1 INTRODUCTION

Since we started, one of the key aims of the team at Tech.eu has been to track all of the funding rounds and exits in Europe, providing the most This report focuses on the ecosystems and funding raised by the comprehensive and accurate records and analysis of the European technology Baltic states of Latvia, Lithuania, and Estonia, between 2014 – Q3 scene. 2017.

We do this by meticulously monitoring hundreds of sources, across multiple In this report we take an in-depth look at the funding in the Baltics over the languages and regions. analysed period, highlight some of the most important investors and startups from each country, and give background on the growing ecosystems of these However, many Baltic rounds were off our radar. They hadn’t been reported on European countries, who are at the forefront of building some of the most by the press, even less by the English press. Much of the data came from startup friendly governments and ecosystems in Europe despite their small founders or investors. This highlights the need for Baltic states to have a more size. These countries have made great progress by investing in ICT comprehensive reporting system for deals, so that we can be sure to have infrastructure and implementing laws that encourage entrepreneurship. accurate data. There were less than 10 exits per country in the analysed period, so instead of We want to thank organisations from each country’s ecosystem, such as the doing an analysis, we highlighted a few of the major exits. Latvian Startup Association and Estonia’s Garage84, whose crowdsourced spreadsheets helped us to complete our data set. Also, thanks to Infogr.am, a We’ve worked to make this report as comprehensive and valuable as possible. Latvian startup we found while doing this analysis, which we used to create Please refer to the end of this report for methodology and disclaimers. For any many of our charts. questions or comments regarding the report we invite you to email [email protected]. Some of the biggest scale-ups emerging from these countries have moved the majority of their operations abroad, such as Skype, Latvia’s Bitfury, and This report was written by: Lithuania’s YPlan, and have been excluded from the analysis. The removal of these successful scale-ups certainly affected the total funding figures for each • Mary Loritz, data analyst at Tech.eu country. We also excluded TransferWise’s huge $280 million round in Q4 2017, • Robin Wauters, founding editor of Tech.eu because our analysis only includes data through Q3 2017. 2 INDEX

Introduction 2 Top rounds in Latvia by year 26-27 Interview with Kadi-Ingrid Lilles 50-51

Index 3 Top investors in Latvia 28 Interview with Ragnaar Sass 52-53 Key takeaways 4 Notable Latvian startups 29-30 Estonian funding analysis 54 Key trends 5 Notable Latvian exits 31 Average and median deal size in 55 Estonia Baltic funding analysis 6 The Lithuanian startup ecosystem 32-34 Top industries in Estonia 56 Funding by quarter and year 7 Interview with Arvydas Bloyze 35-36 Top rounds by year 57-58 Funding in the Baltics and other European 8 Interview with Ilja Laurs 37-38 Top investors in Estonia 59 countries Tech investment in the Baltics and Europe per 9-14 Lithuanian funding analysis 39 Notable Estonian startups 60-62 capita Average and median round size in the Baltics 15 Average and median deal size in Lithuania 40 Notable Estonian exits 63-64

The Latvian startup ecosystem 19 Top industries in Lithuania 41 Conclusions 65

Interview with Jeckaterina Novicka 20 Top rounds in Lithuania by year 42-43 Methodology and disclaimers 66-67 Interview with Olga Barreto Goncalves 22 Top investors in Lithuania 44

Latvian funding analysis 23 Notable startups in Lithuania 45-46

Average and median deal size: Latvia 24 Notable exits in Lithuania 47 Top industries in Latvia 25 The Estonian startup ecosystem 48-49

3 THE BALTICS: KEY TAKEAWAYS, 2014 – Q3 2017

4 KEY TRENDS

Developing strong infrastructures to become startup havens but many keep their back offices and the majority of their staff in their home countries, and pay taxes in the Baltics. The founders are also able to contribute The Baltics – Latvia, Lithuania, and Estonia, are countries that have seen a back to the local ecosystem by sharing their experiences in other markets. lot of success in the past 10 years. Each country’s government has made efforts to invest in ICT infrastructure, fast internet, funding for accelerators, IT education beginning in primary school, and laws to Low overall investment volume, high funding levels per capita encourage entrepreneurship. Each country now has its own Startup Visa programme to attract foreigners to start their business in the Baltics. Though investment volume seems low in the Baltics compared to larger European countries, when taking into account their small populations, they No big VCs mean low funding rounds have much higher investment volume per capita than their counterparts. Estonia ranks above Germany, France, and the Netherlands in per capita The Baltics are so small – with populations ranging from 1.3 to 3 million funding. Latvia ranks above Spain, and Lithuania ranks above Italy and Eastern people – that they can’t support big VCs that would help startups to scale. European countries. That means that most startups with funding from Baltic investors receive early stage or seed funding from accelerators and angel investors, and the The Skype effect majority of rounds in the Baltics are worth €200,000 or less. Larger rounds are usually backed by foreign investors. Estonia dominates the region in terms of total funding and number of deals. The country has raised 3x that of Latvia or Lithuania, with €283 million in the Scale-ups tend to move abroad analysed period. This success can be attributed in part to Estonia’s early adoption of e-Governance initiatives, which, among other things, allow When startups do scale – raising €5 million or more, usually from a foreign Estonians to start a business in just 15 minutes. But the success of Skype was investor – they tend to move their headquarters abroad to cities like key in kickstarting the startup ecosystem, encouraging many to follow its path. London, San Francisco, and New York. However, this isn’t necessarily a bad Many former employees and founders of Skype have gone on to launch other thing. According to Jeckaterina Novicka from the Latvian Startup startups (they even have their own organisation, “Skype Mafia”), and it has had Association, scale-ups change headquarters so they can be near other an effect on the other Baltic states in inspiring entrepreneurship and major companies as well as VCs to make new contacts and partnerships, investments in technology. 5 BALTIC FUNDING ANALYSIS Latvia, Lithuania, and Estonia

2014 – Q3 2017 6 ANALYSIS Funding in the Baltics by quarter and year, 2014 – Q3 2017

• For Europe as a whole, tech funding has been steadily increasing since 2014 – tripling from Q1 2014 to Q3 2017. Yet the Baltic states of Latvia, Lithuania, and Estonia show no such steady growth trends, as quarters tend to fluctuate over the analysed period. In most quarters, between €20 and €50 million has been raised. There is no clear correlation between number of deals and amount raised, suggesting that most rounds are small, with occasional exceptions.

• The average amount raised per quarter across all three Baltic states is €32 million.

• Baltic states had an outstanding year in 2015, raising €189 million. This was due to large rounds for TransferWise (€53 million), Vinted (€25 million) and Adcash (€20 million). Over €100 million was raised in 2014 and 2016, but only €64 million has been raised in so far in 2017. This excludes TransferWise’s $280 million round in Q4 2017. If this round had been included, total funding for 2017 would be brought to over €300 million, making it by far the best year in the analysed period.

• The number of deals per year stayed steady throughout 2014-2016, but dropped off in 2017, with only one quarter left to raise 60 rounds and keep it on par with other years.

7 ANALYSIS Total funding in different European countries, 2014 – Q3 2017

• Investment volume in Baltic nations is clearly lower than the majority of its European counterparts, with Baltic states collecting a total of €465 million over the analysed period, compared to €15 billion for the UK, €10.2 billion for Germany, and €7.4 billion for France.

• Estonia has the highest overall investment volume of the Baltic states, raising €283 million in the analysed period, followed by Latvia with €93 million, and Lithuania with €89 million.

• Yet, is this a fair comparison? Does this necessarily correspond to lower activity? The UK is home to 65 million people, Germany 81 million, and France 67 million. Meanwhile, Estonia is home to a only 1.3 million people, Lithuania 3 million, and Latvia 2 million. • Deal sizes tend to be smaller in the • If we take into account the small Baltics than more populous nations, as populations of Baltic nations, we can see • Correspondingly, the Baltics also had fewer these countries are too small to attract that their investment activity actually deals than their counterparts - Estonia with big VCs, and most deals are early stage or exceeds that of many other European 169, Latvia with 146, and Lithuania with just angel rounds. nations. 8 70. ANALYSIS Tech investment per capita in Europe and the Baltics, 2014 – Q3 2017

• When taking population into account and looking at tech investment on a per capita basis, a much different picture appears. Sweden leads with €480 in funding per capital in the analysed period, followed by the wealthy nation of Switzerland with €345, and the UK with €230, though it leads Europe in total investment volume.

• Estonia ranks very high, neck and neck with the UK, raising €217 per capita, with more activity than wealthier counterparts such as Finland, Germany, the Netherlands, Denmark, and France. If TransferWise’s Q4 round were included, Estonia’s per capita would rise to €399, above Switzerland and the UK.

• Latvia ranks above Spain, Russia, Italy, and Poland, with €50 per capita, making it competitive with Belgium, which has raised €61 per capita, and Austria, with €58 per capita. 0

• Lithuania’s per capita funding remains low compared to other European and Baltic countries with €30 per capita, but is above Italy and other Eastern European countries like Poland, Russia, and the Czech Republic.

