A Funderbeam exclusive interview with Thomas Padovani. He is an entrepreneur and investor. Thomas co-founded the Webinfluence Group in 2007, then went on to found the globally successful online media advertising platform Adcash. Stepping back from the Adcash CEO position in 2018, Thomas now focuses on building and investing in new aspiring startups with growth opportunities. Now he is a lead investor for Punch Drinks funding campaign.

As an early stage investor, what questions do you always ask when looking at a business and its management team?

The thing is that I have been through the same stage as they would experience during their growth, therefore it’s quite natural to ask yourself what I would do if I would be in their shoes at the moment. Seeing similarities, affinities, or familiar behavior is something that would make you confident to make the investment.

BUT! That’s not enough, bringing things too close to your heart will lead to emotions. Emotions are very important; but decisions resulting strictly from our emotions can lead to mistakes. This is what Elon Musk calls “wishful thinking”.

More rationally, going through these stages also brought me a lot of experience that I’m using to understand, in a better way, the challenges that the team will face.

Sectors are different; but challenges can be categories in the same way. The industry, the people, the regulation, the trends, and the economic situation. Financials and business plans are important in the rational part of the decision making.

What is the biggest lesson you have learned in investing in early-stage companies?

Two words, “Human factor”. Focusing only on the potentials that the market is giving or the financial data at a certain point give a shortened and misleading overview. Bottom line the humans behind the idea, concept, businesses are the ones that will make the mistakes, and there, nothing is taken for granted. Pick the right humans with the right ideas.

Are you sector agnostic when it comes to making investments as long as they meet your criteria?

We have usually a preference for SaaS and Softwares, but we are looking as well in a wider range of opportunities.

What is the tipping point to you when you decide in favour of investing?

The momentum is basically between Company potential/growth versus current valuation.

Can you tell us about some of your favourite companies in your portfolio?

BOLT.

What areas do you think will present the most opportunity for early-stage investors over the next 18–24 months?

Softwares, health, entertainment, finance.

Where are you seeing the most exciting early stage opportunities? What are the ‘ones to watch’/ most currently underrated?

Estonia provides quite a lot of opportunities for investors in different sectors.

What are your fears as an investor?

Human Factor as described earlier

A book to read or a blog or podcast to follow…

Ray Dalio — PRINCIPLES

How did you discover Funderbeam?

Through media coverage and successful fundraising of the start-up that was looking at.

What is Funderbeam to you?

A good tool for a start-up to get known and raise funds.

Questions from Kaidi Ruusalepp, Funderbeam CEO and Founder:

1) If you could be a founder/CEO of any company in the world, what would this be and why?

IKEA, because the model is close to perfection.

2) Would you like to win the Nobel prize, Oscar or Olympic gold medal? Why?

None of the listed above but 1st position at 24h of Le Mans would be a great achievement.

Why? Because after all we love winning and all entrepreneurs must be competitors in their soul.

3) If there’s 1 question in the world where the universe provides you the correct answer, then what would this question be?

What happens after we die.

Question from previous respondent Madis Müür:

1) What’s your superpower or secret sauce, how do you help your companies?

As an investor, we must first help people not investing in companies that we believe will not work. It saves time for every one.

Otherwise, when we invest in a company we share our contacts, experience, and whatever is necessary but we don’t interfere. We provide the fuel when necessary the engine is the team.

Article source and credits by Funderbeam. Visit the original article here

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Fan and ticketing data analytics and marketing optimization automation start-up FanSifter raised $300,000 in the pre-seed investment round and is the first Estonian start-up to join the leading music tech startups accelerator program Techstars Music Los Angeles.

„FanSifter is a machine learning-powered fan data analytics platform which helps music, entertainment, and sports events to sell more tickets thanks to powerful segmentation, profiling and enrichment tools,“ said FanSifter founder and CEO Aivar Laan, who has been active in the live events industry for the past 25 years. “The last 5 years of building value at the intersection of data-driven technologies and live events, gave birth to FanSifter based on our clients’ feedback and market insights,” described Laan.

