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Estonia’s impact startups poised for investor success

Estonians, green by nature, have made sustainability and impact the centre of the startup landscape, driving innovation for a healthier environment.

Estonia is a self-described nation of nature lovers: The country’s air is some of the world’s cleanest, over half the land area is covered with forest, nature reserves make up about a fifth of the wilderness, and its capital Tallinn has been designated the European Green Capital for 2023.

Estonians do seem to have a heightened sense of connection with nature, and it’s beginning to show on the country’s tech scene. Impact tech is on the rise, with entrepreneurs showing up in droves for the environment.

We spoke to three entrepreneurs in the sustainability space who are in resounding agreement: sustainability must continue to win hearts and minds. Representing three different areas of impact tech, these Estonian founders are debunking the myth that saving the environment has to be expensive or unprofitable.

 Liis Tiisvelt

GreenTech on the rise — but sustainable hardware companies still lag behind

“I feel that both the Estonian societal and political scene is taking sustainability challenges more seriously than ever before,” says Liis Tiisvelt, founder of reusable packaging company Low imPACK, a startup working to upvalue textile waste into novel packaging material.

Having gained plenty of early support already from clients and consumers alike with Low imPACK, Tiisvelt notes that there is still a deep gorge between the theory of sustainability and the choices people make in daily life. She remains hopeful, however, that sustainability doesn’t have to be expensive when society is willing to make changes — Low imPACK’s reusable packaging, for example, comes with a deposit that gets returned to the consumer, making it a zero-cost lifestyle adjustment for the end user.

Founded as recently as 2022 by three entrepreneurs with a background in fashion, Low imPACK has already found its first export partners in Europe and the US. And while the interest is there, Tiisvelt notes that in comparison to software companies in the sustainability space, hardware startups still need a bit more luck and a very strong sense of mission to break through — but break through they must, if true game-changing innovation is to happen.

“I hope that we see more hardware solutions and technologies in the near future that upvalue waste material into new products, as opposed to incineration,” Tiisvelt says. “We need bold and creative hardware startups that really contribute to the circular economy.”

 Merit Valdsalu

Building for the future — Single.Earth integrates nature into the economy

Merit Valdsalu believes that sustainability has shifted from a novelty to a must on the tech scene. “Everybody knows that these are the solutions that will shape the economy in the next decades,” she says. “And they want to be a part of it.”

Valdsalu is the founder of Single.Earth, an Estonian company making forest preservation an economically viable alternative to harvesting and deforestation. Using big data and AI to evaluate and quantify forest attributes, Single.Earth is developing a new green currency called MERIT. Founded in 2019, today the company is expanding to help businesses assess their footprint on nature and biodiversity. “Nature and biodiversity assessments are a huge challenge,” Valdsalu says. “But we have the science and technology to achieve it. Our goal is to integrate nature into the economy. Starting by measuring the impact that products and services have on nature and ending with giving back to nature with every transaction to bring the economy in balance with nature.”

It’s an ambitious goal, but experience has shown that change can happen quickly in the sustainability space. By the time Valdsalu started building Single.Earth back in 2019, scientists and environmentalists had been talking about the problems for decades, but businesses had only been calculating their carbon footprints for a handful of years. “Today we are already discussing biodiversity loss and other environmental impacts,” Valdsalu says. “Companies are becoming more aware of their wider impact on the environment, beyond carbon. It’s challenging to build something for the future and always feel like we are too early on the market. But that’s the sweet spot for startups, the perfect time to disrupt, innovate, and build.”

But innovation requires investment, which puts impact entrepreneurs in an interesting position in a precarious economy. “Investors are making fewer bets on future solutions,” Valdsalu says. “Climate and environmental startups are creating new markets, products, and solutions that take time to become a part of the economy.”

On the bright side, Valdsalu believes that this state of affairs will not last long. “Hopefully, the investment scene recovers fast,” she says. “The world desperately needs these new solutions to come to the market.”

 Grünfin founders: Triin Hertmann, Alvar Lumberg and Karin Nemec

Impact-driven companies have a lot to prove to investors

Karin Nemec is the founder of Grünfin, a sustainable investing platform for people who care about their impact. A seasoned impact-driven investor herself, Nemec has a comprehensive 360° view of the investment landscape in impact tech.

“Investors like impact-driven companies but make no compromises in other financial and growth metrics,” she says. “Impact companies need to demonstrate that they can solve real problems in scalable ways while simultaneously creating and capturing value.” With Grünfin, Nemec is doing all that and more, and has the numbers to back it up. “Last year, Grünfin’s climate portfolios provided better returns than S&P500 or NASDAQ,” she says. “We want to increase the number of people who invest in impactful ways and break the myth that values-based investing is unprofitable.”

Nemec believes that even though the current economic climate, marked by rising inflation and interest rates and the war in Ukraine,  has understandably shifted people’s focus towards more immediate survival concerns, it is crucial to recognise that sustainability challenges continue to accelerate. “Sustainability is not a luxury that can be disregarded during difficult times,” she says. “It is a fundamental aspect of building resilience and long-term stability.”

Despite the many and varied challenges, Nemec notes that the impact scene in Estonia remains vibrant, particularly in areas such as the circular economy, carbon markets, offsetting, and re-use of materials. “My hope is that Estonia will witness the emergence of its first impact unicorn this decade,” she says. “If impact companies succeed, we all win.”

To plant your tree in the digital forest of Estonia, click here.

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