Baltic startups: set on ‘unicorn’ path, but need to override some constraints

  • 2021-07-01
  • Linas Jegelevicius, The Baltic Times editor-in-chief


Over the past 20 years, Estonia, a country of 1.3 million people, has given birth to an astonishing seven ‘unicorns’.

Seven ‘unicorns’ in Estonia

In late March, Zego, a London-based startup co-founded by Estonian Sten Saar that offers insurance of commercial vehicles, rose to the rank of unicorn when a 150-million-dollar investment round brought its value to 1.1 billion dollars, Startup Estonia, the country’s startup engine and promoter, said.

Meanwhile,, a company offering personal identification solutions in the United States, achieved the status of unicorn in April. Previously Startup Estonia has not counted businesses not registered in Estonia as Estonian unicorns. 

The other Estonian unicorns include Skype communication software; Playtech gambling and trading software; Transferwise, for international money transfers; Bolt, the taxi platform; and Pipedrive, a cloud-based CRM tool. Pipedrive’s valuation was put at about 1.5 billion dollars earlier this year, following a major investment from US venture capital firm Vista Equity Partners.

Lithuania and Latvia no slouches either

The other Baltic states, Lithuania and Latvia, have been no slouches either. Lithuania in particular is enjoying a startup boom, with Vinted, the second-hand fashion marketplace, becoming its first unicorn in 2019. 

Nor is the region resting on its laurels. According to a new report from Startup Wise Guys and EIT Digital, in the first half of 2020 the region saw significantly more funding than the same period of last year. Overall, the number of startups per capita in the Baltic states has increased, especially in Estonia where there are now 39 percent more startups than last year. Latvia and Lithuania also recorded increases of 14.7 and 4.14 percent respectively.

“I would be brave enough to say that coming from the Soviet past the Baltic states are a unique phenomenon, if not globally, than on the European scale for sure,” says Zane Bojare, Head of Marketing & Communications at Latvia’s Startup Wise Guys, one of the leading B2B accelerators in Europe. “There are six startup unicorns coming from a region of only six million inhabitants and the per capita investment rates can compete with Nordic countries that have a very different economic heritage and situation.”

Running out of steam?

The three Baltic states may have been incredibly successful at hatching tech startups – particularly given their size and communist heritage – but some big names in the local investment scene are now warning that they may be running out of steam, given the limited size of the local markets and talent pools.

“Despite some challenges and setbacks, the Baltics, including Lithuania, are indeed a good place for startups. But it is worse now than it was five years ago,” says Ilja Laurs, a Vilnius-based serial entrepreneur and venture capital investor who chairs Nextury Ventures. “I believe that Lithuania is starting to lose ground on many aspects against Estonia, Poland and the hot startup countries beyond the region, like, for example, Singapore.”

Estonia’s splash

Although all three Baltic nations are A-listers on the startup stage, it is Estonia that has made the loudest splash internationally. Like the other Baltic states, it had the benefit of a strong Soviet educational background, especially in sciences, and the links it reforged, first with the Nordic states and then with the rest of the European Union after accession in 2004.  But it was also quicker to make business-focussed reforms and encourage inward investment.

Perhaps most importantly, with Skype, which launched in 2003, Estonia made a spectacular start, helping it to build a tech cluster and develop an investment community.  Skype’s success spurred the emergence of the next wave of entrepreneurs who had had experience of a unicorn, as well as a whole generation of angel investors with a tech entrepreneurship background. 

“Combined with Estonia’s very clear strategy towards e-governance and promoting startup culture, it was a win-win that is hard to catch up with – I mean for Lithuania and Latvia,” says Bojare of Startup Wise Guys, which was itself founded in 2012 in Estonia, and has now invested in more than 185 early stage startups with founders from more than 40 countries.

Bojare points out that Estonia’s commitment to tech startups is shown by the fact that two onetime presidents are deeply involved in the startup ecosystem: former president Toomas Hendrik Ilves and current president Kerste Kaljulaid.

Is Estonia over-hyped?

She admits that Estonia is over-hyped, but this is another factor in its success. “Estonians are also master marketers and in a way that they have created a self-fulfilling prophecy, where sometimes the reality has to catch up to the hype,” Bojare says.

Yet Lithuania is now breathing down Estonia’s neck. Lithuania has had the biggest growth jump in new startups during 2019–2020, whereas Latvia really picked up the pace in November 2020, according to Agne Randyte from Versli Lietuva (Enterprise Lithuania), the Lithuanian business promotion agency.

According to Enterprise Lithuania, the Lithuania startup ecosystem now matches that of Estonia: there are 1,043 startups in Lithuania, compared to 1,121 startups in Estonia and 400+ in Latvia. Randyte lists Tesonet, Kilo Health, Trafi, CGTrader, and Droplet Genomics as names to look out for in the future. 