He added that FanSifter does not only exists to tackle a large problem and inefficiency in the live events industry, but also helps users to save valuable marketing hours as the platform allows hyper-personalized communication of the right offer to the right audience. “This means events can now launch smarter campaigns by email, text, Facebook or Instagram and deliver more personalized experiences to fans. Everything is end-to-end trackable down to a granular fan profiles’ performance,” explained Laan emphasising that FanSifter employs AI across the platform.

FanSifter is also the first Estonian startup to join the 2020 class of the mentorship-driven accelerator program Techstars Music Los Angeles, the world’s leading music tech program run by Techstars in partnership with member companies Warner Music Group, SONY, Concord, Peloton, AVEX, Bill Silva Entertainment, RecoChoku, Royalty Exchange, Q Prime Management and Entertainment One.

The FanSifter’s team moved into the Techstars Music office in Los Angeles, where over the course of 13 weeks they are mentored by a 300 person-strong list of global music and tech executives, venture investors and global-scale artists. “Techstars Music Los Angeles is not a tech acceleration program like others. It is the singular best, bar none, for music and live events business, which has always been part of my DNA,” said Laan, adding that this opportunity is a fast track to the North American music and live events industry. Laan also noted that it is not an everyday thing to get personal time and advice from senior VPs and CxOs of the likes of Live Nation, AEG, Ticketmaster, Warner Music, Sony Music, Avex, , Disney, TikTok, or founders of Soundcloud, Splice, top tier US VC investors, or world-class artists in residence, like Jillionaire, D∆WN or Brad Delson from Linkin Park. “It is very humbling but also incredibly empowering,” noted Laan.

One of the lead investors in the pre-seed fundraising round Thomas Padovani, who is actively investing into different ventures through his investment company Bellone Invest, predicts huge success for FanSifter. “When choosing our next investments with Bellone Invest, we always strive for entrepreneurs that are solving real problems, this is what the market is always buying. FanSifter is offering a solution for which there is a gap in the market and that is beneficial for many verticals in events. Also, ticketing companies could benefit from their platform by learning how their customers act and how to target them better,” stated Padovani.

Furthermore, Thomas Padovani is committed to develop and mentor FanSifter’s technology team on proprietary technologies developed in-house by FanSifter. “With Adcash we focus on faster and more efficient digital tracking. Our senior technology team can most certainly contribute to making FanSifter’s tracking even more precise and effective,” noted Thomas Padovani.

Lead investors in the round were Techstars, Bellone Invest and Webinfluence Group, joined by Change Ventures Fund I and Siena Capital. FanSifter is targeting to raise up to $500,000 in this investment round.

Techstars is the worldwide network that helps entrepreneurs succeed. Techstars founders connect with other entrepreneurs, experts, mentors, alumni, investors, community leaders, and corporations to grow their companies. Techstars accelerator portfolio includes more than 1,900 companies with a market cap of more than $25 Billion.

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Baltic startups have created over €5 billion in value since 2013.
 2018 was a record year for VC Investments in the Baltic states. The total amount of VC raised by companies in the Baltic States hit €534 million in 2018.

Across the Baltics, over €1.5 billion has been invested since 2013, as a result of several large VC rounds such as Bolt, Citybee, Monese, Vinted, Pipedrive, Starship. And its showing a substantial growth since 2013.

Venture Capital investments average growth from 2013 has been rising +88% in Estonia, while Lithuania’s growth rate is booming with +135%. Latvia is still in very moderate stages regarding startup growth and VC investments, compared to Estonia and Lithuania.
By invested venture capital, Estonia is still ranking #1, with €1,173B, while Lithuania is ranking #4 with €375M, according to the latest report.

One-third of the total unicorns in Central & Eastern Europe are created in the Baltics.

The Baltic region has created one third of total unicorns in Central & Eastern Europe, and 3% of unicorns in total Europe, worth a combined €12 billion. Estonia is leading the way in Baltics, with 4 unicorns: Bolt, TransfereWise, Playtech and Skype. While Lithuania has just crowned it’s first Unicorn Vinted, who raised €128M in a funding round that valued it at more than 1 billion euros, making it Lithuania’s first tech unicorn.

“For investors, it is surely interesting to keep a look-out to the Baltic and Northern European countries. Estonia has created a strong and proven track record of successful startups and is still strongly moving forward. But it is worth mentioning to keep a strong eye on the other booming countries, such as Lithuania and Latvia, who are showing a growing number of rising stars”, says Thomas Padovani from Bellon Invest.

