Why Estonia is the perfect place to launch a business

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A deep dive into the start-up ecosystem in the world’s most digitally advanced country.

Why Estonia is the perfect place to launch a business
Tallinn, Estonia © kavalenkava

Timothy Motte from Realistic Optimist presents an overview of the Estonian startup ecosystem and explains why Estonia could be one of the best places in the world to launch and run a company. This post is a part of Timothy’s very own “Ecosystem Deep Dives” series, so make sure to check out his blog, where you’ll find more in-depth reports from various noteworthy places around the world.

Without further ado, let’s focus on Estonia and find out what makes it such an outstanding place…

Survival of the fittest

Estonia’s history is a start-up story in it of itself. Left with the task of building a country from scratch after the dissolution of the Soviet Union in 1991, Estonia was constructed following start-up principles: iteration, efficiency and technology. With a tiny population of 1.3 million and a scarcity of natural resources, the country quickly understood that its wealth would come directly from its people. The question then became: how do we make this country as efficient as possible to give our population the best chance to succeed?

Efficiency, the government rapidly understood, would come in the form of technological advancement. In the 1990’s, the Estonian government launched the so-called “Tiger Leap program” aimed at digitizing the country’s education system. By 2000, the country declared internet access to be a basic human right. That spirit of digitalization permeated throughout Estonian society, and in 2021, Estonia was declared the most “digitally advanced society” by Wired magazine. Some 99% of all government services in Estonian are done online, from voting to tax filings. Estonian officials even provide advice to other countries such as New Zealand to help with their own switch to e-governance. Today, “every Estonian has a mandatory electronic ID, which acts as a legal document and provides digital access to Estonia’s e-services such as banking, tax returns, voting and prescriptions.”

In 2007, a massive cyber-attack following riots over the statue of a Soviet soldier led the country to double-down on its cyber-security apparatus, making it one of the world’s most advanced countries in the cyber-security sector to this day.

“e-Estonia is estimated to save over 844 years of working time for Estonians every year and 2% of its GDP annually.”

CV Check
The Estonian Founders Society

The Estonian start-up ecosystem

The Estonian start-up ecosystem was born in part out of the government’s desire to promote and develop the country’s main export: its population’s brainpower. Combining an already highly-digital society with a small domestic population gave Estonia’s ecosystem two key strengths: the obligation to create scalable products given Estonia’s tiny market size, but also the ability to create a tight-knit and inter-connected ecosystem. Similar to Silicon Valley’s “PayPal mafia” or Colombia’s “Rappi mafia”, the Estonian ecosystem was kickstarted by its very own start-up superstar: Skype. Acquired by Ebay in 2005 for $2.6B, the Estonian founders of Skype have heavily re-invested in their local ecosystem, having either co-founded or invested in two of the most prominent Estonian start-ups today: Wise (cross-border money transfers) and Bolt (ride-hailing). The “Skype Mafia” has even taken it a step-further, creating the Estonian Founders Society, which provides invaluable advice and experience to all ecosystem actors.

Today, the Estonian start-up ecosystem boasts extremely impressive statistics, such as being the EU country with the largest number of start-ups per capita. The Estonian start-up sector employs 1% of the Estonian population and is responsible for 3% of the country’s GDP. With more than 1,000 start-ups and 7 unicorns, every 100th person in Estonia is connected, in one way or another, to the start-up world. The ecosystem’s strengths are not going unnoticed: In the first half of 2021, 18 Estonian start-ups had raised investments of over $1M. Additionally, “the startup sector is the fastest-growing economic sector in Estonia with annual employment growth of 30% on average.”

Estonia is truly what one would call a “start-up nation”, a term often mocked and ridiculed by a segment of the French population (my home country) due to a deep misunderstanding of the term. In my opinion, being a “start-up nation” doesn’t mean placing tech entrepreneurs on a pedestal while ignoring the needs of the society at large. Rather, being a start-up nation means adopting a problem-solving, dynamic mindset aimed at leveraging technology and efficiency for the benefit of the population at large. This “start-up nation mentality” should be adopted by EU welfare states, who were build on noble social objectives but now suffer from bureaucratic overload and severe delays in government digitalization.