9 ANALYSIS Tech investment per capita, 2014 – Q3 2017

Country Total funding, Population Funding per Country Total funding, Population Funding per 2014 – Q3 capita 2014 – Q3 capita 2017 2017

France €7.4 billion 67 million €110 Sweden €4.8 billion 10 million €480 Belgium €700 million 11.4 million €61 Switzerland €2.9 billion 8.4 million €345 Austria €500 million 8.7 million €57

United €15 billion 65 million €230 Latvia €93 million 2 million €50 Kingdom Spain €2.1 billion 46 million €46 Estonia €283 million 1.3 million €217 Lithuania €89 million 3 million €30 Finland €1 billion 5.5 million €182 Italy 500 million 60.5 million €8

Germany €10.2 billion 81.5 million €125 Poland €300 million 38 million €8

Netherlands €2.1 billion 17 million €124 Russia €1.06 billion 144 million €7.4

Denmark €700 million 5.7 million €123 Czech €33 million 10.5 million €3 Republic

10 ANALYSIS How do Baltic states compare to other countries of a similar size or in Eastern Europe?

• Poland raised the most funding overall, with €293 million across 70 deals.

• Estonia had the second highest investment volume, at €283 million, followed by Turkey, Iceland and Luxembourg.

• Latvia and Lithuania follow, each raising around €90 million.

• While there is generally a correlation between funding and number of deals, Latvia diverges drastically, with a higher number of deals compared to funding, indicating smaller rounds. • There are few countries with a smaller • We can see that Eastern European countries population than Baltic nations - Iceland, with higher populations (though perhaps Luxembourg, and Malta. less GDP per capita) raise less capital, including Croatia, Romania, Greece, Hungary, Slovenia, and Bulgaria.

11 ANALYSIS Per capita funding: the Baltics compared to smaller and Eastern European countries

• The Baltics do not necessarily raise more per capita than countries with smaller populations, but rank far above other Eastern European countries for per capita tech investment.

• Iceland, with a mere 334,000 people, has the highest per capita funding for all of Europe, at €538 per person.

• Luxembourg, with a population of 583,000, comes in second with €257 per capita, and Estonia comes in third, with €217 per capita.

• Iceland and Luxembourg both raised comparatively large amounts for such small countries. Both have high GDPs per capita – Luxembourg with €87,000 and Iceland with €41,000 – compared to Baltic countries with less than €25,000 in GDP per capita.

• Malta, with a population of 437,000, ranks below Lithuania, with €18 raised per capita. Slovenia, with 2 million people – the same as Latvia – raised only €9.5 per person compared to Latvia’s €50.

12 ANALYSIS Tech investment per capita in small and Eastern European countries, 2014 – Q3 2017

Country Total funding, Population Funding per Country Total funding, Population Funding per 2014 – Q3 capita 2014 – Q3 capita 2017 2017

Slovenia €19 million 2 million €9.5 Iceland €180 million 334,000 €538 Poland €300 million 38 million €8

Luxembourg €150 million 583,000 €257 Czech Republic €33 million 10.5 million €3

Estonia €283 million 1.3 million €217 Greece €30 million 11 million €2.7

Latvia €93 million 2 million €50 Hungary €27 million 10 million €2.7

Romania €54 million 20 million €2.7 Lithuania €89 million 3 million €30

Turkey €180 million 79.5 million €2.2 Malta €8 million 437,000 €18

Croatia €54 million 4 million €13.5 Bulgaria €1.7 million 7 million €.24

13 ANALYSIS Tech investment per capita in Europe and the Baltics, 2014 – Q3 2017

• This map shows investment volume per capita in each country during the analysed period, 2014 – Q3 2017.

• The countries with the most per capita funding are in red – Iceland and Sweden. Next comes Switzerland in mauve raising €345 per capita, the UK with €230, and Estonia with €217 (which would be €399 if the TransferWise deal from Q4 was included) with other high ranking countries in purple.

• Countries raising €100 or less appear in blue, with some Eastern European countries raising less than €1 per capita (Albania, Bulgaria, Belarus, and Slovakia). Because these countries don’t tend to have strong ecosystems, it is possible that they don’t have websites or organisations systematically reporting deals, and that many go unrecorded.

• We had little or no data for countries missing from the map, including Ukraine, Bosnia, Moldova, and Georgia.

14 ANALYSIS Average and median round sizes in Europe vs. the Baltics

• The average round size in • The average round size in the • Median round size in Europe shows a • Median round size for the Baltics Europe grew substantially in Q2 Baltics varies greatly from steady growth pattern, going from shows no growth pattern, with and Q3 2017, doubling the quarter to quarter, and is €550,000 in Q1 2014 to a high of €1.6 median deal size per quarter about average round size in previous uncorrelated with the median million in Q2 2017, so overall deal 20% of the median deal size for quarters. Average round size for round size, pointing to the size is rising. Europe as a whole. The majority of Europe as a whole across the influence of a few large deals. rounds are worth less than analysed period is €5.2 million. €200,000 in most quarters.

15 ANALYSIS Average and median round size in the Baltics by year

• Estonia’s average deal size hovers around €1 million, while Latvia has a much smaller average deal size at €500,000 in 2014, 2015, and 2016, though it soared to €2.9 million in 2017 due to few rounds and the €21 million deal for Creamfinance.

• Estonia has a higher median round size than other Baltic states, with an average median round size of €314,000.

• Lithuania has an average median round size of €188,000, higher than Latvia. However Lithuania has far fewer deals overall – only 70 in the analysed period, versus 146 for Latvia.

16 A CLOSER LOOK AT COUNTRY- SPECIFIC FUNDING AND EXIT ACTIVITY

17 Latvia

18 The Latvian startup ecosystem

Latvia is the only country in the analysis The country is making progress, however. that shows a year over year growth The government, through its state pattern in investment volume – though it development financing institution, Altum, has still raised less overall than its launched Labs of Latvia, which tracks neighbors. startup news in English and Latvian. Altum provides state funds for However, this can be understood as it has acceleration (€15 million), seed and a smaller population than Lithuania, and growth stage startups (€60 million), and doesn’t have the legacy of Skype or e- for social entrepreneurship (€12 million). Governance in Estonia, which strengthened its ecosystem early on. The Latvian Startup Association has been moving quickly, working with the We’ve also taken Latvia’s most successful government to pass a new startup law startup, BitFury, out of the analysis, that reduces taxes on employees salaries because it moved the majority of its for startups in Latvia, and is being operations to Poland. The startup raised amended to apply to more startups. The €81 million in the analysed period. Had the startup law allows for a flat tax on startup kept their operations in Latvia, the employee salaries, co-financing of highly country’s total funding in the analysed qualified labor, and waives personal and period would be €174 million instead of corporate income tax. €93 million.

19 Interview with

Jekaterina Novicka We also became a member of Startup Nations and the European Startup Chairwoman of the Network and have established a cooperation with international corporations such as Accenture, as we want to increase recognition of Latvia as a tech- Latvian Startup Association oriented country.

Can you provide a brief background of the Latvian startup Over the past few years we have seen more startup events, and host some of the largest conferences in the Baltics, like the Digital Freedom Festival and ecosystem, and how it has changed in recent years? TechChill. We are seeing growing interest from corporations and banks, both Latvian and international, who want to get involved in the ecosystem, by The ecosystem has changed a lot in the past five to six years. Five years ago, coming to events, supporting them, or creating partnerships with some of our you might have heard the word startup in the media once a month, if that, startups. and now you hear the word startup every day. There has certainly been a growth in the number of startups in Latvia, even if they haven’t received big amount of funding yet. Can you tell us about Latvia’s new startup law and how it has affected the ecosystem? The government has begun to acknowledge the importance of startups to the economy, and provide more support. For example, the government We worked with the Latvian government to pass the new startup law in 2016. launched the portal Labs of Latvia three years ago, a website that provides The main advantage it provides to startups is a significant reduction in taxes for news and aggregates all the important information about the Latvian startup employee salaries. Unfortunately, the law has not yet had the impact we would ecosystem. like, because it currently only applies to startups that have received VC funding - not startups backed by accelerators, business angels, or startups with no The Latvian Startup Association was formed in the beginning of 2016 to bring funding. However we are working with the government to make changes to the together different players in the Latvian ecosystem including startup law by the end of this year to make it more inclusive, and these changes should founders and employees, coworking spaces, incubators, accelerators, go into effect in the beginning of 2018. We hope these changes will make the individual and corporate supporters, and investors. The association has been law accessible to many more startups, and attract people from other countries working with the Latvian government to pass the new startup law and to launch their startups in Latvia, or even for more mature startups to relocate Startup Visa. and maintain a back-office here. 20 Interview with Jekaterina Novicka cont’d

