e-Residency is a ground-breaking Estonian program with the mission of establishing and nurturing a multicultural, international community. Digital entrepreneurs and startups now have a platform to grow their businesses everywhere while tapping the best e-services and the most competitive tax system on offer.
Estonia – the land of unicorns
If asked to describe your country, where would you start? Would you rattle off a list of historical events, landmarks, celebrities, and natural wonders? Probably. But ask an Estonian to describe their country, and they might just start listing unicorn tech companies. Skype, Playtech, Wise, Pipedrive, Bolt? They all got started here.
For more than three decades, Estonia has been bent on creating an economy around research and technological innovation. Being an entrepreneur has become a point of pride and something that anyone (really anyone) can do. Indeed, Estonia has the most startups and unicorns and the highest business density per capita in Europe.
“To build a unicorn, you have to move to Estonia, the land of unicorns,” suggests Carlos Paniagua, the CTO and founder of Glia, the Estonian unicorn he runs with two e-resident co-founders.
e-Residency – from a government startup to scaleup
e-Residency is, in a way, just another innovative Estonian startup. Its vision was to create an environment for entrepreneurs that could give them the tools needed to manage their businesses, regardless of their location. By bringing all of those entrepreneurs under the roof of e-Residency, it would also pull in tax revenue and boost the number of Estonian firms.
But how does it work? According to Lauri Haav, managing director of e-Residency, the Estonian government first issues a digital identity to any would-be e-resident, providing them with access to its ecosystem of e-services. “Using this state-issued digital identity, e-residents can sign documents with a digital signature, file their taxes within minutes using Estonia’s e-tax system, and create and administer companies online,” Haav says.
The offering has given Estonia a “good opportunity to punch above its weight and realise its vision of the state as a service,” Haav maintains.
“We’re no longer a startup, we’re a scaleup that’s creating startups,” remarks Haav. He describes the success of e-Residency as a combination of “having people with great ideas and a country that understands the value of entrepreneurship.”
Diverse at heart
At the moment, about 100,000 people from 176 countries (there are less than 200 countries in the world) have joined e-Residency, a number roughly equivalent to the size of Tartu, Estonia’s second-largest city.
“Our core idea is to create a borderless digital society for global citizens. We give entrepreneurs all the tools they need to launch a global business online and to take their EU-based company anywhere in the world,” Haav says.
For some, this opportunity is a lifeline. “We have amazingly talented and ambitious founders that didn’t have the opportunity to grow their business and follow their dreams because they were born in the wrong country,” Haav notes. “Sadly, a passport carries a lot of weight when you’re dealing with international money transfers. But how can you grow globally if you can’t get paid?”
By becoming an e-resident, one gains access to a safe, convenient, and flexible digital ecosystem. Estonia has also reached an unprecedented level of transparency in governance. “Being an EU, NATO, and OECD member provides stability for your company,” Haav knows.
The e-Residency community spans continents, and so does its devoted program team of two dozen employees. Although an Estonian endeavour at heart, e-Residency’s promise of a borderless digital future has enticed talents worldwide. Professionals from Brazil, the US, Germany, and Australia all help to run e-Residency. Some of them started out as e-residents themselves. The same gateway effect can be seen from the business side, where a booming number of new e-resident-founded companies now offer services to fellow e-residents.
“Having a diverse team is vital for us. Our customer base is always going to be diverse, and it’s hard to understand their needs if your team is homogeneous,” Haav notes.
No more red tape
Although Estonia was the first to introduce e-Residency in 2014, other countries have devised similar programs. For example, the United Arab Emirates, Lithuania, Portugal, and Ukraine have launched similar efforts. “It’s definitely validating. As they say – imitation is the sincerest form of flattery,” Haav smiles.
While competition exists, Estonia’s strengths continue to lie in its e-services: the ability to sign documents using a digital signature, do your taxes in a matter of minutes, and create a company online. “Access itself is not enough,” Haav stresses. “If your services are either too complicated or expensive to use, then it won’t work. There’s nothing founders hate more than bureaucracy, and in Estonia, 99% of public services are accessible online. That’s hard to beat.”
To show how easy things can be, Haav flew to London Tech Week in June to demonstrate how quickly a business could be set up using e-Residency. It took Austrian e-resident Dominik Panosh just 15 minutes and 33 seconds to set up his new Estonian company at the conference. The previous record was also held by Estonia.
“Yes, we’re competing with ourselves,” says Haav. “But it’s not so much about the record. Rather, it shows the simplicity of running things in Estonia. People who’ve lived here their entire lives don’t see how simple our systems are. Sometimes, it takes a foreigner’s perspective to really appreciate them.”
Ahead of its time
The COVID-19 pandemic taught the world something that experts had been arguing for years – hybrid working models increase productivity. Though companies were at first reluctant to make a shift to support remote work, the pandemic experience made it clear that it helped foster a better work-life balance.
“Remote work was bound to happen,” says Haav. “The world has become a village, and everything is connected and available. This isn’t just for employees. Companies can now reach a wider talent pool when they go fully remote,” he explains.
The numbers of freelancers, digital nomads, and remote workers continue to grow too. As such, e-Residency has become a necessary platform that provides the tools to establish and conduct a business from anywhere. e-Residency has also been heavily vetted, Haav notes.
“We have been doing this since 2014, so all the necessary infrastructure is fully-functional. And, of course, it’s not just the infrastructure. According to the International Tax Competitiveness Index, Estonia has the world’s best tax system with no corporate income tax on retained earnings, no capital tax, and no property transfer taxes.”
A focus on growth
e-Residency is still just getting started. According to Haav, the next three years will focus on growth. There will be investments in the user experience and new services. “Like all startups, we keep on evolving and working on our services,” says Haav. “The key is to make the program even more accessible for entrepreneurs who want to establish businesses in the Estonian ecosystem.”
One planned innovation will be around reducing the amount of time it takes to become an e-resident. Because an e-residency card is a high-security document, meaning it requires biometric data and face-to-face identification, it can take time and extra steps to complete the process. “When the process takes too long, people lose their motivation. We need to focus on shortening the customer’s journey,” Haav points out.
He foresees a spike in new e-residents too. “We expect to surpass 100,000 e-residents by the beginning of 2023. But more importantly, we want to get more active users whose daily business is run through Estonia,” Haav notes. “I personally also hope to see a unicorn startup solely started by an e-resident.”
Want to become an e-Resident? See our tutorial below and start here!