9 Reasons to Launch or Expand a Startup in Estonia

June 22, 2017     By : Elena Mesropyan

1. The Republic of Estonia is the first country to offer e-Residency, a government-issued digital identity that empowers entrepreneurs around the world to set up and run a location-independent business

E-Residency is a new digital nation for global citizens, powered by the Republic of Estonia. Estonia is the first country to offer e-Residency, a government-issued digital ID available to anyone in the world. E-Residency offers the freedom to easily start and run a global business in a trusted EU environment.

9 Reasons to Launch or Expand a Startup in Estonia

Source: Estonia E-Residency

The e-Residency project was launched on December 1, 2014. As of March 15, 2017, over 18,300 people from 136 countries worldwide had applied for and over 17,300 have received the eID. As of March 15, 2017, more than 1,400 e-residents have established a company and there are over 2,700 companies connected to e-residents (owners, board members, etc.).

E-residents can:

  • Establish and administer a company online (a company can be incorporated in 15 minutes, and taxes paid in 3). Moreover, Estonia has one of the most liberal tax systems in the world – zero corporate tax income.
  • Conduct banking online. E.g.: make electronic bank transfers.
  • Have access to international payment service providers like PayPal, Braintree, etc.
  • Digitally sign documents (e.g.: annual reports, contracts) within the company as well as with external partners.
  • Declare Estonian taxes online.

All of this can be done in a cost-efficient and hassle-free way, without the need to hire any local director or representative (unless they want to, of course).

Finnish FinTech company Holvi has partnered with the government of Estonia and its e-Residency business program, allowing almost anyone anywhere in the world to create a business account and obtain a Mastercard for a small monthly fee.

2. Transaction value in the FinTech market is expected to amount to US $1.025 billion in 2017, showing an annual growth rate (CAGR 2017-2021) of 20.5% resulting in the total amount of US $2.163 billion in 2021. The market’s largest segment is digital payments with a total transaction value of US $925 million in 2017.

3. Estonia is leading the government-level adoption of the distributed ledger technology

It’s been a little over a year since Nasdaq and the Republic of Estonia announced that Estonia’s e-Residency platform will be facilitating a blockchain-based e-voting service to allow shareholders of companies listed on Nasdaq’s Tallinn Stock Exchange, Estonia’s only regulated securities market, to vote in shareholder meetings. The program marks the second official blockchain project Nasdaq is executing on after successfully delivering the first private securities issuance between an investor and company via Nasdaq Linq, its blockchain-enabled platform.

A year later, in 2017, the Republic of Estonia took another step towards blockchain hand-in-hand with Procivis, a Switzerland-based startup, which announced that it is going to present its proof of concept for a blockchain-backed e-government platform at the Microsoft Public Sector Digitization Practice Day in Bern. Procivis is currently raising seed funding and will collaborate closely with Estonian e-government experts for designing its services.

Regarding his motivation to start Procivis, company Founder Daniel Gasteiger said, “Learning about the level of digitization of the public sector in Estonia left me deeply impressed, especially when looking at the state of digitization in Western Europe, including Switzerland. By bringing Estonia’s leading e-government experts on board and adding our blockchain experience, our aim is to create a platform that can serve as the future electronic backbone of democracies across the globe.”

4. User-centricity at the core of eGovernment

According to the latest eGovernment Benchmark Report by EU, at the national level, many countries in the EU28+ show good results on User Centricity, with Estonia being among the top five (Malta, Austria, Estonia, Portugal, and Finland). Interestingly, the greatest progress over the years has been achieved by Austria (+10 points since the 2012 measurement) and Estonia (+8).

Moreover, even if with small progress over the years, Estonia, Malta, the Netherlands, Denmark, and Finland provide the easiest way to navigate public services. Taking into account the time the user takes to go through the online services (speed of use) Estonia and Iceland are leading the way.

5. Transparent governance

Within the eGovernment Benchmark Report 2016, the transparency top-level indicator shows Estonia holding the second place (81%), following the Malta as the top performer (97%). Moreover, on a sub-category level, Estonia ranks very high in the transparency of public administrations (89% in 2014-2015).

6. Estonia remains one of the leading countries that have almost achieved the full implementation of enabling technologies in digital services

The analysis by EU revealed that Estonia is among the countries that made substantial progress focusing on following enablers:

  • The full implementation of SSO functionality (100%).
  • In six member states (including Estonia), the eSafe Enabler is now available for all online public services.
  • Electronic identification is fully available in Estonia.
  • Malta is the top performer and has completely implemented also the eDocuments Enabler (100), while Estonia follows scoring at 94%.

7. Estonia is a cybersecurity fortress

The Market Moghul reports that Estonian state administration has been using the technology of distributed registries for many years, which is also part of the country’s immunization against cyberattacks. The creation of the NATO Cooperative Cyber Defence Centre of Excellence was a clear expression of confidence in Estonia’s cybersecurity.

The edition emphasizes that the data of Estonian citizens is in the cloud, which is to guarantee their authenticity and immutability. Intelligent PKI cards allow digital citizens access not only to handle almost a thousand official cases, but also to vote from 2005 on the Internet, and from 2011 through SMS.

8. Estonian startups attracted EUR 103 million of investments in 2016 – a 12X increase since 2011

Estonian startup community has tracked all investment rounds into Estonian startups since 2006. The trend clearly indicates consistently attractive startup community: in 2016, Estonia’s startups raised over EUR 103 million (over 12X increase from 2011).

9 Reasons to Launch or Expand a Startup in Estonia

Source: Startup Estonia

One of the most successful FinTech startups globally – TransferWise – took the top spot in the list of startups that raised the most funds.

9 Reasons to Launch or Expand a Startup in Estonia

Source: Startup Estonia

At the moment, there are an estimated of 450 startups in Estonia, and by 2020, the country aims to reach a magical 1000 startups. The Estonian startup community has gathered data about the Estonian startup scene since the year 2006 – all investments, fundings, failures, and exits of Estonian tech startups.

9. Estonia to set up world’s first data embassy in Luxembourg, offering an unprecedented guarantee for data security

Prime Minister of Estonia Jüri Ratas and Prime Minister of Luxembourg Xavier Bettel signed an agreement on housing data and information systems between the two countries, thereby creating the world’s first data embassy. The data embassy should start work at the beginning of 2018.

“This is the first data embassy in the world. Its establishment is part of the Estonian general strategy of data management and fundamentally a double guarantee to our data and services. A majority of daily open services of Estonia are digital. Data security and cyber security are generally crucial from the perspective of both people’s confidence and the functioning of services. It is also an important part of the so-called daily digital hygiene in increasingly digitizing societies,” Ratas said.

According to the Prime Minister, Luxembourg has the technical capability to backup Estonia’s data at a high-security level in data embassies. “Estonia is the world’s first country that uses this method to double secure its digital consistency in close cooperation with Luxembourg,” Ratas said.

Share your reasons for Estonia being an outstanding European market for startup growth and development.

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Elena Mesropyan
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Elena Mesropyan

Global Head of Content at Let's Talk Payments
Elena is a research professional with a background in social sciences and extensive experience in consumer behavior studies and marketing analytics. She is passionate about technologies enabling financial inclusion for underprivileged and vulnerable groups of the population around the world.
Elena Mesropyan
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