Why haven’t we seen a strong trend of increasing deals and grow as well as have access to major VC funds. The clear trend we see investment if the Latvian ecosystem is growing? thatthose scale-ups still keep their back-offices in Latvia where majority of staff is located and therefore there is an effect of contributing back to the The number of startups has grown, but they haven’t necessarily received big society by these people and sharing experience to the local startup funding. There haven’t been many available funds the past couple of years, community. Also, our Ministry of Economics is happy as large amounts of the because funding provided from the EU to invest in Latvian startups, taxes paid by these scaleups is still paid in Latvia. administered by government-backed funds Imprimatur Capital, ZGI Capital and FlyCap, ran out in 2016 and Latvia has only few private VCs. So that has Despite lower investment in Latvia than in other European affected investment in Latvian startups, as these were the most active funds countries, because the country is so small it has more investment in the country. in startups per capita than Spain, Italy, and other Eastern European countries. However, Latvia expects to receive €60 million in EU funding next year, to be distributed by different funds and 3 accelerators that are already in the So, for such a small country, Latvia is doing quite well. What do launch process. New private smart money VCs like Change Ventures or Buran Venture Capital have also recently launched in Latvia. So we expect there to you think accounts for its success? be an influx of funding very soon. That’s a good point, we are a very small country. In Latvia I would say almost all business people speak three languages, Latvian, English and Russian, Some of the more successful startups that are receiving large often even more. Latvia has a great airport that makes it accessible rounds and scaling-up, such as BitFury, have moved their internationally, the internet is the 10th fastest in the world, and startup costs headquarters to other countries. Why do these startups change and the cost of living are low compared to other European countries. their headquarters once they start growing? And because Latvia is such a small market, from day one startups here realize Well, this is something that affects all Baltic states, I think. Scale-ups that they need to be designed to reach an international market. I also like to change headquarters when they grow because they want to be closer to think that our success is accelerated by the supportive and very active startup community we have locally. 21 Interview with Olga Barreto Goncalves, Chief Startup Instigator at Investment and Government support is unprecedently high, with a range of support Development Agency of Latvia programmes are being offered to startups. The Latvian startup market is far from saturation point: the money-to-startup ratio (money = startup financing) is much higher than in other countries (e.g. in Silicon Valley it is extremely low, a lot more startups compete for the same $1 than here in Latvia). How has Latvia's ecosystem changed in recent years? This means that a lot of change needs to happen to the “startup” part of There has been a big shift in mentality: in Soviet times, there was little that ratio – we need to increase the number of startups. This is one of the room for innovation, creativity and entrepreneurship. The economy was dilemmas our government is trying to solve: how do we increase the planned, supply shaped demand, and young people were interested in number of startups, while keeping the quality high? stable well-paid jobs. To address this, the government has launched a series of interventions Once the Soviet Union collapsed and the crazy chaotic 1990’s had passed, a which range from helping would-be entrepreneurs who do not even have painful but necessary transition took place towards embracing innovation. an idea yet but who would like to try something of their own, to solid This has been an interesting journey and we are only at the beginning of it! startups who already have a well defined product and would like to conquer new markets – and everything in between. It is a good ecosystem What do you think is important for others to know about the for launching and testing/piloting your product. We hope that foreigners Latvian ecosystem? will also appreciate that and more and more startup founders will come here. The ecosystem has been developing and growing rapidly. In the ecosystem at the moment everyone is doing something by themselves, but we are If you have any questions for the LIAA, you can send them an email at gradually moving towards more open and frequent communication. It is [email protected]. clear that all sectors – public, private, academia need to work together. 22 ANALYSIS: LATVIA Investment volume and number of deals by quarter and year

• For four-fifths of the quarters in the analysed period, investment volume stayed below €10 million in Latvia, and less than €5 million was raised in over half of the quarters on record. Periodic high volume quarters were due to one or two large deals in those quarters.

• Latvia had its best quarter in Q1 2017, due to a large round for the fintech startup Creamfinance (€21 million).

• Q3 2015 was another high quarter, with a large round for Eco Baltia (€10 million), a waste management and recycling startup serving over 45,000 clients.

• Q3 2016 had the most rounds, 32, despite raising only €8 million. All other quarters had 13 deals or less.

• Despite raising less than Estonia, Latvia is the only Baltic state that shows a consistent upward trend in investment volume year over year since 2014. Already in 2017 Latvia’s investment volume has doubled since 2014, though only 11 deals have been recorded this quarter versus 50 in 2016, pointing to the significant effect of Creamfinance’s round. 23 ANALYSIS: LATVIA Average and median round size by quarter in the Baltics and Latvia, 2014 – Q3 2017

• The average round size in Latvia was below €100 million in 11 out of 15 quarters. Q4 2016 – Q3 2017 have seen an increase in average deal size, there were fewer deals in these quarter than in most – between 3 and 6 – and some large rounds including €7.7 million for Twino in Q4 2016, €21 million for Creamfinance in Q1 2017, and €7 million for Atlas Dynamics in Q3 2017.

• The average round size in Latvia is around €500,000 in most quarters, with a few recent outliers, while for the Baltics, the majority of quarters were above €1 million. • The median round size for the Baltics stayed • While Latvia had medians of below €200,000 in below €300,000 for all quarters, except for a Q1 most quarters, there were outliers in which the 2015, which saw a median of €433,000. median deal size was €375,000, €500,000, or €1.4 million. All things considered, median round size in Latvia and the Baltics as a whole is more or less comparable. 24 ANALYSIS: LATVIA Top industries, 2014 – Q3 2017

• Latvia’s top vertical was fintech, raising €43 million across 18 deals for Twino, Swipe, Mintos, Monea, Funderful and Creamfinance.

• Robotics comes next, raising €12.5 million across 7 deals, for AirBoard, AirDog, and Atlas Dynamics.

• Analytics startups such as Zoomcharts, Snowison, Reach.ly, Infogr.am and Clusterpoint raised a total of €7.5 million across 17 deals in the analysed period.

25 ANALYSIS: LATVIA Top rounds in Latvia, 2017 Top rounds in Latvia

• Latvia’s largest round was for the fintech startup Creamfinance, which raised €21 million Series B from South African Capitec Bank in Q1 2017.

• 2017 also saw a large round for Atlas Dynamics, which creates drones and operating systems that can be used in a variety of industries, such as security, agriculture, inspections, and emergency response.

• The top round for 2016 was for the fintech TWINO, an investment marketplace that provides consumer loans. The company operates in 7 countries and has Top rounds in Latvia, 2016 issued over €280 million in loans since it launched.

• Mintos, another fintech that offers peer-to-peer lending, raised €2 million from Skillion Ventures in Q1 2016.

• AirDog, a producer of drones that are intended to follow their owners and create videos of action sports, raised €3 million from FlyCap and Altum in Q2 2016.

26 ANALYSIS: LATVIA Top rounds in Latvia, 2015 Top rounds in Latvia

• Latvia’s top round for 2015 was for Eco Baltia, a cleantech startup that provides waste management and recycling services. The company raised €10 million in Q3.

• Clusterpoint, a software startup that develops special databases that can be used by business and governments alike, raised €3 million across 2 different rounds in Q1 and Q3 2015. Investors included BaltCap and Imprimatur Capital. The company is now developing network forensics cybersecurity solutions. Top rounds in Latvia, 2014 • The top round for 2014 was for Creamfinance, raising €5.6 million in Q4 from Flint Capital.

• Infogr.am, a platform for easily creating infographics and data visualizations such as maps, charts, and graphs, raised €2 million from Point Nine Capital and Connect Ventures in Q1 2014. In May 2017, the Latvian startup was acquired by the US-based interactive presentation platform Prezi.

27 Top investors, 2014 – Q3 2017

• Latvia’s two top investors were Imprimatur Capital and FlyCap. These investors, along with ZGI Capital, received money from the government and the EU for their investments, and these funds have dried up since 2016, accounting for the small number of deals in 2017, though there is supposed to be an influx of EU funding coming in 2018.

• Imprimatur Capital is a London-based fund that backs science and technology startups. Out of the 69 deals Imprimatur Capital has backed in the analysed period, 46 were in 2014 and 2015, and 64 were between 2014 – 2016. The fund apparently has had little left to invest in 2017.

• FlyCap is a Latvian-based fund which invests a maximum of €1.5 million per startup, with first investments ranging from €50,000 – €200,000. It has invested in RCG Lighthouse, PolyLabs, Mailigen, TapCore, and AirDog. All of FlyCap’s 16 deals in the analysed period were between 2014 – 2016.

28 Notable Latvian startups

Sellfy is an e-commerce marketplace for self-publishers of digital LightSpace Technologies has been developing its volumetric content, allowing them to open their own online shop through the real time 3D display technology since 1996. The company has platform to sell their digital products. E-books, music, video, photos, created technology for 3D image guided surgery to help other digital products can be sold by the content’s creators. Sellers surgeons conduct precise and minimally invasive procedures. It can easily customise their online storefront to be consistent with has also applied its technology to create solutions for 3D their brands. Sellfy provides a range of services to these digital sellers luggage screening, and can be used for many more applications. including product hosting, payments, product delivery, and allows It has recently produced a 3D visualization toolbox for MATLAB. users to easily integrate their products into other sites such as Facebook, YouTube, or their own website. The platform also offers LightSpace Technologies raised €800,000 from Imprimatur marketing features, such as SEO optimisation, discount codes, and Capital and HansaMatrix in Q2 2017, and a small round in 2014 email marketing, and tracks the online shop’s analytics. The startup of €150,000. The company just opened its first office in Silicon takes a mere 5% cut from each purchase made through the platform. Valley in 2017 to market its technology in the US market.