The future looks promising


The investments into Estonian startups are still strongly on the rise and the proven track record of creating internationally successful businesses, creates trust for future growth. “Of course, as the first digital nation on the planet, this also creates extra buzz and attracts more interest to look into Estonia,” says Padovani.

It is already clearly seen that the interest from foreign Investors is increasing in Lithuanian tech startups, especially from Western Europe and the USA. Like Estonia, as the leading country of digital technology and startup business scene, Lithuania is also strongly rising up with their business favourable & regulation friendly environment.

For more details, take a look at the report by Dealroom.co for more insights on the Baltic countries startup ecosystem.

Thomas Padovani, after stepping down from the CEO position of Adcash, is now strongly focusing on investing in to startups all over the world through his investment company Bellone Invest, keeping a strong eye and interest on the booming Baltic startup scene. Thomas Padovani, together with Webinfluence Group, was one of the first investors to the Estonian Unicorn Bolt.

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EU-Startups.com ranked Estonia among three of the best European countries to set up a startup. Estonia is an attractive destination for startups because of its powerful educational system, highly digitized procedures, ease to obtain work and entrepreneurial visa.

According to EU-Startups.com, Estonia is different from any other region in the world. The online publication points out that Estonian government has long advocated entrepreneur-friendly tax policies and has created aggressive incentives to attract foreign investors, especially in IT and some other niche segments like FinTech.

In terms of the entrepreneurial employee activity and competitiveness Estonia ranks the first in Europe and in terms of number of startups per capita – third. There are 550 startups in Estonia ready to conquer the world, following the four Estonian unicorns: Skype, Playtech, TransferWise and Bolt.

EU-Startups.com also points out that Estonia has a very flexible corporate tax framework that attracts many foreign companies to start their activities here.

The country has no corporate income tax on retained and reinvested profits. This means that the tax system is particularly suitable for companies that are planning rapid international growth – you can spend the funds you would otherwise pay as taxes to the government, on innovating.

Estonia’s e-Residency program is world-famous as it was the first of its kind anywhere on Earth and as the country’s e-residents can manage their Estonian company remotely.

Forbes reported already in June 2019, that upcoming startup hubs such as Tallinn are attracting heavy investment, with still plenty of room to grow.

World-class human capital, unique digital capabilities, a competitive business environment with advantageous tax system make Estonia a smart, agile location for businesses with global ambitions.

Source

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Tax Competitiveness Index 2019: Estonia has the world’s best tax system – no corporate income tax, no capital tax, no property transfer taxes

According to Tax foundation, Estonia’s top score in 2019 is driven mainly by four positive features of its tax code:

• It has a 20 per cent tax rate on corporate income (reduced to 14 per cent in case of regular dividends) that is only applied to distributed profits. This means that Estonia’s corporate income tax system allows companies to reinvest their profits tax-free.
• It has a flat 20 percent tax on individual income. The tax us not applied in case of distributed dividends that have already been taxed with a corporate income tax (see above).
• Its property tax applies only to the value of land, rather than to the value of real property or capital.
• It has a territorial tax system that exempts 100 percent of foreign profits earned by domestic corporations from domestic taxation, with few restrictions

A simple tax system means less hassle

A clear advantage of Estonia’s tax system is that companies spend less time on tax compliance than they would in any other country in the OECD. For example, in an average OECD country, 42 hours per year are used by companies to comply with just corporate income taxes. In Estonia, the figure is five hours. Other taxes, such as the value added tax (VAT) also have a low compliance burden.

Estonia is also among the few countries in the OECD that do not have any property transfer taxes, meaning taxes on the transfer of real property (real estate, land improvements, machinery) from one person or firm to another.

Low marginal tax rates create a competitive tax code

According to Tax Foundation, the structure of a country’s tax code is an important determinant of its economic performance. A well-structured tax code is easy for taxpayers to comply with and can promote economic development while raising sufficient revenue for a government’s priorities. A competitive tax code is one that keeps marginal tax rates low.

In today’s globalized world, businesses can choose to invest in any number of countries throughout the world to find the highest rate of return. This means that businesses will look for countries with lower tax rates on investment to maximize their after-tax rate of return.

