Having gained momentum through Skype and other miracles of software, the Estonian startup ecosystem increasingly creates opportunities to enhance national pride: Estonia’s clean nature. There are forests and swamps and the cleanest air in the world – three things every Estonian proudly proclaims. With a little bit of magic, the field of Estonian eco-innovation will come alive.
Why is cleantech the next big thing?
International Energy Agency predicts 920 GW of increase in renewable energy capacity during the period of 2017-2022. This makes a 43% increase in five years – the same volume as the coal sector achieved in 80 years. The increase in risk investments in various cleantech areas reflects the introduction and potential of new technologies. To put it bluntly, old polluting technologies will not be there anymore in some years due to the following reasons:
Old business models are slowly dying
In an open world, where information about climate change and the social and carbon footprint of big companies flows, the old economy encounters great problems. Investor Priit Lepasepp, CEO and founder of Sunly sees the basic problem corporations have: they are incapable of dealing with innovative technology development themselves. ‘The only way out for these companies is buying up startups.’ And future technologies provide their money with sustainable flow. ‘Cleantech innovations are the ones that take into account the future business models and guide their actions based on new and upcoming regulations that are intended to adapt and mitigate the climate change we face,’ says the CEO of Cleantech ForEst, Erki Ani.
Clean = economically proven
Clean technologies offer holistic solutions to their foundational problems. It is not OK to sell clean energy, for example, and have a polluting enterprise; the cycle has to be well thought through. Together with optimization, the cost also goes down. ‘In cleantech one does the same thing with a smaller energy cost, the same thing with a lower environmental impact,’ explains Greentech manager at Tallinn Science Park Tehnopol, Ragmar Saksing. He also offers great examples of market takeovers in different cleantech areas. ‘For the renewable energy technologies, people always ask about payback time. I would ask in return: what would the payback time of diesel generators be? This concept does not exist, since you always have to add diesel. The usual warranty period for sun panels is 25 years and it is just economically sensible to invest into things that last a long time.’ He continues: ‘The food industry is a great field of investment, since the population is growing and we simply have no option but to innovate in this field. One third of the land is used for livestock farming, a third for animal feed and only one third remains for food production. This tough reality boosts the share of a clean Foodtech company. And why should one invest in an electric car-charging startup? Because our infrastructure is not ready to receive all these coming electric cars yet and it’s quite definite that the value of the startup doing that increases.’ The early adopters of cleantech solutions often see themselves as market leaders. ‘People who are at the forefront of cleantech industries will certainly have difficult times in the process, but the consequence may be that you will, at some point, discover yourself as a market leader,’ says Lepasepp. There are numerous examples and cleantech entrepreneur Ivar Kruusenberg takes the classic one: ‘These who made the first investments in wind or solar energy are definitely very happy right now. Back then nobody believed that wind or solar would work out in Estonia.’
One of the reasons that cleantech is a growing trend is the passing of regulations such as the Paris Agreement or those of the European Union. Lepasepp sees that there are several problems ahead to solve and institutions provide resources for companies arising with the solutions.
Sense of mission
One of the most important motivations for investing in cleantech is the sense of mission. ‘In today’s developed world, a person might have an inner urge to make the world better,’ hopes Kruusenberg.
Higher risk/reward ratio
This investment reason is only for the brave among us! From the perspective of an investor, it is the risk/reward ratio that differentiates hardware and software. Cleantech is usually hardware. Tuuliki Kasonen, the head or marketing of Sunly explains: ‘Software development requires people. And oftentimes that is all. In projects of energetics or hardware, which cleantech usually is, your risks are much higher, you invest much higher sums, but I would say the rewards are also significantly greater.’
Trends in Estonian cleantech
According to the statistics of Startup Estonia, there are at present around 550 startups in Estonia that contribute to the steady yearly growth of 30% in the overall startup sector when main indicators (number of employees and employment taxes paid) are considered. 48 of these startups comprise the cleantech sector. Despite its emerging nature, the cleantech sector in Estonia has already seen three successful exits – NOW! Innovations (exited 2015), VitalFields (2016) and PlanetOS (2017). And exits are known to be the ultimate success indicators of startup entrepreneurship.
But who are currently defining the field for Estonia? The largest employers of the field are Skeleton Technologies and Comodule, but there are numerous newcomers with a mission to make our future liveable.
Let us now take a closer look into some of these cleantech heroes in two of the main future trending categories of Estonian cleantech – energy efficiency and intelligent electrification.
Skeleton is seen as Estonia’s first cleantech unicorn to-be. It has the potential to establish itself amongst the top four Estonian software firms. In the words of Kruusenberg: ‘The most active and successful are the energetics-focused startups.’ Saksing attributes it to the cool climate of the area. ‘Using renewables in different processes, for example ventilating and heating with solar energy or using solar energy in food drying systems. Bright ideas also provide solutions for consumers to produce solar energy at home.’
The idea is to help to save energy and the means for it are market-leading ultracapacitors (energy storage devices), ultracapacitor modules and full energy storage systems. The technology enables companies to reach significant energy savings in a wide variety of industries. Skeleton has already raised 41.7 million euros from investors. You can read more about Skeleton’s breakthrough here.
Their solar roofs are integrated photovoltaic construction elements that replace the conventional roofing and facade materials. ‘They have a unique approach to sun panels, which is special on a world scale,’ believes Kruusenberg, who is well aware of the energetics himself, as seen in the example of the next company. You can read more about the company’s succes story here.