Sellfy was founded in 2011 in Riga by Maris Dagis and Kristaps Alks. The startup raised an undisclosed seed round in 2011 from StartupHighway, followed by another undisclosed round in 2012 by angel investors Sten Tamkivi and Toivo Annus. 29 Notable Latvian startups

BranchTrack has created a platform to train employees through Nordigen is a B2B fintech and data analytics startup. The company digital simulations. The platform is especially tailored to uses machine learning and AI to analyse customer transaction data in customer service and sales, but can be used in any sector to order to more accurately evaluate credit scores. Banks typically reject improve learning and outcomes for employees. Using 30-90% of all loan applications, however Nordigen claims that the BranchTrack, companies can create digital simulations of riskiness of rejected applicants is often overrated. situations in which employees may find themselves, allowing them to role-play with different responses. Companies can add “A lot of resources are spent to acquire information necessary for characters, materials, videos, and voiceovers to the platform to making a credit decision – loan applicant’s salary, liabilities, late customise the training. payments, household expenses, etc. Luckily, all this information is already available to you in client bank transactions, including The startup has also gamified its service, so learners can payment behaviour, payday loans, gambling and 200 more accumulate points by completing simulations, compete with categories,” according to the company. coworkers on mobile devices, and engage in competitive digital roleplays. The company raised a €250,000 seed round in Q1 Nordigen allows banks to reduce the number of rejected loan 2016 from Imprimatur Capital and an angel investor. applications by providing better data, thereby increasing revenue for BranchTrack has already partnered with 1,500 clients, including banks, and providing more loans to those who need them. major companies such as Johnson & Johnson, Mary Kay, and The startup, founded in 2008, works with more than 20 banks and Slack. alternative lenders in 5 countries. 30 Notable Latvian exits

Infogram is an online platform to create data visualizations and Founded in 2015, Setupad, a Latvian adtech and marketing startup, graphics. Users can create charts, infographics, maps, and entire helps companies and publishers better target their advertising, and reports. helps publishers gain incremental revenues ranging from 50% to 70%. Setupad provides a yield management service and allows Infogram was founded in 2012 in Riga by Oldis Leiterts, Raimonds publishers to get back to their job of content creation. Kaze, and Alise Semjonova. It initially raised a €250,000 seed round in 2012, and raised €2 million in Q1 2014 from Point Nine Capital Setupad was acquired by the Swedish Signia Group in May 2017. and Connect Ventures. The Signia Group is a digital media company whose customers include major media conglomerates and niche publishers. It helps In May 2017, Prezi, a San Francisco-based platform that allows users content creators, publishers, and brands to increase their customer to create interactive, cloud-based presentations, acquired Infogram engagement. Signia provides services and tools for workflow for an undisclosed amount. management, business intelligence, reporting, ad delivery and monetization.

31 Lithuania

32 The Lithuanian startup ecosystem

Lithuania has been busy transforming universities and industry for R&D, and itself into a business friendly country in Vilnius was also listed as one of the top Investment volume Number of deals the past decade. The country may not ten “smart cities” by CNN. have seen a steady rise in investment volume over the past three years, but the The country has some of the lowest taxes number of startups has grown from in Europe. Meanwhile, the cost of living is around 80 five years ago to over 300 quite low, with Vilnius ranked among the today. 5 least expensive cities in Europe.

Between 2006 - 2013, Lithuania spent Infrastructure, low taxes, the ease of €411 million to develop R&D starting a business, and low costs are not infrastructure and science valleys, and is the only reasons to startup in Lithuania. Top startups investing another €679 million between The country boasts a highly-skilled 2014 – 2020 to further develop R&D workforce, where nearly 100% of young capacity. professionals speak English, and many speak additional languages. Students The country has been ranked the 16th begin to learn computer science and most business friendly country in the robotics in primary school. What’s more, world for 2018 by the World Bank. labor costs here are 4x less than the According to Lithuania’s Centre of European average. Registers, it only takes three days to start a new business. The country ranks 1st in the CEE for collaboration between

33 The Lithuanian startup ecosystem

Because of the ease of obtaining a The country’s Startup Visa banking license, which only takes 3 programme was also implemented in months in Lithuania, about 12 Israeli 2016. It is designed for startup fintech startups have recently moved founders who want to establish their operations there. And the UK-based business in Lithuania or attract fintech Revolut, a money transfer foreign talent. It allows entrepreneurs app, has just established a presence to quickly gain temporary residency in Lithuania in order to apply for a status based on their business plan, European banking license. bypassing other requirements like capital or employment. The country’s low tax rate and low costs have also attracted several Lithuania’s startup ecosystem hosts Russian startups to relocate in the over 100 tech and startup events country and establish a presence in every year, providing forums for the EU. networking, building partnerships, and exchanging ideas. Lithuania introduced several reforms in 2016 and 2017 to make the country New facilities provide space for more business friendly, including startups to work and for hosting strengthening minority investor events. The Vilnius Tech Park opened protections by increasing corporate in 2016 and includes offices for transparency, and introducing an established startups, a large electronic system for filing and paying coworking space, 31 meeting rooms, value added tax, corporate income 3 event spaces, and a conference tax and social security contributions. room that seats 250 people. 34 Interview with Arvydas Bloze CEO at Startup.lt, and The Lithuanian government is firmly taking the baton from the investment manager at European Investment Fund, if you will, in using EU structural and early stage VC fund local funds in instruments to facilitate entrepreneurship. Such measures include €120 million in public funds for accelerators, co- Practica Capital investment, VC and PE funds that have launched or will be launched in 2017-18, investing from pre-seed to growth stages. These funds How has the Lithuanian startup ecosystem changed in recent years? will in turn attract at least 40% of private money, creating a multiplier effect. I have no doubt that Lithuania will become a point The ecosystem is clearly maturing, there are over 320 active startups in of gravity in the regional tech scene. Lithuania, employing about 1,500 people. It’s truly impressive, considering that five years ago “startup” was just a concept. Today Lithuania is enjoying its first In 2017, the government also took a major interest in startup policy startup success stories, like the Oberlo and TrackDuck exits, startups raising and investment conditions. We had a lot of changes in legislation to Series A,B,C, and heavyweight bootstrapped startups like Bored Panda and facilitate VC and PE infrastructure, with the government working Pixelmator. closely with Lithuanian private and venture capital associations. Currently the government is working on a startup package to further The country is pioneering in fintech regulation in the EU and front running in ICO facilitate the ease of kickstarting from Lithuania. When the Startup fundraising. There is fairly visible success in the Lithuanian diaspora (startups Visa programme was launched, it picked up interest from that have gone abroad): AimBrain, Genus AI, and Medigo to name a few. We Belarussian, Ukrainian, Russian, Turkish and US teams. The have close to one million Lithuanians living abroad, including solid professional Lithuanian Startup association was also formed in 2017, to give networks in London, Stockholm, Berlin, New York and Silicon Valley. voice to startups’ interests in policy making.

35 Interview with Arvydas Bloze cont’d…

What are some of the challenges you see in Overall, we want to stress execution, and turning Lithuania’s startup ecosystem? ideas into business requires true grit from local founders. The talent pool. Lithuania is a small, export-driven economy, dominated by traditional sectors. Firstly, Funding levels haven’t increased in the past and very naturally, it implies a limited two years, why do you think this is? “We have a young understanding on how global market works in new ecosystem and a first economic sectors, where the real inefficiencies are, The bigger numbers are Series A or B rounds, how exactly to resegment the market, etc. facilitated by foreign investors. The number of pre- time founder seed and seed rounds is pretty stable year over generation that yet has Secondly, we have a young ecosystem and a first year and is provided by local capital. In 2016 we time founder generation that yet has to acquire raised €5 million, as there was a gap in A and B to acquire experience. experience. Gladly, we are on a fast-track in doing rounds for several reasons. While in 2017 we have Gladly, we are on a so. €10 million raised and counting, and an exceptional fast-track in doing so.” €100 million if ICOs are taken into account. Thirdly, our talent pool is limited as competition is on a global market. The talent pool for startups is Local VC capital has to bring startups to a level affected by braindrain to Western countries and where broader focus funds can pick them up. This service centres of big corporations (Barclays, means we have to seed, bridge, participate in Booking.com, etc) opening in Lithuania. I believe it Series A, and be patient. Very importantly, there is short-term problem, as on a long-term basis we are a whole bunch of startups in Lithuania that did will see (and actually are already observing) people not receive any funding but have had success – come back to Lithuania with experience or such as Bored Panda, Pixelmator, Omnisend, acquiring it working in a big corporation locally. Tesonet, Nordcurrent, to name a few. Interview with Ilja Laurs, Founder of GetJar and Founder and CEO of “I think the ecosystem is going to grow 10x in terms of people and number of Nextury Ventures startups in the next 10 years.”