If a country’s tax rate is too high, it will drive investment elsewhere, leading to slower economic growth. In addition, high marginal tax rates can lead to tax avoidance. According to research from the OECD, corporate taxes are most harmful for economic growth.

Source

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Estonia ranks 1st out of 68 countries when it comes to the best and worst countries to live a connected life. This is according to the first Digital Life Abroad Report from the biggest online expatriate network, InterNations, which broke down the best and worst countries to live a digital life abroad.

The results, based on the group’s annual expat insider survey, reveal Estonia, Finland, Norway, Denmark and New Zealand are tops when it comes to offering a digital environment. Expats in these countries are very satisfied with their unrestricted access to online services and the possibility to pay without cash almost anywhere.

To identify the best and worst countries for digital life, survey respondents were asked to rate their satisfaction with the following factors on a scale of one to seven:

• the unrestricted access to online services such as social media
• the availability of government/administrative services online
• the ease of getting a local mobile phone number
• the ease of paying without cash
• the ease of getting access to high-speed internet at home.

At the other end of the scale, Myanmar, China, Egypt, India and the Philippines are rated the worst countries for digital life. Expats in these countries struggle with a lack of government services online, difficult access to high-speed Internet at home, or even restrictions in their use of online services.

Estonia comes in 1st place in unrestricted access to online services

According to the report, Estonia comes in 1st place out of 68 countries in terms of digital life. The country is rated best in the world for both unrestricted access to online services (e.g. social media) and the availability of administrative or government services online.

In fact, 96% of expats judge the access to online services favorably (vs. 80% globally), with 86% saying it could not be any better (vs. 58% globally).

94% are impressed with the availability of government services online (vs. 55% globally)

In Estonia, 94% are impressed with the availability of administrative or government services online (vs. 55% globally), with 70% giving it the best possible rating (vs. 23% globally). “Expats looking for a country without bureaucratic hurdles need look no further than Estonia”, the report says. This definitely mirrors Estonia´s motto as the world’s most digitally advanced society.

It is easy to pay without cash in the Scandinavian countries

Expats in Scandinavian countries are happy with the ease of paying without cash. As shown above, Estonia ranked 5th after Finland, Denmark, Sweden and Norway. It is true, paying without cash is no issue at all. Shops, cinemas, supermarkets, theatres, concert halls and even busses, trams and trains have card payment options. International and local bank cards are both accepted.

These excellent results help the country compensate its more modest rankings in terms of available leisure options (51st) and travel opportunities (65th). All in all, Estonia comes in a good 21st place out of 68 countries for its general quality of life. Estonia was featured in the Expat Insider survey for the first time.

Estonia also ranked high for family life

For those that are thinking about settling in Estonia with their family, they will be glad to know that Estonia was ranked 11th best country for family life in the annual Expat Insider survey. Quality and cost of education, and family well-being were among the most appreciated qualities of Estonia.

Settling in Estonia has recently become even smoother thanks to the new expat service centre. International House of Estonia provides free personal consultations for foreigners, their families and local employers about settling in, documentation, healthcare, language programs etc. It is located in the capital, Tallinn. Book your appointment online.

The country is attracting more internationals with its clean, safe and tech-savvy environment

According to the recent statistics, the number of international talent in Estonia has more than doubled in the past 5 years. With respect to the European Union, the TOP 5 countries are Finland, Latvia, Germany, Italy and France. With regard to beyond the European Union, the TOP 5 countries are Ukraine, Russia, Belarus, India and Nigeria. People also relocate from the US, the UK, Sweden and other places.

The most popular job offers are in the tech sector.

Expats mostly choose Estonia because of possibility of achieving career goals faster – the country is considered to be Northern Europe’s knowledge hub in tech. Estonia is attracting more internationals as it offers a clean, safe and tech-savvy environment to accelerate the most demanding professional careers. Interested to know more? Have a look at the reasons why international specialists like to live in Estonia.

Estonia has lately received high rankings in press freedom.  A recent study showed that compared to other European countries, Estonian children experience fewer internet threats. Moreover, Estonia is the first country in the world to offer e-Residency – a solution that has attracted more than 55k+ e-residents.

