How 2016 went for the Estonian startup scene, including the stats about paid taxes, raised funding, the biggest employers, most popular industries and much more – courtesy of Startup Estonia.

There are currently a little over 400 startups in Estonia and roughly 90 percent of them are in the very early or early stages of development.  Estonian startups are a heterogeneous bunch and cannot be defined by a ruling industry. Widest spread common keywords are “IT services” and “B2B”, which are rather vague, however, 4 slightly more prominent categories do come out:

Fuelling the economy

Although there is a common belief that startups are mostly good at burning the investors money rather than making it, statistics show that they are actually significantly and growingly contributing to the economy. By the end of Q3 2016, Estonian startups had already paid the same amount in employment taxes to the government as they did for the whole 2015. All in all, the startups’ tax contribution grew to 28 million euros in 2016 from 21 million a year earlier.

 

The number of people employed in Estonian startups is growing rapidly and reached 3,500 as of the end of 2016. Comparing this number to the year before, startups have attracted an additional 1,000 employees. The general rule of thumb shows that 3/4 of all people employed by the Estonian startups are employed in Estonia, meaning approximately 750 of the new jobs were created in Estonia and 250 outside of the country.

Some Estonian startups are becoming more and more mature, a fact that is illustrated by the fact that the top 5% of startup companies account for 50+% of the jobs and 3/4 of all tax contributions. The biggest bread-giver is Transferwise, who has altogether a 600 people on their payroll, 400 of which are in Estonia. Followed by Pipedrive (240), Zeroturnaround (170) and Creative Mobile (100).

Investments

Altogether, Estonian startups have raised 370 million euros during the last ten years with more than 80 percent of it coming from foreign investors. 2016 turned out to be a record year with 102.5 million being raised. By Christmas, it looked like 2016 would turn out to be a step back from 2015 regarding the whole capital raised, deal count and deal sizes. But with Pipedrive, Monese and Starship Technologies announcing huge rounds in January for deals dating back to 2016, it made the past year the most successful funding year for Estonian startups yet.

Transferwise-party

The average deal size of the 40 deals recorded in 2016 was 2.5 million euros. Taking a closer look, the biggest contributor, Transferwise, raised 48 million in 2015 and 23.5 million in 2016. As mentioned before, the end of the year displayed a huge investment activity with Starship Technologies raising a historically massive seed round (16.5 million), Pipedrive attracting 16 million and Monese raising 9.4 million. Most notable initial rounds in 2016 were done by Leapin (200,000 euros), Shipitwise who raised two rounds on Funderbeam platform (total of 357,000),  Globalreader (165,000) and Transferfast (150,000).

People

The biggest asset and cost. Asking some of the startups who raised a considerable amount of capital last year – what will they be using the money for, it becomes very clear that the main cost for startups is employment. For example, both Skeleton Tehnologies and Scoro are using the new funding for product development and hiring new people.

“We use the investment for expansion, both in terms of production, such as opening a new production plant in Germany, as well as operational costs. We are currently in the process of hiring 20 new people for 13 different positions,” said Oliver Ahlberg, the COO of Skeleton Technologies.

The startup visa

With the Estonian startups growing, the need for talent is becoming more important than ever. To address this need, a new Startup Visa program was launched on January 18 2017, and the Startup Committee has already received over 40 applications, approving 9 and declining 16 of them. Others are still under review or waiting for additional information from the applicant. The biggest interest so far is from Ukraine, followed by Russia, Belarus, US, and UK.

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