You have a lot of experience early on in the Lithuanian startup Why do you expect it to grow so much? ecosystem, having launched GetJar in 2002. What was it like then and what is it like now? Lithuania is a hungry country, because we have so little. There is a lot of incentive to work., and a really good attitude towards work here. People are also strongly educated. In 2002 there was no ecosystem whatsoever. You either had a profitable business or you didn’t exist. In a way, this mentality helped us learn how to be strong. We have a strong community now, and multiple success How so? stories. We now collaborate with fairly well known international VCs, such as Accel Ventures, and have several local VCs and government The government started implementing IT education in schools in the initiatives to support startups. early 2000s, and so everyone knows how to code, install Windows, and use photoshop. I think the ecosystem is going to grow 10x in terms of people and number of startups in the next 10 years. What also helped was a strong a black market for software in Lithuania from 1995 to 2010, so every kid had access to any software they could want for a couple of dollars.

37 Interview with Ilja Laurs, cont’d

If you had complete control, and could do We also must choose our priorities as an ecosystem, anything to improve or change the Lithuanian and focus on specific verticals, especially in fintech, or startup ecosystem, what would you do? some other vertical, and focus on those – that is “We need to make changes critical. so that students can have I have a lot of ideas – and I’m involved with many And in general, we need an institution devoted to initiatives to make changes. access to their own innovation. intellectual property.” Firstly, we need to change our education system. Also, our angel funding ecosystem is not functional. Intellectual property created by students now The UK has a great example for how tax incentives belongs to the university. This needs to be changed. can encourage angel funding. Copying the UK model Millions of hours are spent creating ideas and would be a big kick for the Lithuanian startup programmes, which just turn into research papers, ecosystem. and universities own the patents - the students don’t “Skype had a big effect on have access to them. We need to make changes so Lithuania. Skype’s success has that students can have access to their own Why have the Baltic states been so much intellectual property. more successful in creating startups than really changed people’s other Eastern European countries? mentality, and made people Universities have a lot of resources. They can more easily acquire a lot of EU funding, because they’re I think Skype had a big effect on Lithuania. Skype’s think, ‘I can do this’.” non-profit, to do research – this means bonuses, success has really changed people’s mentality, and more jobs, creating more labs – but it doesn’t actually made people think, “I can do this”. create anything except research papers.

38 ANALYSIS: LITHUANIA Investment volume and number of deals by quarter and year

• The highest record for investment volume was Q4 2015, when €36.8 million was raised across just 7 deals. In this quarter there was a large round for the second-hand fashion marketplace Vinted (€24.5 million), and for the neurodiagnostic medical device company Vittamed (€9.3 million).

• Lithuania’s next best quarter was Q1 2014, when it raised €24.8 million thanks to a another large round for Vinted (€23 million). Both of Vinted’s rounds were backed by NYC-based Insight Venture Partners.

• Less than €2 million was raised in two-thirds of the quarters in the analysed period, indicating that the majority of deals are smaller seed or angel investments.

• 2016 and 2017 have seen significantly less investment volume than 2014 and 2015. The highest quarter being Q3 2017 with € 8.4 million, the majority of which was raised by Trafi.

39 ANALYSIS: LITHUANIA Average and median round sizes, 2014 – Q3 2017

• In Lithuania the average round size was between €100,000 – 400,000 in two-thirds of the quarters, with a few outliers. The average round in Q1 2014 was almost €5 million, influenced heavily by the €23 million round for Vinted. Q2 2017 had an average of more than €5 million per round thanks to another round for Vinted, and two other large rounds for Vittamed and Trafi.

• The average round size in Lithuania is generally much lower than it is for the Baltics as a whole, which has an average of €1 million or more in most quarters.

• The median round size stayed below €360,000 for all quarters except for Q2 2016 and Q3 2017, which only had 1 or 2 deals. Most quarters had a median deal size of €200,000 or less, and is on par with the median quarter for the Baltics as a whole. 40 ANALYSIS: LITHUANIA Top industries, 2014 – Q3 2017

• Fashion was the vertical that raised the most funding, €48 million across just three deals – two for Vinted and one €200,000 round for Robert Kalinkin.

• Transportation is second, with two large rounds for Trafi.

• Medical startups raised €11 million, with a €9 million round for Vittamed.

• Fintech came next with 7 deals, and several rounds over €1 million for TransferGo and WoraPay.

• There were 7 rounds for food totaling €2 million, including FoodOut, Hello Hungry and PlateCulture.

41 ANALYSIS: LITHUANIA Top rounds in Lithuania, 2017 Top rounds in Lithuania • The top deal by far for Lithuania in 2017 was for Trafi, a mobility app that connects different transportation options throughout a city, so users can better navigate their routes. Trafi raised €6 million in Q2 2017 in a Series B round from Octopus Ventures and the European Bank for Reconstruction and Development.

• The top round for 2016 was for TransferGo, which raised €3.1 milion from Vostok Emerging Finance (VEF). Next was Rubedo Sistemos, a robotics company, which raised €500,000.

• The next highest round in Lithuania was for Interactio, which Top rounds in Lithuania, 2016 provides real time audio broadcasting solutions, and raised €330,000. TutoTOONS, which creates mobile games for kids to foster imagination and creativity, raised €200,000.

• PlateCulture, a marketplace for homemade meals, raised €350,000.

• Top rounds were much smaller in Lithuania in 2017 and 2016 than in 2015 and 2014, with only two rounds of more than 1 million. No scale-ups such as Vinted or Integrated Optics raised major rounds of €20 million or more as they did in previous years. 42 ANALYSIS: LITHUANIA Top rounds in Lithuania, 2015 Top rounds in Lithuania

• Lithuania’s top deals in 2015 and 2014 were for Vinted, a second-hand fashion marketplace. This scale-up raised €24.5 million from Accel Partners and Insight Venture Partners in Q4 2015 in a Series C round, and €23 million in Q1 2014 in a Series B round from the same investors.

• Vittamed, a neurodiagnostic medical company that develops ultrasound-based devices, raised €9 million Series A from Xeraya Capital in 2015. Top rounds in Lithuania, 2014 • WoraPay, a fintech that allows retail customers to order and pay through their mobiles, thereby avoiding queues, raised €2 million in 2014.

• Integrated Optics, which develops lasers and sensors for spectroscopy and LiDAR technologies used for the manufacturing of highly integrated optical and electro-optical devices, raised €1.2 million in 2014.

43 ANALYSIS: LITHUANIA

Top investors in Lithuania, 2014 – Q3 2017

• Lithuania’s top investor is Practica Capital, which has backed 23 deals in the country since 2014. The fund invests in early- stage startups, providing €3,000 to €2 million in capital per deal, though most of its investments are worth €200,000 or less. Startups backed by the fund include Trafi, TrackDuck, Interactio, Hello Hungry, Robert Kalinkin, Xylo, and TableAir.

• Lithuania-based Nextury Ventures was started by Ilja Laurs, the founder of one of country’s earliest startups, GetJar. Nextury has backed 4 startups in the analysed period: Baltic Arrow, Ekspertas.lt, Toyze, and Feedpresso. The VC was founded in 2013 and invests in early-stage startups.

• BaltCap is a private equity and venture capital investor in the Baltic states of Estonia, Latvia and Lithuania focusing investment on the growth of SMEs.

• Insight Venture Partners is the only non-European investor that made the top five. Based in New York since 1995, it has • Paris-based Kima Ventures is an active early-stage investor, making 2-3 raised nine funds and invested in over 300 companies. Its investments per week. It has invested in over 400 companies in the investments are typically much larger than those of Baltic past five years. investors. In Lithuania, it has two rounds for Vinted.

44 Notable Lithuanian startups

Vinted is a fashion tech startup launched in 2008 in Vilnius. It’s basically an Trafi claims to be the “world’s most accurate public transport app”. It online thrift shop - a marketplace and app where users can sell, buy, and uses machine learning, crowdsourced data, and self-learning swap secondhand clothing and accessories. It lets people get rid of algorithms to help users plan their journeys and navigate through a clothing they used to love, or that just doesn’t fit anymore, and find good city. The app combines information on all public transportation options homes with people who will love the clothing just as much. The startup is - buses, trains, and trams - and has recently partnered with Uber to one of the most successful in Lithuania, having raised over €50 million. It include ridesharing options. The app also locates your closest raised €20 million Series B in 2014 from Insight Venture Partners, and €23 transportation hub, and provides schedules and arrival times. million Series C from Burda Principal Investments. Trafi raised $7 million from Octopus Investments and the European “Vinted’s business model is perfectly scalable and will work in practically Bank for Reconstruction and Development in 2017, following a $6.5 any country,” said Martin Weiss, Burda Media’s managing director. “We million Series A round in 2015, also backed by Octopus Ventures. think Vinted can benefit from Burda’s focus on digital media and the Unfortunately, the app is only available in a few countries – Brazil, international media market.” Estonia, Latvia, Lithuania, Turkey, Taiwan, and Indonesia.