Source

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By Charles Orton-Jones

Some facts about Estonia. At the last election, 44 per cent of ballots were cast online. Voters are able to vote on their PC or mobile before polling date, and change their choice as many times as they like. One woman changed her vote 648 times. The police arrived to ask why. She asked whether they had a problem with it; they said no and left her in peace.

All government services are online. And completely connected. Go to a doctor and they can pull up your digital records immediately. No farcical paper Lloyd George envelopes, as with the NHS. Your prescription is entered into an online e-prescription system, accessible to all pharmacies. Just go to the nearest one, present an ID card and collect.

The data in every government department is integrated on a single platform. An ID card, with a 2048-bit encryption chip in it and a four-digit pin, grants access to all services. Voting, paying tax, signing documents, buying tickets for public transport – more than 600 government services can be accessed via the same log-in. What is more remarkable: more than 2,000 private-sector companies are permitted to use the same system. Your grandma can check her bank account in the same way that she votes.

And the most remarkable fact? The entire cost of government IT – including software, hardware and salaries – is less than €100m. By comparison, a single British project, Universal Credit, costs £12.8bn – sorry, £15.8bn as of the latest revision.

Which raises one enormous question: how do they do it?

It’s not down to natural resources. Estonia, with a population of just 1.3 million, is an unlikely candidate for a tech superpower. For 50 years the nation languished under the dark imperialism of Soviet occupation.

And the digital transformation hasn’t happened overnight. I recall my first visit to Estonia on a snowy winter night in 2001. I walked into Tallinn’s old town for the first time and marvelled. It looked like a medieval fairy tale. I was despatched to research an economic report on the country, a fresh-faced young journalist. Yet, even in those early days, the ambition was tangible.

A tech entrepreneur told me back then that he wanted to change the name of the nation to Estonia.com. He wasn’t kidding. Others agreed. The head of the main telco showed me how to pay for parking with a text message. Remember: this was 2001. The foreign secretary told me Estonia had ambitions to become a Nordic nation like Finland and Sweden.

It was bold talk, but was it realistic?

Today, Estonia is the most digitally advanced nation on Earth. The UK, US and EU regularly send emissaries to learn from this tiny country.

For the spring 2019 edition CMI magazine Professional Manager, we spoke to two pioneers to find out the secrets of this e-miracle.

A TECHNICALLY SKILLED NATION

The first, Taavi Kotka , former CIO of Estonia, is a blond-haired extrovert renowned globally as the most eloquent spokesman on what his nation has achieved.

I ask Kotka about the budget and how it’s so incredibly low. “If you don’t use Accenture or McKinsey, you’d be amazed at what you can get done,” he laughs. “We don’t have enough money, so they don’t bother us!” Instead, services were built on a budget, improving slowly. “Estonia used ‘agile’ before ‘agile’ was even invented,” says Kotka. “My own student bachelor’s work was describing prototyping in the year 2000: launch with a barely functional model and then have many iterations a month. Compare this to the waterfall method in the UK. Your problem is you want to solve everything at once.”

A golden rule is that no software used by the Estonian government should be more than 13 years old – even if it works fine. This avoids costly obsolescence. “Most of the money in the UK goes towards keeping up old stuff,” says Kotka. “You never ask if it is optimal. It’s like comparing Uber with a traditional taxi company. Uber is automated and efficient. The other needs secretaries to take calls.”

Estonia wants to be known as a technically skilled nation. It has no choice – there’s no oil here and tourism is limited to the capital. So the country has invested in technology skills. The Estonian IT Academy was established in 2012 in order to improve the quality of ICT training. A revised Aliens Act, approved in the summer of 2013, makes it easier to employ highly qualified foreign ICT specialists in Estonia. The nation is now teeming with impressive startups, such as advertising platform Adcash and jobs website Jobbatical. TransferWise, the currency exchange service valued at more than £1bn, was founded by two Estonians. Skype was built here.

With such a strong IT ecosystem, the government can outsource coding and maintenance of its tech. “Ninety per cent is done by the private sector,” says Kotka.

Underpinning it all is the architecture of the national IT system. The 600 or so departments offering services retain control of their particular user data. So libraries keep library data. Doctors keep medical records. Yes, data can be transferred between the two seamlessly, but it’s what Kotka calls “a distributed architecture. There is no single point of failure. It is, in IT jargon, peer to peer. There is no central hub”. The platform is called X-Road and is so efficient that Finland, Estonia’s linguistic and cultural sister nation, has adopted it.

