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From the production lines of the Unicorn Factory: Estonia is the champion in founding billion-dollar startups

7 unicorns founded by Estonians and / or in Estonia have taken the country to Europe’s (and probably the world’s – depending on methodology for counting) top in number of unicorns per capita. We explore how each unicorn that was born here or has Estonians among its founders, reached the billion-dollar valuation – and how Estonia’s e-society, agile business environment and supporting startup community influenced them on the way.

🦄 7 ID.me: exporting the main idea behind Estonia’s digital success

Digital ID-s are a big thing in the United States with millions of dollars invested in the identification businesses; one of the most recent success stories being ID.me. The company is valued at 1.4 – 1.6 B U.S dollars after its latest funding round that included participation from CapitalG, the independent growth fund of Google’s parent company Alphabet Inc.

If you are a Californian and log on remotely to update your address or change a registration with the local DMV, there’s a good chance you’re using ID.me. And you are not the only one as the number of people using this service is growing rapidly with about a million users added every two weeks.

Tanel Suurhans described the essence of the service he co-founded on Äripäev radio: “It lets me prove that I am Tanel Suurhans and the information I am sharing online – for example with the IRS, the tax authority in the U.S – is my information.”

ID.me was founded in 2010 as TroopSwap, a military-focused solution verifying U.S Armed Forces veterans for discounts. The Estonian co-founder and CTO Tanel Suurhans came on board in 2013 – and this was the time when things started to change towards the ID.me we know today. What co-founder Suurhans brought along besides great technical skills and experience from various software projects in Estonia (including planning and executing the modernization of the largest digital content management and publishing platform used in the Baltics), was the real-life experience of using secure digital identity and e-signatures, solutions that are natural to Estonians and can be considered the key cornerstones of e-Estonia. And naturally this proved useful when co-founding a service such as ID.me.

As Suurhans himself explained on Äripäev radio: “When I moved here in 2013, I had the vision from Estonia in my head.” This vision, of course, changed when met with the U. S reality, including its differences between states, state-level bureaucracy, technical issues such as the lack of a unique national ID number, etc. Suurhans quickly understood that for various reasons a country-wide electronic ID system like the one in Estonia was not going to happen in the states – but solutions for secure e-identity are still needed.

What brought along quick growth for ID.me, was the COVID-19 pandemic. COVID-19 has brought new social benefit programs on the U.S state level, which in turn has led to growth in fraud attempts – and thus the need for secure online ID services. The growth in the number of employees at ID.me has been quick during the last year – the company has moved up from about 100 employees to 800. The level of 1,500-2,000 will be reached by the end of 2021.

The future seems bright for the unicorn as according to Suurhans, under president Joe Biden, the U.S is trying to move towards a system of online federal services, similarly to (but to a smaller extent) how government-provided services have moved online in Estonia. This, in turn, means almost endless possibilities for ID.me. As Suurhans said: ID.me’s next goal is 10 B U.S dollar valuation.

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🦄 6 Zego: creating a digital revolution in insurance and offering better prices on the way

One of the investors of Zego and a member of its advisory board, Taavet Hinrikus (that is also co-founder of unicorn #3 – Wise) has said: “I saw that the insurance sector is facing the same as other areas – quick onslaught of technology creating ten times better services.”

That seems to be true, looking at the way Zego handles its business – and how it has grown into a unicorn. “While most traditional insurers price their insurance products based purely on factors such as age and vehicle type, and while others may use telematics-based driver behaviour data too, Zego is able to price policies based not only on traditional factors, but also driver behaviour data and working habits data,” Zego’s CEO and founder Sten Saar told TechCrunch. “In fact, overall, the information Zego can collect amounts to five times more data per vehicle than competitors, or 50 data points per second. This means that we have a much more comprehensive understanding of risk than competitors, enabling us to provide best-value insurance coverage, from policies ranging from one hour to one year”.

To date, Zego has provided more than 17 million insurance policies and covered more than 200,000 vehicles in five countries – and as the Insurance field becomes more and more digital, further growth is expected for Zego.

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🦄 5 Pipedrive: for those who sell from those who know how to sell

First, we must say that we are happy customers and huge fans of Pipedrive at the Estonian Investment Agency, as the digital sales processes at our United Nations awarded agency have largely been built around it. Thanks, Pipedrive!

