Every year, key members of the Estonian innovation ecosystem come together for a candid discussion about the present situation and future possibilities. This January, the Annual Fireside Chat drew a large audience to Erinevate Tubade Klubi in Telliskivi, who eagerly listened to the reflections on this challenging yet productive year. The discussion, moderated by Eve Peeterson (head of Startup Estonia), featured:
- Joonas Vänto, Director of Estonian Investment Agency
- Kaidi Ruusalepp, President of Estonian Founders Society, CEO & Founder of Funderbeam
- Margus Uudam, Member of the Board of Estonian Private Equity and Venture Capital Association (EstVCA), founding partner at Karma.VC
- Mait Sooaru, board member of Estonian Business Angels Network (EstBAN) and CEO North-East Europe at Unifiedpost Group.
Getting to normal
2023, with its cooled investment appetite, was still a prolific year for the Estonian innovation ecosystem. Per Startup Estonia estimations, Estonian startups raised €191M in 2023 (only the companies established less than 10 years ago are counted). This might be a decrease from previous numbers but a healthy one, argued Margus Uudam. “For me, we’re back to normal now after a big party”, he said.
A broader picture should be considered, said Joonas Vänto, and investments into industries and other sectors should be taken into consideration. Invest Estonia finished 2023 with the second-best result in its history. There’s a lot of noise in the news now, but the investors’ outlook is different, as they think in decades, not quarters or years, he argued.
“Now is a really good time to invest and look for the future investments”, he says. Besides capital inflows, there are other statistics to back this. “Last year, we saw 167 visits from investors to Estonia from all over the world. The interest is here”, he added.
Atomico’s definitive report on European tech tends to agree Estonia is keeping its innovation edge. Describing the county as the “startup and unicorn haven of Europe,” the report highlights Estonia’s contribution to the rising Carbon & Energy sector, startups, and unicorn creation records.
Finding the next big thing
Yet there’s always something to improve. “We need more founders, more of those crazy people who can squeeze oil out of stone”, said Kaidi Ruusalepp. Her FinTech startup Funderbeam closed a record €36.1M round in 2023. More female founders will be in the spotlight this year, argued Ruusalepp. The time of puffy storytelling is over, but those who execute will prevail.
Another important thing will be to bring in foreign founders to Estonia, highlighting its strengths: no admin burden, close-knit community and talent quality. “Every country is fighting for talent. Besides ICT employees, we also need to welcome engineers to Estonia and boost our industry sector, mix it with the startup innovations”, argued Vänto. Estonia needs the next big thing; an industry should be a part of that. “We see it from Estonian successes, such as Skeleton and Elcogen.” Both raised significant sums with corporate VCs participation, such as Japanese conglomerate Marubeni, German industrial giant Siemens and HD Hyundai from South Korea.
For DeepTech to blossom, Mait Sooaru listed two key things: public attitude should encourage and support entrepreneurship and universities should make it easier for scientists to find cofounders, raise money and transform IP into equity. “The growth of DeepTech takes time, so we need more seeds to be planted. But the global VCs are definitely keeping an eye on the Estonian DeepTech sector”, said Vänto.
Defence as an anchor
Among many other topics, DefenceTech stood prominently. “Let’s build a one billion euro defence sector,” Ruusalepp stressed. Bolt’s cofounder Markus Villig has recently urged to consider this as a cornerstone of the Estonian investment strategy. Interest in defence innovations from foreign investors is in the rise, confirmed Vänto. Estonia is among NATO’s most committed members, and its security is at an all-time high. Innovations plays a huge role.
Held in June 2023, Defence DemoDay brought together Estonia’s finest defence, cybersecurity, and dual-use tech innovators alongside representatives of NATO’s innovation arm. Hosted by the NATO Innovation Fund and Invest Estonia, it was a strong showcase of local DefenceTech advances and a bridge for even more international cooperation. NATO’s early stage acceleration program is also up and running, intending to invest almost €1 million in Estonia-based startups.
With all the pieces, including the AI innovations and the expected economic rebound, 2024 will be a turbulent year. Still, it will also present countless opportunities for those who are determined enough, concluded Uudam. “It’s impossible to hold back a strong founder,” he claims.
Yet even the strongest founders need support, and now there’s one more vehicle to deliver it. Announced at the opening of the event by Anu Oks, EstBAN managing director, the new Connect2Scale investment ecosystem project is aiming to ease access to funding, empower startups through specialized training and help them to become successful scale-ups.
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