The code is open source, so anyone can examine or deploy it. The two nations’ systems are interoperable, and they now exchange information on health, tax and customs, traffic and demographics.

Another ingredient: keep politicians out of it. They panic at the first sight of problems, says Kotka. They interfere. And they keep changing. No decent IT project can be run on this basis. “Even Google doesn’t get things right first time. They need to A/B test and do rollbacks to make a product work properly. That is normal product development. Politicians never understood this,” says a clearly chastened Kotka. “One thing I learned: there is no ownership in politics.”

BIG BROTHER HAS PRIVACY PROTOCOLS

There is an obvious objection to all this. If all data is online, and accessible to almost anyone, isn’t there a security risk? And what about the Orwellian state? The UK avoids ID cards for fear of an overbearing government. Estonia suffered under the ‘Sauron eye’ of the USSR. How can its people tolerate the risk of being spied on?

Toomas Hendrik Ilves, Estonia’s president from 2006 to 2016, understands Estonia’s national psyche better than most. He’s also a genuine expert on technology and cybercrime, having been chairman of the EU eHealth Task Force and chairman of the European Cloud Partnership Steering Board.

Talking to Professional Manager from his residence in Stanford, California, where he is a distinguished visiting fellow at the university, Ilves says Estonians don’t worry about ID cards in the same way as Brits. “There is a clear cognitive break between the government and an operating system. Estonians dislike whoever is in power as much as anyone. A priori, if you are in government you are an idiot, stupid, corrupt – that is no different. But it’s similar to the way you see the police. They are not the government.”

STRICT ON SECURITY

The X-Road system is designed to allay privacy concerns by being totally transparent. All interactions are logged, Ilves explains. Citizens can see immediately who has looked at their data. “We had one famous case where a systems administrator with the police abused her authority. She checked up on her boyfriend. The police are not allowed to do this. She was fired and convicted of a felony.”

So the system is open, but infractions of the rules are severely punished. “Our health records are stored online, and I can grant legal access to medical professionals. If anyone else tries to, it sets off bells and whistles.”

If anything, the system is more trustworthy than Google’s or Apple’s. We entrust our emails, our search history and even our geographic location via our phone to a tech company located abroad. Yet we have little knowledge of how our data is accessed or monetised. In Estonia, all activity is available online for citizens to review.

And cyberattacks? Estonians have good reason to worry. The country has been physically conquered five times in its history, and the Russians over the border are a constant menace. Russian tanks entered both Georgia and Ukraine in recent memory, making this little Baltic state rather nervous. In 2007, Russia launched a cyberattack on Estonia, crippling services.

For Ilves, that incident proved the strength of their system. “They never got in. It was a DDoS, a denial of service attack. You couldn’t access your newspaper or your bank, but the government system didn’t collapse. There was no breach.” The distributed architecture of Estonia’s X-Road platform meant the attack was diluted across many nodes on the network. If a single node got knocked out, the others would continue just fine. It worked.

In fact, it needed to triumph. Because at the very heart of Estonia’s IT system is a challenge to what it means to be a nation state. Estonia is a country with land borders. But, if Russia invades, the nation may need to reconvene outside the zone of occupation. A purely digital government, with everything backed up in the cloud, can be rebooted from anywhere – citizens minus the land. Servers in Luxembourg hold a complete set of records, just in case.

And when borders disappear from the citizenship equation, interesting things start to happen. Citizens from other nations, for example, can become e-citizens – which is what Estonia offers. There are citizens of other nations who have become a sort of honorary digital Estonian. “We already had the infrastructure,” says Kotka, “so it didn’t cost us anything.”

ONE WAY TO GET AROUND BREXIT?

To become an e-resident, go online to e-estonia.com, and fill out the form. Then collect an ID card from the nearest embassy or consulate. The card provides access to all Estonian services, just like an Estonian. Start a company, access banking and sign digital documents with your Estonian ID. The Mayor of London’s entrepreneurs of the year in 2017, Ellenor McIntosh and Alborz Bozorgi, founders of eco-friendly wet wipe brand Twipes, created an Estonian company this way to avoid Brexit complications.