Founded in 2010 by Timo Rein, Urmas Purde, Ragnar Sass, Martin Henk and Martin Tajur, Pipedrive’s main selling point has been that it’s a highly intuitive sales software built by salespeople for salespeople. According to the company, 100,000+ organizations across the world use their solutions.

About 14 years ago Pipedrive’s co-founder Ragnar Sass ventured into entrepreneurship with his first startup, United Dogs and Cats. Simply said, it was supposed to be a Facebook for … you guessed it – dogs and cats. “When it became clear that United Dogs and Cats will not continue then in the spring of 2010 Purde and Rein contacted me about their CRM idea. Their main problem was that over half of CRM softwares were not actually used or catered to the needs of people doing the actual selling,” Sass told Life in Estonia magazine.

After exchanging emails with Purde, he discussed the idea with Henk and Tajur. The parties involved decided that the concept was valid, and they would go ahead as equal partners.

“Purde and Rein had both been in sales for many years. They started off with door-to-door sales. They had a clear vision in their heads what kind of CRM and to whom and why they wanted to build. They had even asked someone to draft a 50-page technical spec for what they wanted to build. We decided not to use that, so we would not limit ourselves,” Sass said.

What cannot be underestimated, is the influence of Estonia’s previous unicorn builders on Pipedrive, most importantly the influence of ex-Skypers. It is an interesting coincidence (or maybe not) that one of the backers of Pipedrive was Swedish billionaire entrepreneur Niklas Zennström that also backed Estonia’s first ever unicorn Skype, Pipedrive being his second ever investment in Estonia.

We can expect that in the same way as the sale of Skype triggered a frenzy of starting new companies in Estonia, the sale and unicorn status of Pipedrive will have the same effect. First success stories are already becoming visible.

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🦄 4 Bolt: saying good-bye to “Kitty”

“We might have decreased the number of old-school taxi call-centres − meaning dispatchers and taxi company owners − but we have given tens of thousands of drivers an opportunity to offer their services on our platform,” Markus Villig, co-founder of Bolt told Life in Estonia magazine.

Bolt (formerly known as Taxify) is a ride-sharing platform that operates in 40+ countries in Europe, Africa and South America with thousands of drivers and millions of passengers signed up.

In 2012, Markus’s brother and other co-founder of Bolt, Martin Villig, was organising an event in Kyiv, Ukraine, and tried getting a taxi online, which turned out to be quite a hassle. He then came up with the idea of how to make ride-sharing much easier.

Markus picked the idea up and plunged into it. According to his own account, he discovered he had a lot of time on his hands during his high school final exams, so he decided to build a platform to ‘get this taxi business in order in Tallinn’. There were 30+ taxi companies in Tallinn at the time, all operating old school call centers, with an operator, often misogynistically referred to as ‘a Kitty‘, mediating the rides.

The early start was quite promising. Markus did a Google Docs survey in his school to which he received 600 answers, 90% out of which responded that there is an acute need for a new taxi platform. Nobody had even heard of Uber yet.

Markus started going through the taxi stops and things started going a bit astray: “Of course I had no platform to show yet and being a 19-year-old kid disturbing the drivers from reading their newspaper…” 8 out of 10 taxi drivers would yell at him to get the hell out of their cars. Also, he soon realised that his initial budget of 200 euros was simply not feasible to actually develop an online platform. A developer he had found ‘somewhere from the city’ was asking for 7,000 euros just for a prototype…

The bumpy road continued, finally taking the company to a unicorn status. “My ambition from the very beginning has been building one of the biggest technology companies in Europe,” Markus Villig was not shy to announce after the big announcement was finally made. And Bolt’s ambition does not stop there – be it in making the services more user-friendly, safe to use and provide, or sustainable.

