Insights into Estonia’s Startup Ecosystem – an Exclusive Interview with Allan Martinson
Estonia’s fascinating startup landscape has become a powerhouse in Europe. The country’s small population and strong focus on technology have created a unique environment that fosters rapid startup growth. To get deeper insights into the ecosystem, we recently had the pleasure of speaking with Allan Martinson, a seasoned serial tech entrepreneur with a remarkable journey spanning over three decades. Allan has seamlessly navigated between roles as an investor and an executive, finding his true passion in the operational side of business. From founding the largest news agency in the Baltic States to leading IT giants and pioneering autonomous delivery technology with Starship Technologies, Allan has an influence in the tech world that is undeniable. Today, as the President of the Estonian Founders Society, he continues to shape the future of Estonia’s thriving startup ecosystem.
TT: You will be keynoting the upcoming Tech Tour Deeptech & Defence event this October in Tallinn. Would you share with us your perspective on Tech Tour programmes and the value they create?
AM: It is a very interesting format. I think when I started my venture capital career, probably one month after I started my VC firm, I went to a Tech Tour event – and I really got the very first feeling of what being a VC looks like, and there were so many other fellow VCs I could learn from. I created lifelong connections – so it was probably the best time spent back then. What I would say is, there is value added at Tech Tour events which is different from others, having in mind especially Tech Tour Deeptech & Defence is a closed-door, invite-only event. What I like about Tech Tour is the pipeline of companies – somebody has really worked to get the best companies to the stage. And secondly, I like these very high-intensity one or two days. Maybe the feeling can be compared to being at, say, Sundance or any similar film festival and somebody has curated several movies a day – at the end, you feel very tired, but you get so much new information and new emotions in.
TT: As the President of the Estonian Founders Society, you no doubt have in-depth insights into the Estonian startup landscape. Can you share with us more about the Estonian tech scene?
AM: Today, if you look at it as a snapshot, we can see an extremely vibrant tech ecosystem in a very small country of 1.3 million people. We have a database of about 1900 startups, which last year generated revenues in a ballpark of 5 billion euros. The ecosystem has about 15,000 people working within it at the moment. In 2022 it raised 1.3 billion euros in venture capital. So if you compare it to the size of the country, 1.3 million people, Estonia always wins on per capita basis. And it is number one in Europe when it comes to number of startups per capita, it is number one in Europe when it comes to unicorns per capita. It is number one in terms of fundraising per capita. In many aspects, it can be compared to another successful country, Israel, which is also successful on per capita basis and borders with not the friendliest of neighbours.
In Estonia’s startup ecosystem we do not have one single dominating company – which is good. We have 9 or 10 unicorns (depending on how you define it). But there is no one single dominating industry. It can be mobility platforms, power, electronics – there are lots of different companies in very, very different sectors. It is very widely distributed which is much better for the economy. There are clusters within the Estonian startup ecosystem, and probably the most dominating sector is B2B business software. There are lots of successful mid-sized companies operating in that sector. We also have emerging deep tech, we have emerging defence and out of 1,900 companies probably a few hundred are in deep tech, and around 100 are in defence tech & related areas. Indeed, it is a very interesting ecosystem.
Probably we can trace the origins of the ecosystem- it started to become interesting around 2008, after Skype was already exited. Skype was the very first, very visible success story, and it created waves around it. People started to establish new companies, as the money which was earned from the sale of Skype was reinvested. Obviously this was the most visible part- there are many other entrepreneurs, not related to Skype, but overall the Skype story created a role model – it is possible to build a unicorn from a small country. I would say today’s number of companies that have grown out from Skype alumni is around 900 – and close to 200 of them are in Estonia. So it is a massive creation of new companies, and today’s startups are probably fourth generation of companies already – it is like waves in a lake, after you throw a stone. It has been a very significant impact on the whole ecosystem.
TT: Why Estonia – what is your perspective on the market’s startup fundraising and potential?