Living in the metaverse © Renee Altrov

National brand

A common trend I’ve noticed among many successful start-up ecosystems is the construction of a true, recognizable, start-up brand. This is something the French ecosystem has recently gotten a hold of, with the implementation of “La French Tech” and its logo, a red rooster, which has significantly improved international visibility and foreign investment into French start-ups. This is something the Estonian government has really sought to develop through “Start-Up Estonia”, which offers the double-advantage of building a national start-up brand but also centralizing all of the resources Estonian start-ups might need (legal templates, ecosystem mapping, etc…) Moreover, initiatives such as Start-Up Estonia act as the bridge between governmental legislative powers and the demands/needs of the country’s ecosystem as a whole.

“We engaged in state-level storytelling for creating a shared vision of our future while Startup Estonia will be acting as an intermediary for boosting cooperation between startups and state.”


Attracting foreign talent

One of the specificities of the Estonian ecosystem is the emphasis it places on recruiting foreign talent, both in founders and start-up employees. As with almost all ecosystems, Estonia faces a shortage of local talent. However, while it is caused by a weakness of the educational system in other countries, this is clearly not the case in Estonia (PISA 2018 shows Estonian students ranking first among European countries in all three domains of assessments: reading, mathematics and science.) Rather, the shortage of local talent is due to inherent demographic limits, caused by the country’s small population. 

To remediate to this, the Estonian government offers a “start-up visa” through which non EU-citizens can get jobs at Estonian start-ups or set up their own business in Estonia. Today, 20% of Estonian start-ups were founded thanks to the start-up visa; the 3 most represented countries being Russia, Ukraine and Brazil.

This type of policy goes to show how important it is for ecosystems to factor in international attractiveness in the equation. Silicon Valley’s success isn’t due to some obscure intellectual superiority of people living in Bay Area, but rather due to the huge number of foreign founders, each bringing with them unique talents. According to Forbes, 55% of America’s billion-dollar start-ups have at least one immigrant founder. While figures aren’t as impressive in Estonia, the policy of attracting foreign talent into the ecosystem is already starting to bear its fruits, as seen in the graph below. 

In that same dynamic, one should also mention the Estonian e-residency program, which allows people throughout the world to incorporate a business in Estonia, completely paperless, gaining access to European capital, markets, and payment infrastructure.

Room to grow

The Estonian ecosystem is still struggling with a couple of things, identified by an excellent report called the “Start-Up Estonian White-Paper”. These include:

  • Not enough R&D, innovation in deeptech: Estonia could look at the steps Singapoure took, a country facing the same demographic challenges, to develop one of the most IP heavy ecosystems in Asia.
  • Not enough female founders: While women represent 36% of Estonia’s highly-skilled start-up employees, 85% of Estonian start-ups are founded by men.
  • Not enough diversity: The socio-economic background of Estonian founders is still pretty homogenous, a trait that might evolve with the growth of the start-up visa program.

Estonia also suffers from the highly fragmented EU start-up ecosystem, which contains a variety of different, national ecosystems, which are loosely link and don’t work close enough with each other. Attached is an interesting infographic from the white-paper, which demonstrates the variabilities between different ecosystems on the continent and worldwide.

Source: Start-Up Estonia white-paper


Estonia’s start-up ecosystem is the logical child of two of the country’s main traits: its ultra-digitalization and its “start-up” minded population. By virtue of being a small country with limited natural resources, the Estonian government was propelled to invest heavily in its citizens ever since the country’s independence in 1991. Seminal moments such as the Tiger Leap program, the acquisition of Skype and the recent launch of the start-up visa program have all contributed to one of the most interesting and dynamic European start-up ecosystems today. I also think that the effort to build a true, national “start-up nation brand” was fundamental in the international attractiveness Estonian start-ups enjoy today.

If countries with natural resources can use the revenue to actually invest in their people instead of simply keeping them quiet and alive with subsidized goods, one wonders how many more Estonian-like success stories we would’ve seen by now. With all that being said, Estonia still faces its own difficulties, but I have no doubt that the country’s pragmatic and efficient approach to problem-solving will make them succeed, once again.


If you enjoyed reading this article – let us know which country we should feature next and make sure to check out the rest of Timothy’s Ecosystem Deep Dives.