Countless startup success stories come from the Bay Area or other international hubs, such as London, Paris and Tel Aviv. But what about startups that are based in tiny countries, as Lithuania – a small country in Eastern Europe, where the population is hardly 3M people and the minimum salary less than $350/month?
Can they expand internationally and become highly profitable? Here’s three learnings from the development of Lithuanian startup scene.
1. Why has such a tiny country managed to produce these startups that are getting traction?
Backbone of Lithuanian startup scene is technical talent and willingness to experiment. Like in many Eastern European countries you will find talented tech talent due to strong education system and white-hat hacker culture. While schools and universities prepared people with good math and science backgrounds, illegal file sharing platforms and self-made LANs became the first playgrounds for many early hackers, who currently run their own startups.
When did the entrepreneurial scene in Lithuania begin to flourish?
Approximately in 2007 Internet entrepreneurship started going mainstream in Lithuania with first startup events and success stories. Beginning was very modest and most attempts were oriented at local or neighboring markets. Real startup movement didn’t begin till 2011, when Lithuanian startup accelerator StartupHighway was founded, first big hackathons and events took place. A few notable ones are App Camp Vilnius, LOGIN and Startup Weekend Lithuania.
Though late and humble, first initiatives and events hit the spot and in a few years #LTstartups started bearing fruits. Market was ready for a new type of IT business and innovation, but most importantly there was talent to tackle some of the big global problems. Older Lithuanian IT companies were not perceived as interesting and startups offered a lucrative alternative for the most adventurous employees. Once funding became available by the local VCs (described below), quite a few entrepreneurs realized Lithuania was a very comfortable place to continue developing the company – even if HQs were moved to London or US.
Probably the most well known example is Vinted – a p2p “pre-loved” second-hand fashion marketplace was started by Milda Mitkute and Justas Janauskas in Vilnius, back in 2009. Initially the product was dedicated only for the Lithuanian market. A few years later they raised a significant $6,5M series A from Accel partners and unified their brand under the Vinted name. However, the operations and development stayed in Vilnius even after raising further $27M series B in 2014 from Insight Venture Partners.
2. Lessons On Growing Internationally From Lithuanian Startups
Even though Lithuania’s startup ecosystem is still much smaller than the ones of San Francisco, London and other metropoles, it has quite a few startups that have managed to grow internationally while based in Lithuania.
Here are five good examples with useful tips for other founders:
1. Do content marketing right away
ChameleonJohn.com is an online coupons website operating in the United States. In just over a year the company grew to 18 employees full-time (with an office in Vilnius, Lithuania) and currently do tens of thousands of sales every month. We have not raised outside funding and currently have no plans to do so.
Co-founder Jacob Laukaitis told they used mostly location-independent customer acquisition channels, such as PR, loyalty programs and content marketing. For example, this article on medium has been viewed over 160,000 times. Not only that, the company has been successful in getting covered by blogs covering online savings and discounts.
“Content marketing is relatively hard to crack, but once done right it will drive tons of qualified leads towards your product or service. Make sure to provide valuable information, share insider insights and be as open as you can with your readers. Companies like Buffer and Groove have made millions this way. And the best part – you can be based anywhere,” Laukaitis advices.
2. Test, test, test
MoboFree is an ad listing website in Africa that has 4M registered users who exchange over 5M personal messages every month. Their target markets are Nigeria and Uganda, but they are quickly expanding to other English speaking African markets, such as Uganda and Zimbabwe.
To tackle the cultural differences, MoboFree has adapted the Lean Startup method, where they test and pilot many initiatives on a small scale, learn from the results and take decisions based on those insights.
CEO Cristobal Alonso thinks being based in Lithuania has quite a few advantages, such as: perfect internet infrastructure; good, hard-working and reliable talent; relatively low operational expenses. On the other hand, he says there are downsides too: “You can do market research, take data driven decisions and grow successfully from any place in the world. But when the project needs to close big deals or do some offline marketing activities – location becomes an issue. At least in our target markets everything is based on networking and personal contacts, thus at a certain stage we will have to open local offices in quite a few African countries.”
“Every location has its own advantages. Identify them and exploit them. For example, being based in a non-mainstream startup hub means lower competition and lower apexes – cheap office rent and easier talent search,” Alonso advises. He thinks the two strategies that were essential to MoboFree’s rapid growth are strict focus on performance based marketing and reacting swiftly to opportunities handed by the competition.