AM: Sometimes your weakness becomes your strength – and the number one thing that is difficult to emulate. Estonia is extremely small and you can’t really build a significant business only in the home market. That is compared to Poland, France or Germany- entrepreneurs there can build a very viable, successful and big business in their respective home market. In Estonia, we don’t have that luxury. And that means that most of our startup entrepreneurs have global markets in mind from day one.
Most of our founders had already been in some sort of international setup when they started their company – which made it easier to launch to the global markets. And of course it might be a little bit about the culture – Estonians are extremely pragmatic, very non-religious, and have a healthy scepticism. Oftentimes they achieve a lot with very limited resources. And that has been a trademark of many Estonian startups.
For example Bolt – the Estonian answer to Uber – is one of the leading companies in Europe and in Africa when it comes to ride-sharing and food delivery. Bolt is many times a unicorn, yet when you compare fundamentals, it is much more efficient than, let’s say, big American unicorns. An Estonian unicorn is still run like a startup – extremely efficient.
As a result of this high efficiency, what we see in Estonia is that a very low number of startups actually die. Maybe it takes 10 years, but they finally get an exit or a breakthrough. It is extreme persistence, stubbornness, and it probably has to do with the culture.
TT: What are your thoughts on the importance and potential of deep tech and defence in particular? Please share your insights on the startup landscape.
AM: Deep tech has a longer history, and defence tech has been relatively new, it still forms a minor part of the Estonian startup ecosystem, when it comes to value created and people employed. Probably we have about 150 deep tech companies and close to 100 defence tech companies (where some overlap).
Deep tech and defence tech are obviously much more difficult disciplines, compared to B2B software, for example. The development cycle, the sales cycle, the product-market fit cycle can be much longer. But at the same time, what is your weakness can also be your strength – if you achieve a breakthrough and you have very strong product, most likely it is really difficult to compete with you. And once you have established that position, it can be defended for many years to come.
In my experience, the number one thing is not skills and knowledge – because that can be acquired, you can learn very fast. The number one thing is your attitude, your values and your general experience as a tech entrepreneur. Once you have built something in technology, you acquire certain skills and attitudes that help you to build a successful company again and again. Today, if I look at deep tech companies and especially defence tech companies, many of the founders are very successful founders from other industries. And I can see them succeeding already, because they bring the experience of building technology organizations with product skills, R&D skills, talent skills, fundraising skills and so on. So that skillset and that value code are sometimes what’s more important.
That is why I’m very optimistic – we have a really strong foundation. I see how people love to attack new problems, then use the same approach of perseverance. You can’t do anything in deep tech or defence tech in two years – it takes five or ten years to achieve real value growth. And you need to have the perseverance and stubbornness that I earlier described.
TT: What advice would you give to entrepreneurs who are looking to make an impact?
AM: If you want to make an impact, you need to be focusing on that impact – not on making quick bucks and quick returns. It is all about what you want to achieve and what you want to build. When I meet new people, my number one question is, “What are you building?” – if a person has a mission, they are able to answer.
I talk so much about these kind of soft skills, like values and culture, but I believe that’s the foundation of anything you do. Any skill can be acquired, but when it comes to values and your mission in the world – that is something that must be coming from your heart.
And that’s the number one, most definitive sign when it comes to the success of a startup – it is mission-driven. You need to be able to answer the question “What are you building?” and how the world will become better, if you succeed.
TT: What are you building right now?
AM: I am currently part of the executive team of a stealth defence tech company – I am making the world a safer place. There are so many ways to make the world safer through technology. Very rarely can you get a sense of satisfaction like when working in defence tech, because you know you are taking little steps to defend your home and your country.
Over the years, I have been involved in many industries and I’ve been fascinated by different things at different times. I like a rainbow approach [to life] – it stimulates you intellectually and keeps you young.
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To meet Allan Martinson and other fascinating leaders making an impact, join us in Tallinn at the upcoming Tech Tour Deeptech & Defence 2024 this October.
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