Two weeks ago, we decided to drive to the Baltics together with people from AaltoVG, to promote the Finnish startup scene, find great stories, and build stronger collaboration with the region. There is too little interaction between the Baltics. Each country stands as a standalone, tiny market, forced to internationalize to make a difference. We believe that if we can collaborate more with our nearby neighbors, great things will happen! This is my first article in a series of posts about the Baltics.

Estonia doesn’t exactly jump to mind when asked about the hottest European startup countries. Often, remarks about the beautiful women and the Soviet background will come up.

The country has its share of success stories. Skype is the most obvious one, with its $4Bn exit to Ebay. The company had 4 estonian co-founders, together with 1 swede and 1 dane. Erply is another one. The easy to use ERP system for SMEs was a Seedcamp winner, that raised $2M from top US and UK investors (including Index and Dave McClure). Other examples include Fortumo, an easy mobile payment platform for SMEs, deployed in 44 countries, or Playtech, the world’s largest publicly traded online gaming software company, which did its IPO in London at $460M.

The country is facing many of the same challenges as other small European countries. The startups are too local, with too little global ambition. There is not enough experience in international sales and marketing. There are too few foreigners. Lack of smart money, excess of public money. Because of this, many are afraid to start-up and prefer going to work at Skype or Webmedia. There haven’t been small or medium size exits yet. The recent failure of United Cats and Dogs has been seen as a negative thing.

The Estonian ecosystem is very active. Asides from our Arctic Evenings in Tallin, there is the Startup Leaders Club, which is a gathering of 30 founders that meet monthly for drinks, talking about current topics and even lobbying. This is organized by the same people who run Open Coffee and Mobile Monday. Connect Estonia organizes trainings and seminars for angels, and mentoring events for selected companies, where they will pitch to a panel of experts. HumanIPO is a recently launched platform to help startups partner and raise seed money. It’s essentially Facebook for startup plans. There is a very active blog covering the Estonian scene, called Testmarket. The biggest event is Garage48, which we’ll cover in part 3 of this post.

Funding wise, the main player is Ambien Sounds Investment, which was started after the exit of Skype. Arengufond is the Estonian development fund (similar to Tekes in Finland). There is Enterprise Estonia, and WNB. There has been little foreign activity however.

Stay tuned for a list of 20 hot Estonian startups tomorrow!

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