Estonia’s early goal was to sign up ten million e-residents – almost ten times the physical population of Estonia.

Tech people love to talk about disruptive startups. Estonia is the first disruptive nation, rethinking what it means to be a country.

It’s clear that Estonia leads the UK in more than a purely technical sense. It is using technology to reflect on the philosophy of nationhood. Catching up will require more than adding extra zeros to our IT budget.

Source

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There are currently around 550 startups in Estonia from a variety of sectors including Fintech, Greentech and beyond. While looking at the main indicators – number of people employed (3763 in 2018), employment taxes paid (46M EUR in 2018) – we are seeing a steady 30% yearly growth in the sector.

The top 20 startups in Estonia account for an astonishing 62% of the new jobs created by startups in 2018. TransferWise has been the biggest recruiter (+239) followed by Bolt (formerly Taxify) (+92), Monese (+57), Veriff (+54) and Pipedrive (+53). 

Another important element of a successful startup ecosystem are investments. Since 2010, the proportion of investments raised from abroad for Estonian startups has been growing year-by-year, reaching the highest percentage in 2018 (96.3%). The increased interest of foreign investors confirms that Estonian startups are being noticed globally, we have a strong startup ecosystem and a credible, transparent, business environment.

In 2018, investments into Estonian startups have, for the first time, exceeded 300M EUR, reaching 328M EUR announced publicly. By far the biggest investment (150M EUR) was made into Bolt (formerly Taxify) and that investment round upgraded Bolt to unicorn status. Bolt was followed by Pipedrive (43M EUR+8.7M EUR), Monese (51.6M EUR), Starship Technologies (21.4M EUR) and Realeyes (13.5M EUR). So far, Estonia has produced four billion-dollar unicorns: Skype, Playtech, TransferWise and Bolt as well as a dozen other startups valued over 100M EUR each.

Estonian startup ecosystem might be small but it is very international. The key role of increasing the international community over the past two years has been performed by the Estonian Startup Visa. The Startup Visa helps non-EU founders grow their startup in Estonia and it also makes it easy for Estonian startups to hire non-EU talent. In the first two years since the launch,  1108 applications were received from more than 80 countries and 931 people altogether have relocated to Estonia or been granted the right to do so. Although we are expecting more and more founders to find their way to Estonia and become employers themselves, it is clear that the need for talent in Estonian startups is growing significantly. 2018 was a record year of investments in Estonian startups; the funds are directly connected to the increase in available jobs. There are jobs available not only for developers but also marketers, sales people, customer support, designers, etc.

A huge role in the development of our startup ecosystem is played by organisations and service providers who support the growth of our startups. At the end of 2018 we counted 103 such organisations, meaning we have roughly 1 organisation per 5 startups! The ‘’by-product’’ of support organisations is a strong giving-back mentality within its network of mentors, with entrepreneurs who have been active for more than 10 years in Estonian startups like Fortumo, TransferWise, Bolt, Starship Technologies and Pipedrive. The strength of our ecosystem is definitely its people – thought leaders who help to shape the ecosystem with new endeavours.

Source: Invest in Estonia

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Neither could anyone have predicted that the company to disrupt the taxi industry all over Europe would be built by a very persistent Estonian teenager.

“We might have decreased the number of old-school taxi call-centres − meaning dispatchers and taxi company owners − but we have given tens of thousands of drivers an opportunity to offer their services on our platform,” says Markus Villig, the CEO and founder of Bolt (Taxify), a ride-sharing platform that now operates in 20 countries in Europe, Africa and South America with 100 000 drivers and 4 million passengers signed up. Taxify recently announced funding (of an undisclosed amount) from Didi Chuxing, the world’s biggest ride-sharing platform that forced Uber out of China.

Markus and his colleagues can now use the knowhow and the tools provided by their Chinese investors while not leaving their main office in Tallinn, which is based in a recently renovated art nouveau-style limestone building that housed a furniture factory for the best part of the previous century. “We really needed extra space and that was almost the only office of that size available in Tallinn,” Markus explains in his usual modestly self-assured manner.

It’s lunch hour in their office and a buzzing group of young people gathers in the kitchen on the first floor, bringing their meals in from a canteen next door. Looking around in the room it’s obvious that I’m the oldest person in the room as the average age of Taxify employees is about 28-29. “But now we actually do have people younger than I am,” Markus adds. Just to make it clear: he is 23.