The company says that 11 million girls and young women use the site According to the company, it already has 250,000 users, and hopefully every day, and spend about 45 minutes shopping and chatting with sellers. that number will grow as they expand to other countries with their Vinted says it has made over $150 million in sales since it launched. new funding rounds. 45 Notable Lithuanian startups

TransferGo is a global money transfer company launched by Bored Panda is one of the most popular Lithuanian startups – Justinas Lasevičius, Daumantas Dvilinskas, Arnas Lukoševičius though it has raised no funding. It’s a webzine full of creative and Edvinas Šeršniovas in 2012. The company provides low- articles, art, and photography. Its submission platform helps cost international money transfers, especially targeting artists and writers turn their stories into viral content. It offers migrant workers sending money to their family, but also for content related to art, photography, design, animals, travel, other types of transactions, such as businesses paying illustrations, DIYs, food art, architecture, parenting, and more. international suppliers. The platform was launched in 2009 by Tom Banišauskas, who was at the time a business management student at Vilnius The company bypasses bank fees using a digital account-to- University . account business model, so money transfers do not have to leave the country as funds are paid in and out locally. It charges According to the startup, it has about 38 million readers, and a a low, fixed fee for transferring money and a 0.6% to 1.5% fee recent report by NewsWhip states that Bored Panda is one of for the currency conversion per transaction. TransferGo now the most popular sites on Facebook, ranking above CNN, the operates in 45 countries, handles over 1 million transactions BBC, and the New York Times. per year and has transferred over 559 million to date. Since it removes the costs of international transfers, The company has an office in Vilnius Technology Park Vilnius Tech Park and employs 36 people, according to Wikipedia.

46 Notable Lithuanian exits

Oberlo is a marketplace that allows In January 2015, Lithuanian app development TrackDuck simplifies collaboration on entrepreneurs to search for products to sell consultancy Lemon Labs was acquired by web development projects, by allowing online. It allows online stores to easily run Wahanda, a UK-based online health and beauty users to easily give both visual and their business through dropshipping. marketplace, as part of their strategy to go content feedback on live websites. mobile. TrackDuck can be integrated with other Oberlo connects merchants with suppliers, project management platforms. To give who send products directly to customers. “We have been working with the Lemon Labs feedback on a website, a user can simply Oberlo merchants have sold over 85 million team for the past six months in building our select an for improvement and leave a products to customers around the world consumer and business apps, and the results comment, which immediately goes to since it launched in September 2015. speak for themselves,” said Lopo Champalimaud, other management tools or web CEO and founder of Wahanda, as reported by developers. In May 2017, the Oberlo was acquired by Scratch Magazine. “Last week we broke through Canadian Shopify for $15 million, shortly after the 150,000 downloads mark, and that number is In May 2017, TrackDuck was acquired by raising an undisclosed seed round. growing 20% month on month.” InVision, a collaborative product design platform based in New York. The terms of Wahanda itself was acquired soon after in June the deal were undisclosed. 2015 by Recruit Co., an advertising, publication, and human resources company based in Tokyo. 47 Estonia

48 The Estonian startup ecosystem

Estonia has been called the “most advanced digital society in the world”. Moreover, the corporate tax in Estonia is 0%, As early as 1997, Estonia established e-Governance, though dividends are taxed at 20%. allowing citizens to access many public services online, saving time and paperwork. In 2000, the Estonia has been ranked #1 by the OECD for Tax country declared access to the internet a basic Competitiveness, #1 from the World Economic human right. In 2001 it created the Digital Identity Forum for Entrepreneurship, #1 for Barclays 2018 Card, which all citizens use to access everything Digital Development Index, and #12 in the World from transportation to their medical records. In Bank’s Global Ease of Doing Business ranking. 2005, the government started allowing citizens to vote online, the first country in the world to do so. This background of a high-tech, digital society with Top startups low tax rates has made Estonia the Silicon Valley of In 2014 Estonia launched e-Residency, letting Eastern Europe. Though funding levels trail behind anyone in the world apply to be an Estonian e- many Western European countries, this is due to resident. The programmeme does not grant the Estonia’s very small population of only 1.3 million right to live and work in Estonia, but allows e- people. When looking at investment volume on a residents to establish a business there from abroad per capita basis, Estonia ranks above the UK, and access certain e-services. However the new Germany, and France. Startup Visa programmeme, implemented in early 2017, allows startup founders and employees to In the next slides, Tech.eu interviews Kadi-Ingrid relocate to Estonia physically. Lilles from Startup Estonia and Ragnar Saas, co- founder of Pipedrive, to share their thoughts on the According to Startup Estonia, it takes only 15 Estonian startup ecosystem. minutes to set up a business in Estonia, and just 3 minutes to do the taxes. 49 Interview with Kadi-Ingrid Lilles, Head of Communications at enhanced the startup ecosystem? funds will in most cases be used to scale Startup Estonia internationally, and the benefits from foreign The Startup Visa programme, begun in January investment have become invaluable. They bring How has the Estonian startup ecosystem 2017, has helped in internationalising the more connections to the startup, and often a changed in recent years? local startup community with over 280 foreign foreign investor will take interest in other Estonian startups applying for the Startup Visa so far. Of startups, too, after investing in one. The I would say that the ecosystem has definitely these, 70 have already gotten their visas or challenges with the talent have now started to be become more mature and this can also be seen temporary residency permits. Additionally, 125 addressed with the Startup Visa programme as with the growing number of startups scaling to non-EU nationals have been able to relocate to an well as several tax exemption plans available from international markets, raising larger rounds and Estonian startup. All of this already has and will the government. employing more people by the year. This is continue to positively impact the local startup illustrated by the data collected by the startup ecosystem. What does the future hold for the Estonian community itself over here. Startup Estonia is also tech startup scene? keeping an eye on these growth numbers and puts What challenges does the Estonian startup the data out every six months. We've also started ecosystem face? Hopefully the next Skype-like success story in to see even more startup founders giving back to terms of the impact and influence on the the ecosystem, such as creating startup hubs I would say the challenges that startup ecosystem, that it would be a source (Lift99 with Pipedrive's co-founder Ragnar Sass ecosystems around the world face are pretty of entrepreneurial talent to the ecosystem thanks as the founder), startup accelerator funds (Mobi similar - challenges with capital and talent. When to which we'll see even more startups springing up Solutions with Fortumo co-founders as founders), it comes to Estonia's case, it's just too small of a in the next couple of years. Then of course educational non-profits for promoting tech (Eesti market to host a larger VC fund and thus Estonian becoming more international with foreign 2.0 with GrabCAD's founder as one of the startups looking for funding beyond Series A have founders and startup employees, and working on initiators) etc. to raise it internationally, but to be fair, we see it facilitating the smooth entry process of foreigners as more of a benefit than a shortcoming as these to the local startup ecosystem. So in short, more How have initiatives like e-Residency startup success stories, more new startups and more international talent. 50 Interview with Kadi-Ingrid Lilles

Do you think all of the digital initiatives in Estonia have Compared to other European countries Estonia ranks highly made a major contribution to the ecosystem? when you look at per capita investment– above Germany, the Netherlands, and France. What do you think has led to Yes, for instance the founder of Jobbatical says that being able to run Estonia’s success in having such a vibrant startup her company online in Estonia saves her 5 working days a year. Over ecosystem? 3000 available e-services are now available through the government. It goes back to the 1990s, by the way the government started to Do you think the small size of Estonia in some ways helps reinvent the country from scratch after leaving the Soviet Union, and its ecosystem by promoting connectivity? unlike other post-Soviet nations, it went straight into building a digital infrastructure, Internet access, etc. Absolutely, we see it as a strong benefit, companies are physically very close, there are roughly 450 startups but basically none are In the past 10 years, the success story of Skype has contributed competitive with each other, so there’s a great deal of mutual greatly to the ecosystem. Having had the experience of building a support between startups. successful startup in such a small time, it inspired others to do the same. What difference did Skype make in kickstarting the Estonian ecosystem? Despite being such a strong ecosystem for a country of its size, we haven’t seen a clear growth pattern in funding The importance has been immeasurable. Many co-founders and levels since 2014. Why is this? previous employees at Skype have gone on to create their own startups, they even have an organisation, Skype Mafia, that lists all of The number of deals is going up, but especially early stage or angel the companies that have been started by Skype founders and stage, and these startups will hopefully raise larger rounds later on. employees, the most successful being Transferwise.

51 Interview with Ragnar Sass, Co-founder of Our aim is to help this movement, to connect experienced founders with talented people, who have a lot of drive to startup new companies. If we Pipedrive and connect experience and young energy - miracles will start to happen.

