MarketLine Blog

Estonia: Only 1.3m people, but 4 unicorn start-ups

The former Soviet-controlled nation of Estonia, home to just 1.3m people, is one of the most tech-savvy countries in the world. It holds the world record for the number of startups in the country per capita, has one of the world’s fastest broadband speeds, and its education system teaches every child how to code. It is also leading in the development of online governance infrastructure – participating in elections by internet voting takes just 90 seconds. Its highly flexible, transparent, and hassle-free infrastructure makes it a great place for business – and indeed Estonia has four ‘unicorn’ valued startup companies as a result. How has this country leap-frogged from its soviet roots and into a haven for innovation, venture funding, and online services?

In the mid 90’s, Estonia began a transformation. In the aftermath of Soviet control, it’s relatively young government placed a big bet on what was at the time, a promising looking technology: the Internet. The bet paid off. Now, its governance system is probably the least bureaucratic and most user-friendly backbone infrastructure in existence, and underpins a thriving startup nation. The reasons behind its rapid development are numerous, but a key part in its emergence has been the Estonian education system, which is probably the best in Europe, pressure on the country to develop robustness in order to counter the looming threat of Russia, and the relative youth of Estonian government during its early stages of transition. Now, the innovation ecosystem established is growing, with success feeding on itself to create a second generation of startups and investors putting Estonia onto the world-stage.

Estonia is now the most connected country in the world, with the country’s economy centered on the internet. Not quite Nordic but under increasing political pressure from Eastern Europe and with a sizable Russian-speaking minority, Estonia was vying to compete against Norway, which had oil, Finland, which had mobile phones, and Swedish design. Choosing the internet, Estonian infrastructure is now entirely online – from bus tickets, to police, to its health system. Citizens from anywhere in the world can choose to become an e-Resident of Estonia. Indeed, as early as 2002, the government had built a free-Wi-Fi network that covered most of the populated areas.

From its early beginnings in implementing the shift to online governance, the government decided not to hire internal programmers, but to outsource the production of government IT infrastructure to private companies. This not only ensured that the software developed was cutting edge, but due to the volume of work required acted to underpin the competitiveness of the Estonian IT sector.

Estonia has the highest number of unicorn companies per capita than any other country in the world. Taxify, Skype, Transferwise, and Playtech are private companies valued at over $1bn US dollars – so called ‘unicorn companies’. This is in a country with only 1.3m people – 300 thousand people less than the population of Barcelona. Yet Spain only has one unicorn company.

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