3. Never stop communicating with your customers
Plag is a mobile social network that has managed to acquire hundreds of thousands of users in just 6 weeks after its launch with no marketing budget. Currently their biggest markets are Germany, Switzerland and Lithuania.
Plag’s Marketing Manager Laura Inamedinova told me so far they have not had any difficulties with the cultural differences because they spend a great amount of time communicating with their users about their product on Plag itself. “We simply need to ask our users what they need, what they like and how they want the product to develop. Funny thing – we even found our editor, Elizabeth, via Plag.”
But why are they based in Lithuania?
“Lithuania is just like a completely new surf spot with hardly any surfers. Thus it’s relatively easy to catch the best waves. The startup community in Lithuania is still in its infancy, so we are able to get some really good talent and it’s very easy to connect with fellow entrepreneurs if we need their advice or help,” says Inamedinova and shares some of her insights on growing a social mobile startup that quickly:
“After all, it doesn’t really matter where you are located if you have a really good product. You need to push it to the right direction and it will grow.”
“Use non-scalable customer acquisition channels like social media, PR and word of mouth. We have been extremely succes
getting press simply by using e-mails, Twitter and LinkedIn. After our app launched we got covered by TNW, GigaOm, Time and dozens of other popular websites. Every time we got covered by a big website, we would get anywhere from 6,000 to 20,000 new registrations on our app,” says Inamedinova and continues to talk about user stickiness:
“Our initial users fell in love with the product and became our best ambassadors by blogging about it and telling all their friends. Encourage people to talk about your product.”
4. Build valuable partnerships
CGTrader is a 3D model marketplace that connects designers from all over the world with businesses in need of 3D models and design services. Most of their clients are from the United States and Western Europe.
Dalia Lašaitė, CMO, tells me they have not had any issues in closing high-profile partnerships with companies like Lowe’s, Microsoft and Amazon through Skype and phone calls. As the company grows they do think of opening a few offices elsewhere to be a little bit closer to their customers, though.
Lithuania has worked out great for the company, as Lašaitė says: “Lithuania has a slightly less competitive talent market at the moment – it is easier to retain and motivate employees here rather than in some of the major hubs. All of our employees speak fluent English, since most of them have lived abroad. Cost is another major advantage – we have been able to achieve what most of our competitors cannot, at a fraction of the cost.”
“Make sure to travel to the major industry events at least several times per year; if you want to understand the market better, aim to get your customers on the phone rather than e-mail; research the key people in your industry and interact with them in every possible way (Twitter, e-mail, calls),” Lašaitė advises.
To grow CGTrader from a small startup to one of the market leaders they have used these four customer acquisition channels: SEO; Content Marketing; Direct Sales; and Community Initiatives.
“If you are at the forefront of an industry, typically there are no ‘best practices’ and thus no substitute for thinking deeply about where the market is moving and creating products to service the customers’ needs,” says Lašaitė.
5. Author’s experience on Lithuania
Our startup – TrackDuck is a visual feedback and bug-tracking tool for web development and design. We target freelancers, digital agencies as well as large enterprises use this tool to streamline communication in their web projects. Most of our customers come from the US, UK, Germany, France and Australia with the rest from over 120 countries.
We have stayed in San Francisco, London, Helsinki and Tel Aviv, but currently we are based in Lithuania. Vilnius is a great place to live in, compared to the other popular startup hubs. If we were based in in a place like London or San Francisco, most likely our expenses would be at least 4 times higher. What’s more, we find it really frustrating to have to deal with bad Internet connection in San Francisco, while Vilnius has superb Internet.
3. Which Investors Have been Leading The Change?
If you ever wanted to move your startup to a place with little people, low operating costs, good and affordable talent, Lithuania might be your place. And there are quite a few wonderful organizations ready to help you, such as Invest Lithuania, Startup Highway and Practica Capital.
So Does It Matter Where You Are?
Apparently it is possible to grow internationally being based in Lithuania – a small Eastern European country. The country has had quite a few success stories, such as GetJar, Vinted and Trafi being one of their rising stars.
Not to mention all of the companies I have interviewed who might go on to exit for millions of dollars.
This guest post is written by Edmundas Eddy Balcikonis, the co-founder and CEO of TrackDuck – A visual feedback and communication tool for websites. Eddy is passionate about promoting Lithuanian startup community and all kinds of sports.