Garage48, Founder Estonia is different because Estonian founders strive to give back to the of Lift99 community. This is something I haven’t found in other countries. What is your experience in the Estonian ecosystem? How have you seen Estonia’s startup ecosystem change over the years? My first startup began in 2007, it was called United Dogs, which is like Facebook but for dog and cat owners. Later I became of the founders of We are such a small country that the government has been doing things to Pipedrive, which has been named the best B2B startup from Europe by help us. They are looking at who we should give a Startup Visa to and who we TechCrunch. We already have 50,000 customers, and Pipedrive was named should not. Over a thousand companies have been opened because of e- the best employer in Estonia in 2016. In 2010 I started Garage48 Foundation Residency. You can do everything online and it really helps the ecosystem. with 4 other startup entrepreneurs , which organizes hackathons in Eastern Europe and developing countries. We have held more then 80 hackathons As I mentioned, there is also a lot of giving back to the ecosystem. For and our most successful alumni is MSQRD, what was sold to Facebook 3 example, one successful entrepreneur started a nonprofit in Boston that is months later with more then $100 million. now giving 3D printers to Estonian schools.

The main objective of a hackathon is to bring together professionals and I think startups are becoming more popular, you used to only hear about engineers. The idea is for participants to get the sense of what it would feel Skype, but now many more as we’ve seen much more of a variety of ideas, like to start your own company, and to learn about startups. we’ve seen that Taxify can be competitive with Uber. We look at how much tax startups have been paying in Estonia, and it goes up every year 50-60%, Last year we moved this to the next level, I founded Lift99, a startup I’m sure that in the next few years we will see 3 or 4 new unicorns from founders community, coworking and event space. Estonia. 52 Interview with Ragnar Sass, cont’d…

I’ve heard that Estonia is too small to support large VCs, and I don’t think the government can do much, I think it’s entrepreneurs who the majority of Estonian startups are dependent on help each other and build an ecosystem. accelerators or angel funding, or have to look for foreign What government can do is support entrepreneurship. I would investment. Do you think this will change? encourage people to check out foreign accelerators like YCombinator. Pipedrive was successful because we became active in accelerators in If you look at the statistics 90% of funding is from outside of Estonia. We Silicon Valley. have to understand that we need foreign funding, and because we depend on foreign customers it is important for us to be thinking I spoke to one man whose parents were working in IT in the 80s… so in a internationally from the beginning. I have seen more and more foreign way you could say the Soviet Union actually helped Estonia evolve VCs taking interest in Estonia. We have to go pitch to investors in Berlin, digitally, because they had made some technological advancements. London, New York. What has changed totally in the past 10 years is that we see a lot more experienced angels. What do you see for the future of the Estonian startup Looking at the data on funding per quarter in Estonia, there’s ecosystem? no real trend as quarters seem to fluctuate, and there’s no I think because of the Startup Visa and e-residency we will see many correlation between the number of deals and investment more startups coming from foreigners. The amount of people who have volume. Why do you think this is? experience with successful companies is doubling, and they can help new startups. We have been attracting people from neighbouring countries The numbers we have in Estonia depend on a few outliers, so we have to like Russia, Belarus, and Ukraine, where they can have access to the EU. look at the numbers on an annual basis.

How did the government help when you were building Pipedrive? 53 ANALYSIS: ESTONIA

• Estonia showed much higher investment volume per quarter than Latvia or Lithuania. Estonia’s average quarter over the analysed period is €18.8 million.

• The data shows no clear growth pattern in the analysed period. Investment volume and number of deals do not correlate, and fluctuate greatly from quarter to quarter. For example, €80 million was raised in Q2 2015 across just 9 deals, but only €2.3 million was raised in Q2 2017 across 21 deals, the highest number of any quarter in our analysis.

• As in the Baltics as a whole, high volume quarters tend to depend on one or two large deals, while the majority of deals are worth €500,000 or less.

54 • Both the average and median round sizes for Estonia tend to be larger than the Baltics as a whole, suggesting that Estonian startups raise bigger rounds than Latvia and Lithuania.

• Median round sizes for Estonia were of 500,000 or less, with one outlier of 770,000.

• In 8 of the quarters, the median was at or above 350,000, while in 7 of the 15 quarters more than half of the rounds were worth less than 200,000. • However, average round size in • Average and median round size in Estonia is less than half of the Estonia show no growth trend in average round size for Europe as a the analysed period, meaning that whole of 5.2 million. Median round deal size is not rising. size as well is less than half of the median round size for Europe. 55 ANALYSIS: ESTONIA Top industries, 2014 – Q3 2017

• The top vertical in Estonia was by far fintech, with €114 million raised across 23 deals. Estonian fintechs include Bondoroa, Funderbeam, Investly, LeapIn, Paytailor, and TransferWise.

• Marketing startups brought in €20 million across 8 deals, including startups like Adcash, Clipman, SorryasaService, and Promo Republic.

• €16 million was raised for robotics by Starship Technologies.

• Developer tools raised €12 million for ZeroTurnaround and High Mobility.

• Analytics raised €9 million across 24 deals – the most of any vertical. Estonian analytics startups include Nordic Automation Systems, Planet OS, Spectx, and TeamScope.

56 ANALYSIS: ESTONIA Top rounds in Estonia, 2017 Top rounds in Estonia • Starship Technologies raised the highest round in Estonia in 2017, raising €16 million in a seed round led by Daimler. Starship is building a fleet of self-driving delivery robots that can deliver food and other goods locally within 30 minutes and potentially upend the delivery market.

• Jobbatical is platform for job recruitment and job seekers, especially those looking to relocate to new countries. It has recently moved into scale-up territory, raising €3 million in 2016 in two different seed rounds, and another €3.4 million Series A in 2017 from Mistletoe.

• TransferWise has already reached European unicorn status, with Top rounds in Estonia, 2016 a valuation of €1.6 billion. The company just raised $280 million in Series E funding from numerous investors in Q4 2017 – which, unfortunately, is left out of our analysis. However it also led Estonia in 2016, 2015, and 2014 – though their deals in these quarters don’t approach the $280 million raised in its Q4 2017 round.

• Skeleton Technologies creates ultracapacitors and energy- storage systems to deliver high energy, reliable and long-life storage solutions across industries. It raised €17 million across two rounds in 2016, after raising €10 million in 2015. The company works with global engineering companies including the European Space Agencies and car manufacturers. 57 ANALYSIS: ESTONIA

Top rounds in Estonia Top rounds in Estonia, 2015

• TransferWise allows customers to transfer money internationally at lower rates than before. Customers have already moved £1 billion through the platform. It raised €53 million in 2015.

• Adcash raised €20 million Series A from Naxicap Partners. Adcash’s platform provides publishers and advertisers with highly targeted solutions and tools for profitable online campaigns. The company currently has a portfolio of over 70,000 websites.

• Pipedrive raised €10 million in 2015, and another €16 million Top rounds in Estonia, 2014 in 2016. The scale-up makes sales CRM (Customer Relationship Management) software for companies with big ambitions.

• Lingvist is an online language learning platform and app, similar to Duolingo. It uses a smart algorithm to track the mistakes and progress of users, and adapt its lessons to match their level and memory patterns. It raised €7 million in a Series A round in 2015 led by Rakuten.

• ZeroTurnaround is known for its award-winning product JRebel, a Java development productivity tool. It raised €6 million in two rounds in 2014, led by Bain Capital Ventures. 58 ANALYSIS: ESTONIA

• Startup Wise Guys, an accelerator based in Tallinn, has backed the most rounds in Estonia since 2014. Startup Wise Guys typically provides seed investments of €20,000. It also offers mentoring and office space to new startups.

• The next most active Estonian investor is Jaan Tallinn, a programmemer and physicist who co-founded Skype in 2002, and has funded 11 Estonian startups since 2014, including Fleep, Shipitwise, and Plumbr.

• SmartCap is a government held fund of funds supporting the development of the Estonian economy, that manages the early stage venture capital fund Early Fund II. It has €40 million in assets under management. SmartCap has decided on a strategy to make new investments into early stage venture capital funds, or accelerators. It has invested in Jobbatical, Vitalfields, Fits.me, Lingvist, and the accelerator Startup Wise Guys.

59 Notable Estonian startups

Taxify was launched in 2013 in Tallinn, and is one of the Testlio helps companies to improve their products and their fastest growing companies in Europe and Africa with over 3 customers’ experiences by testing products for quality assurance million customers in more than 20 countries. Taxify was before they go to market. It has a growing customer base and founded in Estonia in 2013 as a market-leading platform already has some major clients including Microsoft. Testlio tests connecting riders to private drivers or licensed taxis. iOS, Android, web, and desktop applications.

Taxify has steadily grown its Uber-like service across Europe According to the company’s website, it’s mission is to “Connect and in Africa, fuelled by €2 million in funding and a recent enterprises with the best testers in the world to provide amazing undisclosed financing boost from Didi Chuxing, the Chinese customer experiences.” ride-sharing giant. The company was founded in 2012 by the tester couple Kristel and Mark Kruustük. It raised €6 million Series A led by Vertex Ventures in 2016, after a €900,000 seed round in 2015.

