entrepreneurs needed, propelling the country toward elite status on the global startup scene.
Estonia’s premier incubator, Startup Wiseguys, is capitalizing on the nation’s emerging recognition. Founded last year by Skype veterans and Kaufmann Fellow Herty Tammo, Startup Wiseguys is backed by the Estonian Development Fund and boasts a score of mentors ranging from Marvin Liao to Stanford Engineering Professor Burton Lee. In just the past year, the country’s SmartCap Venture Fund has provided alumni teams €1 million and Wiseguys has signed agreements with several San Francisco co-working spaces to give alumni companies a foothold in the Bay Area.
Another key advantage to doing business in Estonia is its down-to-earth cost of living. Compared to other EU countries, Estonia boasts attractive prices for both rent and food, keeping salaries reasonable. Business costs are kept in check by the country’s pro-business tax laws and its modern infrastructure. Estonia boasts top rankings in press freedoms and intellectual property law, and to top it all off the entire country is blanketed in free Wi-Fi. Anticipating the high demand for Estonian developers, the government has incorporated computer science instruction into all public schools from the elementary level on up.
Estonia’s leading universities also emphasize the value of innovation. The Tallinn Institute of Technology recently created the Mektory Lean Lab, a hybrid design school, mini-incubator and tech transfer office intended to help move the school’s innovations into the marketplace. In 2009, Skype joined with the government to create the Estonian IT Academy to expand access to tech education. The tech push doesn’t stop at Estonia’s borders; both Tallinn Tech and the 400-year-old University of Tartu offer free tuition for any graduate student – whether from Estonia or elsewhere on the globe – who pursues a degree in one of several technology-related fields.
In the spring of 2010, six entrepreneurs from the Startup Leaders Club created the Garage 48 Foundation to sponsor intensive weekend hackathons that spur the creation of new startup companies. The foundation also runs the Garage 48 Hub in Tallinn, a low-cost co-working space for fledging companies. Since its founding, Garage 48 has expanded to cover much of northern Europe and is planning to move into Africa’s emerging mobile market.
“Estonia itself isn’t a very large market, so companies develop with an eye toward the United States, the UK and then Europe,” Tammo said. The decision to “look West” was made early in Estonia’s push into tech, creating both an expansive outreach program and extensive research into overseas consumer dynamics and behavior.
Being small has its advantages. “Due to our small yet tech-savvy population as well as our infrastructure and technology-friendly government policies, Estonia itself is a fantastic proving ground for young businesses as they seek to hone their products,” Tamkvi said.
This post was originally published on thedishdaily.com before it was acquired by The Stanford Daily in summer 2014.