Tesonet, a startup run by two guys, call itself an incubator, a venture builder, a digital frontier specializing in all things IT.

Kilo.Health is a Lithuanian digital health startup provides a slew of digital products such as personalised exercising schedules, diet planners, customisable meal recipe generators, and much more to help consumers follow a healthy lifestyle.

As a mobility services startup, Trafi integrates cities’ mobility services into one single platform with the goal to stimulate travelers to use more sustainable means of transport. It operates in nearly 50 major cities worldwide now.

Meanwhile, CGTrader, a Lithuanian startup too, boasts of having built the world’s largest database of 3D models and 3D designers to cater for increasing demand from VR/AR, 3D printing, and computer graphics industries.

Lithuania breathing down Estonia’s neck

Another to watch out for Lithunian biotech startup Droplet Genomics aims to commercialise droplet microfluidics technology.

“Estonia is famous for its digitalization, especially in the governmental sector. It is very easy to get an e-residency or open a new company,” says Sarune Smalakyte, head of the Rockit fintech and sustainable innovation centre in Vilnius. “No one doubts that Estonia is famous for its unicorns like Bolt or Pipedrive, but Lithuania has always been spotted with such startups as Vinted or [what do they do] Transfergo,” she says. 

Lithuania is now one of the biggest fintech hubs in the world, with a ranking of #4 (competing with hubs like the USA, Singapore, and UK) and this is our key area,” she says. Smalakyte also picks out up and coming startups Ondato and

Ondato offers know-your-customer (KYC) solutions. Last summer, it closed a pre-seed round and attracted €450 000 from the Startup Wise Guys accelerator fund.

Ondato, founded in 2016, is developing remote KYC and compliance solutions, which help identify both private individuals and legal entities, review data registers and fully authenticate the client in line with the highest security and reliability requirements. is a research service that provides financial data and technical analysis of publicly traded stocks.

She also points out that the other Baltic states share many of the same advantages as Estonia.

“Most investors agree that the business infrastructure, tax regulations, and talent availability are quite similar across the Baltics,” she says.“An innovation-friendly environment, the strong performance of the regulatory system, the talent pool, and ease of doing business are among the strongest innovation dimensions for both Latvia and Lithuania,” says Smalakyte. “What is more, acceleration programmes, collaborations between corporations and startups, the business angels network, and VC funds also play a big role in startup boosting in the whole region.” 

Each country has strong sides

Ivan Ladan, Founding CEO Marine Digital, a startup that originated in Riga, says that both Lithuania and Latvia have made a lot to progress in building a better environment for young companies to start a business.

Each of the countries has got strong sides, he says. “It might be so that Estonia has started these activities a bit earlier and established cooperation within the local ecosystem between the government, corporate business, and IT/industry entrepreneurs, while in Lithuania and Latvia these processes are still on the way to a great balance,” he says.

Bojare of Startup Wise Guys says Latvia and Lithuania have their own advantages too.

“If we look at Latvia specifically, its stronghold is what I like to call ‘heavy industries’ such as drones, hardware, robotics, biotech, medtech, deeptech. Also, its recently passed employee stock option regulation puts it in a favourable position for founders looking for a good base in Europe,” Bojare says.

She also points out that both Latvia and Lithuania reacted very fast in tackling the political crisis in Belarus, which also shows in the incoming startup visa numbers coming from there. 

Size of economies matters among other things

But the Baltic states are also coming face to face with severe constraints because of the size of their economies and their limited talent pools, which have become even smaller as the local superstars such as Wise (ex-Transferwise), Bolt, Vinted, Printify and others grow. 

“The local market is small and there should be no illusion about a breakeven on the local markets,” says Ladan of Marine Digital. “Also, as not all industries are represented in the Baltics, one has to do the research in-depth before starting a project and locating it in a particular place, as an example Lithuania has the edge for fintech projects, Latvia has the edge for engineering projects, Estonia might be good for some other industries/niches.”

Rigidness of traditional banks

Finance can also be a constraint. Laurs of Nextury Ventures says a big challenge now for Lithuanian startups is the rigidness of the local traditional banks. “They have become super-cautious [in issuing loans] and taking super extreme measures, which is a kill for any startup,” Laurs says.

This is even more damaging given the weakness of the local stock markets, meaning that startups often have to rely on local angels until they can reach a size that enables them to do an international IPO or attract a global fund.

Global thinking is a must

But the small size of the Baltic states means that tech startups necessarily have to think globally if they are to succeed. Mindaugas Ubartas, head of Lithuania’s association of communication industries, Infobalt, says that to develop more unicorns, Lithuanian startups need to follow in the footsteps of Estonia and think globally, not regionally.

Marine Digital’s Ladan says that not all of the local funds and angels yet have the international and global mindset, and some of them are willing to invest only in local operations.

“For me it‘s understandable, but this is definitely not related to business logic,” he says.