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🦄 3 (Transfer)Wise: Europe’s most valuable Fintech ready for further growth

“Ten years ago, Taavet [Hinrikus] and I set out to fix international money transfers for all of us who’d been overcharged and underserved by banks,” co-founder of Wise Kristo Käärmann wrote in the TransferWise blog when announcing the rebranding of one of the most valuable startups ever founded by Estonians. “We named our idea ‘TransferWise’ — because our early customers were ‘wise’ to know their banks were charging hidden fees in exchange rate markups. Today our name catches up with who we’re already building for — a community of people and businesses with multi-currency lives.“

But what is behind Wise’s success? Co-founder Taavet Hinrikus explained us a few years back at technology conference Latitude59: „There is something in the soil in Estonia, which makes the Estonian people much more capable of making something great!“ He added that Estonians are used to doing things with little means – Wise being just one example of a company having been created with relatively little means but grown into a global business.

2021 will be a year of further expansion for Wise, including hiring 165 new employees for its Tallinn office. On April 1st, Reuters also announced that Wise is on course to launch an initial public offering in May 2021. The news has yet not been confirmed by the company yet, though. What we know is that Wise is not aiming to be ‘just’ a money transfer company anymore, the recent name change highlighting the company’s expanded portfolio of services.

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🦄 2 Playtech: becoming world’s largest online gaming software supplier

Playtech is the world’s largest online gaming software supplier, founded in Tartu, the second largest city of Estonia, in 1999. The mastermind behind the start of Playtech was Cypriot-Israeli entrepreneur Teddy Sagi that wanted to bring together the best minds from gaming, technology, and multimedia to create a company without a rival. Naturally he chose Estonia for the company’s location.

It only took two years for Sagi and his team to launch the company’s first casino – but this was just the beginning as several technology and media usage trends were taken advantage of on the way, innovating the way online gaming software is run through and through.

Just over two decades later, Playtech is on the FTSE 250 Index and listed on the London Stock Exchange. Playtech now owns over 300 gaming brands, has more than 150 global licensees and runs its offices in 19 countries around the world.

One of the key success factors for Playtech in recent years has been their ability to hire and retain top-class talent from Estonia and abroad. The employees just love Playtech – one big reason why there seems to be a bright future ahead for the gaming software supplier.

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🦄 1 Skype: changing the calls – and the game

The co-founder of Wise, Taavet Hinrikus told in an interview to CNBC a few years back that he sees the founding of Skype as one of the pivotal chapters in Estonia’s digitalization as well as its rebirth as a haven for tech startups and entrepreneurs.

The influence of Estonia’s first unicorn, as well as its numerous alumni is visible throughout Tallinn’s bustling startup scene and by now, in many other parts of the economy.
Why Skype is important in the context of FDI? It is one of the early hugely successful foreign investments in Estonia’s startup ecosystem. Niklas Zennström and Janus Friis could have gone almost anywhere with their idea, but they chose Estonia where bright minds, Ahti Heinla, Priit Kasesalu, Jaan Tallinn and Toivo Annus among others, helped to make their idea a reality. The sum of 2.6 billion U.S dollars that Skype Technologies was sold to Ebay for, was huge – especially in the context of Estonia in 2005.

Today, almost everybody knows what Skype is and its current owner Microsoft still has a part of its team working on messaging and video conferencing software in Estonia.

In 2021, the president of Estonia, Kersti Kaljulaid, awarded one of the co-founders of Skype, Niklas Zennström, a state decoration for his persistence in his activities and loyalty to the contemporary Estonian values of openness and democracy, knowledge and entrepreneurship, caring and noticing.

‘To skype’ has become a verb in English, Estonian and many other languages, meaning making calls over the internet. Of course, looking back how things have gone, we could also consider another meaning for the verb: to start the production lines of the Unicorn Factory.

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What about the future?

Yes, we know that the story does not end at number seven – or where we began the list from. In recent months, the Estonian Investment Agency has gathered several predictions about companies in Estonia having the potential to become Estonia’s next unicorns.

The list, proposed by some of the most prominent people in Estonia’s startup scene, includes but is not limited to companies such as Salv, Pactum, Xolo, Supervaisor, Veriff, Starship Technologies, Skeleton Technologies, Funderbeam, Cleveron and FoodDocs.

Who will be the eighth unicorn*? We do not know yet but will most probably find out soon.

Wish to do business in Estonia? Send us a request for e-Consulting to get further information and your personal consultation from one of our investment advisors.

* – Unicorn with Estonian founder(s), headquarter or significant part of R&D based in Estonia.

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