PowerUp Energy Technologies
The company founded by Kruusenberg is also dealing with a huge problem for maritime transportation and is an excellent example of the realisation of discoveries in fundamental science. It deals with the production of the world’s first portable fuel cell-based smart generator, which can be connected with solar panels and wind turbines to produce power on board a yacht or camper van.
The company provides affordable building integrated solar panels. ‘They have similar stones to Tesla’s sun panels’, describes Kruusenberg.
Elcogen is the world’s most advanced manufacturer of ceramic anode-supported solid oxide cells and stacks for power generation. The company is internationally very successful.
WePower’s energy procurement and trading platform is a one-stop-shop solution that provides companies with tools to help them understand their electricity consumption patterns, find a best-fit renewable electricity producer, contract with it digitally and then monitor generators as they are built and start generating electricity. Saksing describes this Lithuanian-Estonian company as the Energy TransferWise. ‘I cannot understand why renewable energy has to be pricier than energy coming from fossil fuels and this problem is something they attack very strongly.’ You can read more about the truly big things WePower is doing here.
TUGE wind turbines
It feels as if the lack of sun allows Estonians to appreciate and make value out of the energy coming from it, but there are many wind-centred ideas also, one of which is Tuge and its small wind turbines.
Erki Ani would not let us forget that there are several successful startups from other fields of cleantech as well (e.g. agritech, textile). e-Estonia is all about digitalisation and the greatest grounds for innovation may also lie therein. ‘Digitalisation has always been one of the biggest strengths in attracting innovation to our country. I believe this will be the case in the future, too. It just opens so many new opportunities to bring about new innovation and test it in a flexible digital society.’
‘When talking about the electricity market, electricity grid and charging, as well as renewable and distributed energy solutions, then Estonia is the world’s best place for the R&D,’ describes Lepasepp. ‘It has the world’s smartest grid and world’s first nationwide EV charging network. Just because you can have access to the test server base with a very easy contract – and this is something not done elsewhere in the world. Elsewhere you will always encounter restrictive network operator regulations. Estonia’s easily accessible consumption data can be generalised to the rest of the developed world and varieties of innovative solutions can be created based on that.’
The company that gathered the greatest turnover during the first half of 2019 represents the direction to electrification. Comodule offers IoT solutions for mobility, already as a global leader in bicycle and scooter connectivity. You can read how Comodule connects light vehicles to the internet here.
Lumebot produces autonomous snow removal robots and Saksing would bet on them: ‘This is a hell of a strong team and therefore we at Tehnopol have made them a deal that next winter they will be shovelling here. They are solving the snow problem before it can even rise, since the robot does not mind working at 4:30 AM’. You can read how Lumebot is trying to change the world one snow pile at a time here.
Young but wise cleantech ecosystem
Before introducing the three pillars of the emerging Estonian cleantech ecosystems – Cleantech ForEst, Tehnopol and Port of Power – it is fair to emphasise the role of research institutions that the network is based on. ‘If we look at the cleantech startups then most of them have backgrounds in science and when a startup has something to test or certify, scientific institutions can be turned to,’ stresses Saksing, whose Tehnopol has strong ties with TalTech university. Next to that, Estonia makes effective use of the funding mechanisms of European programmes through institutions such as InnoEnergy and ClimateKIC. Startups that have made it to the production phase are welcomed to cooperate and work in the PAKRI Science and Industrial Park. The following three pillars of the ecosystem are organisations that work specifically to support the creation and development of cleantech startups.
An Estonian non-profit that supports and funds early-stage green technology startups, helps them advance their export relations, advances environmental awareness and business-science cooperation and supports energy experts. Ani explains the core of the organisation as follows: ‘I believe there’s a huge role in international cooperation when it comes to sustainable businesses support. Overall, the climate doesn’t have borders. That’s why our network also consists of stakeholders from developing countries, where the ideas developed have an even bigger impact, but also of relevant organisations needed for cleantech innovation commercialization from the EU and US.’
Tallinn Science Park Tehnopol
A research and business campus with the mission of helping startups and SMEs grow more quickly. Tehnopol has a separate cleantech direction that, with its 5 years of existence, was the first institutional seed in the now-emerging cleantech ecosystem. Some third of the Tehnopol’s portfolio consists of companies working on energy-efficiency of buildings. ‘And we’re quite good at finding the export opportunities and contacts for these startups,’ adds Saksing.
Port of Power
Renewable energy company Sunly and Estonian green innovation support organisation Cleantech ForEst lately signed a collaboration agreement that also marks the beginning of the establishment of a new centre for cleantech and energy technologies startups. Named Port of Power (PoP), the hub draws together companies from the relevant areas offering investments and access to regional and international networks.
Sunly is the only Estonian corporate investor that specialises in cleantech companies. Lepasepp explains the initiative: ‘Our aim is to provide an environment for people who think alike – green, in the given context. This coexistence creates synergies between the ideas, making them even more brilliant.’ One of his partners in this centre of the future is Ani, who sees Port of Power as part of the development of Estonia’s overall business mindset. ‘When organisations are starting to build up their own programs for supporting new innovation, this gives a great push towards corporate-startup partnership. That’s even healthier for the ecosystem and that’s what we see happening now.’ Kruusenberg supports the idea of the developing centre as something that brings brains from outside Europe.