Why Tallinn, Estonia is the new Silicon Valley

When most people think of tech innovation they may picture the innumerable glass offices of Silicon Valley

But this is not the only place in the world where tech startups are pushing the boundaries with innovative new products and services used the world over. While it doesn’t share the same spotlight as Silicon Valley, since the early 2000s Estonia has made a name for itself in the tech industry with a varied and rich range of startups from old-school powerhouses like Skype to newer innovations like Pipedrive, Transferwise and Bolt. 

With one of the highest startups per capita rate and an economically active population oriented to entrepreneurship and disruption, it is no wonder that Estonia’s capital – Tallinn – has been dubbed the European Silicon Valley. The first big name in Estonian tech is largely credited as Skype which – in 2005 – sold for $2.6 billion to eBay. 15 years later and more than 1,000 startups have chosen to set up base in Estonia, with the Government’s innovative policies and education initiatives making it more attractive than Silicon Valley’s crowded ecosystem. 

A digital-first innovator 

Estonia is widely considered to be the most advanced digital society in the world. It considers internet access a basic human right and it was one of the first known countries in the world where 5G solutions were demonstrated in real life. Traditional paperwork has also fallen to the wayside and has been replaced by a digital ID card that allows you to provide digital signatures on demand. This goes for everything from paying taxes to signing leases, to online voting.  Though these may sound like minor benefits, by practicing the technology they preach, Estonia is accelerating many of the processes needed to develop tech and creating an environment that encourages technological development. For Silicon Valley and across the US more broadly, the digitisation of traditional paperwork processes remains a hot topic for debate. President Trump and his Republican supporters recently attacked suggestions of introducing a vote-by-mail system, despite calls to expand vote-by-mail options during the coronavirus pandemic.  

An education powerhouse 

Estonia may only have a relatively small population of 1.3 million, but it has become Europe’s newest education powerhouse, climbing its way to the top of the Programme for International Student Assessment list. Not only do Estonian students outperform their global counterparts, their access to quality education does not depend on socio economic status. 

Estonia is leading the charge when it comes to digital innovation and training. Already in 1996, the country launched an initiative called Tiger Leap to heavily invest in development of computer and network infrastructure in Estonia, with a particular emphasis on education. It was followed in 2012 by a programme called ProgeTiger, which saw the integration of technology subjects, including programming and robotics, into the education curriculum for school aged students. When considering that digital literacy levels in the US remain low and schools across the Silicon Valley area chronically underperform, the continued investment by Estonia’s Government in skills-proofing the next-generation of talent could act to further increase the country’s appeal as a startup hub. 

Innovative investment avenues 

Another major area where Estonia is leading the way is in their investment avenues. Estonia has a wide array of infrastructure that makes it the ideal startup hub. There are numerous incubators and accelerators in both the public and private sectors which have created a thriving startup ecosystem. Adding to this, there are also numerous funds that support startups with both financing and the information they need to develop and scale rapidly. For example, Startup Estonia, which is a governmental initiative aimed at ideas worth funding, striving to create the best ecosystem to see startups being born, grow, and turn into success stories. By supporting startups in the early stages of their development, these funds are boosting the success of those that choose to locate there.  

Silicon Valley may be the gold standard for technology hubs but when it comes to startup funding, more money is flowing into European tech than ever, and according to Atomico’s State of European Tech report, it’s increasingly (19%) coming from venture capital’s elite U.S. firms. Closer to home, Crunchbase has reported that Silicon Valley based startups are also securing less funding than they once did.  

Easier access for global entrepreneurs 

All these incentives have made Estonia an attractive spot for investors and the Estonian government has taken advantage of this. Estonia makes a great case for attracting foreign investment. By implementing tax policies that encourage foreign investment, they have received strong funding in their IT sector as well as more niche segments like Fintech. The government also supports international companies opening their branches in Estonia and have created a relatively simple process to do so. In 2014, Estonia was the first country to offer e-Residency, a government-issued digital identity and status that provides access to Estonia’s transparent digital business environment. E-residents can start and manage an EU-based company online. The country’s startup visa program has allowed for 700 companies to move to Estonia (the most within any country in the EU).  

In summary, Silicon Valley is doing a lot of things right but there is also much room for them to learn and there is no better place for them to look than Estonia. The cost of doing business and living in Silicon Valley is among one of the highest in the world – showing no signs of slowing. Not to mention it remains heavily overcrowded and traffic is a nightmare. While many nascent companies are discovering that they can succeed without being in Silicon Valley, it may be a good time to discover Estonia. A truly digital first society that has grown a hotbed of startups over the last 15 years has a lot to teach. Above all, Estonia has proven that by giving people access to technology in all corners of their daily life, it can inspire the next generation of entrepreneurs. Likewise, by opening their eyes to the opportunities around them in terms of foreign investment and potential investment avenues, Estonia is setting the stage for new startups to succeed.  

About the Author

Raj Sabhlok is CEO at Pipedrive. Founded in 2010, Pipedrive is the first CRM platform developed from the salesperson’s point of view. Inspired by proven methods of experienced sales people, Pipedrive engineers developed a platform that helps salespeople and teams focus on learning and repeating their most effective process to close deals.

Featured image: @Grigory_bruev