60 Notable Estonian startups

Deekit is a virtual whiteboard, which allows real-time Sprayprinter is a smart spray can technology which collaboration between remote teams or individuals to prints pictures from smartphones to different surfaces. work together on projects. The whiteboard can also be For that, users need a SprayPrinter, the smartphone used in meetings to show and discuss ideas with app and spray cans. The phone tracks movements of stakeholders. Users can add various forms of content, the printer and tells it when to release paint and when including drawing, text, and images. not. The platform provides templates for specific uses such SprayPrinter was founded in 2015 and is based in as marketing or business plans. was the winner of Tartu. The young company did a successful global “Estonia’s Best Early Stage Startup” in 2016. Deekit has crowdfunding campaign on Indiegogo which resulted been enjoying international success ever since. Besides with over 200 pre-orders and massive amount of the winning investment, the company has raised an inquiries from retailers, promoters and strategic additional €468,940 investment, received international partners. recognition and was named the finalist at the Startup Europe Awards.

61 Notable Estonian startups

Leansite is collaborative platform to support the Tebo is a platform for teachers to organize all of their management of construction projects. It allows users to materials, by uploading their files and creating new ones, create master schedules and set milestones, and connect Teachers can also add links and videos to their collection, and them to weekly work plans, where tasks can be assigned to the site provides templates for interactive exercises like different team members. Documents and other files can creating quizzes and assignments, or simply texts for lesson be uploaded to the platform, where everyone has access plans or syllabi. Teachers can automatically assign homework to them along with schedules and work plans. There is also or tests to students through the site. The platform can also a discussion forum for workers, managers and other users automatically evaluate students’ performance on certain to talk about the project. assignments.

Leansite raised an undisclosed seed round from Startup Tebo also allows teachers to create or join groups to share Wise Guys in 2016. You can try the platform for free for 14 their files with students or other teachers. Students are also days, or get the full unlimited version for €499. able to create content on the site, and the platform can be accessed by teachers and students from any digital device.

Founded in 2015, the startup raised an undisclosed seed round in 2016. 62 Notable Estonian exits

The Climate Corporation, US-based subsidiary of Monsanto, Teleport was founded in April 2014 by early Skype acquired VitalFields, a farm management software company employees Sten Tamkivi and Silver Keskküla while based in Tallinn, Estonia, in Q4 2016. Founded in 2011 and Tamkivi. The company’s main product – Teleport Cities – available in seven European countries, VitalFields offers an uses data science and matching algorithms to help easy-to-use tool for farmers to plan, manage and analyze their knowledge workers discover their best places to live and field activities, including simplified tracking and reporting of work. Teleport Cities provides income, cost and quality all crop inputs to help ensure compliance with European of life data from 260 cities around the world, and served Union environmental standards. over a million searches by its 250,000 users in 2016.

The VitalFields team is expected to strengthen The Climate Teleport was acquired by MOVE guides in April 2017. Corporation’s ability to deliver industry-leading digital technologies to farmers around the world.

63 Notable Estonian exits

Lithuanian-founded Fits.me is an ecommerce tool that In August 2017, Intertrust Technologies acquired fashion retailers can integrate into their websites, Planet OS, a geospatial big data service provider allowing customers to try on clothes virtually. founded in 2012 by Estonian entrepreneurs. Planet OS Customers can enter details about their weight, height, has built a multi-party data platform that has broad and body type, and see how an item of clothing will fit applications to the Internet of Things. them. Planet OS allows users to manage and visualize multi- Rakuten, a Tokyo-based company that provides global format, large-scale data from numerous sources, ecommerce solutions, acquired Fits.me in 2015, but enabling operators to see patterns and act on analyses the platform continues to run as a stand alone that they may have previously overlooked. The business. platform can allow device makers and service providers go to market with innovative data-driven products in broad markets from self-driving cars and modern public transportation to food security value chain monitoring and healthcare.

64 CONCLUSIONS Considering population and GDP, the Baltics are tech superstars Scaling-up

When one adds up the numbers, it is clear that the Baltics are punching way Some Baltic startups have really begun to scale in recent years, though those above their weight class in tech innovation. On a per capita basis, Estonia is who do usually depend on Series A and B rounds from foreign investors, as neck and neck with the UK, and this is especially impressive given that GDP local funds usually can only provide seed or angel rounds. The most notable per capita in the UK is more than double that of Estonia and other Baltic states scale-up in the Baltics is TransferWise, which is already an Estonian unicorn. (with GDP per capita below €15,000). On a per capita basis, Estonia also beats Ragnaar Sass, co-founder of another scale-up, Pipedrive, says he expects to Germany and France for tech investment. see another 3 or 4 Estonian unicorns in the next few years. Lithuania’s Vinted is a clear scale-up, having raised two rounds of €20 million or more in the Though we may not see clear upward funding trends in the Baltics (in part due analysed period, and Trafi and TransferGo are also scaling. Laurs predicts that to certain startups moving abroad), it is clear that their ecosystems are the Lithuanian ecosystem will grow 10-fold in terms of the number of startups growing in several ways. Leaders from the respective ecosystems speak of a and people working for startups in the coming years. While the most supportive community, with more events, a growing number of startups, and successful scale-up from Latvia, BitFury, has unfortunately moved its increasing interest from international investors. The ecosystems are gaining operations abroad and therefore is excluded from the analysis, the fintech more and more government support and EU funding to make their countries Creamfinance has raised over €25 million in the analysed period. While many more startup friendly, helping to fund accelerators and other programs, and Baltic scale-ups move their headquarters abroad to have greater access to each launching Startup Visas programmes within the past year or two. An international markets and resources, most maintain the majority of influx of EU funding is in fact expected in the coming year, so the Baltics can operations in their home countries, and give back to their ecosystems. look forward to an uptick in funding. Focus on early-stage investments The Skype Phenomenon As Baltic states still lag behind in terms of wealth compared to their Western Multiple leaders from Baltic ecosystems cited Skype as a major factor in European counterparts, they lack big VCs that can provide large rounds, and encouraging tech entrepreneurship, and not just Estonia. Ilja Laurs from scaling startups have to look abroad for funding. This isn’t necessarily a bad Lithuania also credits Skype for inspiring tech startups in the Baltics. And in thing, however, because as small countries, Baltic states need to have an Estonia, former Skype employees and founders have together launched over international focus to market their products and establish an international 40 startups, and call themselves the “Skype Mafia”. presence. 65 METHODOLOGY & DISCLAIMERS

From November 2013 onwards, Tech.eu has continuously monitored Also, in many cases when deals are reported, the deal size is not disclosed, approximately 120+ sources of news and information across multiple which prevents a completely accurate picture of funding within startup European regions and languages. ecosystems. This goes for the Baltics and many other countries.

All the transactions have been analysed by the Tech.eu team for the purpose We did not provide an analysis of acquisitions or IPOs in the Baltics, because of this report, along with additional transactions that were collected by there were so few (less than ten per country). However, we tried to highlight various individuals and associations in the Baltics. the most important exits in each country.

According to our methodology, we do not include startups whose We include non-European Union member states such as Russia, Turkey, Israel, headquarters have moved abroad, unless the majority of staff and operations Norway, Switzerland and others as comparisons in our analysis, as we consider are still located in the startup’s home country. Therefore we excluded several them an integral part of the European technology industry as such. This is in startups, including major scale-ups like BitFury and YPlan, from the analysis, line with Tech.eu’s overall editorial policy. and so our figures may diverge from numbers given by startup associations in the Baltics. Considering the vastness, fragmentation and breadth of different languages that defines Europe, it is possible that certain transactions were not included in Also, many Baltic deals were not reported by the press but by founders or our analysis. investors, and collected by local startup associations. Many deals may not be reported at all. However in bigger ecosystems such as the UK and France, We believe, however, that this is as comprehensive a report as possible. The there are several deal aggregators, such as UKTN in the UK, and in France date of each transaction is recorded on the date it was initially reported by an through websites including Maddyness and Alloweb. The Nordic Web is a authoritative source, not necessarily the inking of the agreements or listings in good example of an aggregator of deals in the Nordics, including Iceland, question. Hence, transactions closed at the end of 2015 may be included in Denmark, Finland, Sweden, and Norway. data for 2017.

The Baltics could benefit from similar news sites or aggregators in order to Please subscribe to our newsletter to be kept up-to date on future reports, ensure that accurate data is collected and recorded. which will dive into specific verticals, geographies and other groups. 66 METHODOLOGY & DISCLAIMERS

We welcome any feedback you may have on our report and methodology. If you’d like to report inaccuracies, flag possible omissions or additions to the data set, or have any other comment to share or questions to ask, please reach out to [email protected] and we will respond as soon as possible.

Thank you for reading our analysis.

Robin Wauters Mary Loritz (Founding editor, Tech.eu) (Data analyst, Tech.eu)

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