The purpose of ranking the Estonian technology companies once a year isn’t to predict the next unicorn, but to keep an eye on the growth of the values of the technology companies that are established by Estonian founders and also take into account the potential growth in the future. The aim is to provide a comparable assessment of the value of companies at a specific point in time based on a similar methodology.
“Technology companies are usually excluded from classical rankings compiled on the method of comparable multiples because they do not have historical profit figures,” explains Indrek Uudeküll, the partner of Prudentia Advisory that leads the compilation of the TopTech ranking. “Since in the fourth industrial revolution, the economic structures are rapidly transforming and Estonian tech startups have been remarkably successful, we have decided together with the Estonian Founders Society and Siena Secondary Fund to celebrate it by establishing a new format,” Uudeküll adds. Previously, he has participated in the TOP101.ee ranking project created in cooperation with Nasdaq Tallinn, which ranked Estonia’s most valuable companies. “The most recent TOP101.ee was won by Eesti Energia that was valued at €1.6 billion based on 2019 results. When shares of Wise were listed this summer, Wise was estimated to be worth almost €10 billion,” Uudeküll notes.
According to Rando Rannus, partner of Siena Secondary Fund that specialises in secondary market investments in technology companies, it was high time to compile TopTech because 2021 has been a breakthrough year for the whole sector. “The listing of Wise and the sale of Pipedrive has been topped by a massive influx of capital – Estonia is approaching this year’s magical €1 billion mark raised by its startups – which is more than 3% of Estonian GDP, just to put into context. Moreover, the market cap of the Top 25 technology companies in Estonia is close to being roughly twice of Estonian state budget and this sector deserves public attention and appreciation.”
Lars Trunin, Head of UK Product at Wise, the winner of this year’s TopTech ranking, said that he is extremely happy to see the growth of the Estonian technology sector. „More and more smart founders are finding innovative ways to solve some problem in our society. Just like Wise is solving the problem of moving money. Every recognition is motivating and powers teams to move even faster towards their goals. We’re in a truly good company in the TopTech.”
Sten Tamkivi, board member of Estonian Founders Society, says that when talking to friends abroad, Estonians refer to Wise, Bolt or Pipedrive proudly as “ours”, just like Skype a decade ago. „It helps that these companies have millions of everyday users around the globe, giving them broad recognition regardless of how tiny their home country is on the map. The list gets more intriguing from there on. If you are curious to know where our next unicorns come from, now is the time to think if they are hidden in Skeleton supercapacitors, ride in on Starship robots or are one identity verification away by Veriff.”
TopTech ranking methodology
TopTech keeps an eye on the growth of the values of the technology companies established by Estonian founders, also taking into account the potential growth in the future. The aim is to provide a comparable assessment of the value of companies at a specific point in time based on a similar methodology.
The ranking includes only technology companies that are defined similarly to the approach of the Founders’ Association’s startups, i.e. fast-growing technology companies that have at least one Estonian founder or are registered in Estonia AND the company’s head office or at least 20% of employees are in Estonia.
The basis of the valuation is publicly available financial information and additional insights provided by the companies themselves based on the last available funding round. If the final funding round was more than 12 months ago, then the valuation obtained from the funding round will be adjusted according to the most recent financial information of the company using revenue multiples.
If the company hasn’t raised money, then the valuation is based on revenue multiples using a sample of comparable companies, who have raised capital in the past 12 months or are listed on a stock exchange. If the company is listed, the market cap as of 31.07.2021 is used as a value. If the company has been sold in the last 12 months to a financial investor, the company’s sales price is taken as a value. Due to the nature of the technology sector (low debt ratio), only equity is evaluated as the enterprise value and equity value, in this case, are fairly similar.
The TopTech ranking’s valuation was conducted by Prudentia Advisory in collaboration with Siena Secondary Fund. The sources of publicly available information are Crunchbase, Capital IQ, Orbis, Infopank, Startup Estonia, Estonian Founders Society.
See the full list of TopTech25 here.
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