In a year they will move a few blocks down the road to a new building, that will be located right next door to another Estonian-born international superstar, TransferWise, which just recently announced a whopping €240M round on top of its previous investment rounds. “As compared to TW, we have been super-efficient in our growth, having made it so far with only €3M,” Markus comments. Taxify probably better deserves a comparison to Uber which has raised €10B. “Compared to them, TransferWise is still very efficient,” Markus remarks.

As to the current employee-count, Taxify’s General Manager Riina Einberg has to look up the most recent number: “We have been adding up to 20 people per week.” The count comes to 320, 160 for Estonia and the same for another 19 countries and 25 cities. There are 30 nationalities in the Estonian office alone.

An early start

One might think that Markus is too young to have pulled off a company of such a multinational scale but he’s actually no rooky in the startup world. In 2010, at the age of 16 he − accompanied by his father Tiit − attended the first ever Garage48 event in Tallinn, which was organized by his older brother Martin who was then working for Skype. Markus happened to be in the same team with Skype founders Jaan Tallinn and Ahti Heinla, and although nothing came of their baby-name-generating app Namefy (other than the ending of the word −fy), he had already lost his soul to entrepreneurship.

In 2012, his brother Martin was organizing another Garage48 event in Kyiv, Ukraine, and tried getting a taxi online, which turned out to be quite a hassle. He then came up with the idea of how to make ride-sharing much easier. Markus picked up the idea and plunged into it. According to his own account, he discovered he had a lot of time on his hands during his high school final exams so he decided to build a platform to ‘get this taxi business in order in Tallinn’. There were 30 taxi companies in Tallinn at the time, all operating on old school call-in devices, with an operator, misogynistically referred to as ‘a Kitty‘, mediating the rides from a central station.

The early start was quite promising. Markus did a Google Docs survey in his school to which he received 600 answers, 90% out of which responded that there is an acute need for a new taxi platform. Nobody had even heard of Uber yet.

Markus started going through the taxi stops and things started going a bit astray: “Of course I had no platform to show yet and being a 19-year-old kid disturbing the drivers from reading their newspaper…” 8 out of 10 taxi drivers would yell at him to get the hell out of their cars. Markus could hardly speak any Russian and that was an obstacle communicating with drivers.

He soon realized that his initial budget of 200 euros was simply not feasible to actually develop a platform. A developer he had found ‘somewhere from the city’ was asking for 7000 euros for a prototype.

He turned to his parents who finally gave in to his pleas and lent him the money they had set aside for his studies at university. “It’s up to you now, what you spend this money on,” they said with a heavy heart. His mother Reet helped a lot with the early sign-ups of the Russian speaking drivers and to this day she keeps in touch with the company, now taking care of the office plants.

Bumps on the road

Other than strong support from his family, it was all downhill for Markus. “We had no money for marketing so we sent press releases to all media outlets in Estonia saying that a 19-year-old is trying to shake the taxi industry in Estonia and luckily it worked, we got our first stream of customers. But the first prototype was full of bugs, drivers who had shared their contacts did not really sign up and people literally could not get taxis,” Markus confesses.

A lot of money had been wasted but there were no drivers and people who had downloaded the app could not use it. Business prospects seemed gloomy. Any less strong-willed person would have given up there and then. But not Markus.

“It was now or never. It was a pretty crazy month. I was working 24/7 to get it to function, learned a lot of mobile development to fix the prototype and spent the rest of the time out on the streets hiring more drivers. By the beginning of September, we had almost reached the critical mass of drivers.” That meant 20 rides a day. These days, a regular month means hundreds of thousands rides in Tallinn, which is only the 10th largest city for Taxify.

Markus had just started his studies at Tartu University and could not continue roaming the streets of Tallinn at night, harassing the leather-vest-clad moustachioed middle aged men who would much rather solve crosswords in their Wunderbaum-scented Ford Scorpios than discuss possibilities of earning extra money by offering better services to their customers with a taller-than-average teenager.

He also realized they needed a real developer. The only person who responded to their ad on php.net forum just happened to be the right person. After the first meeting, Oliver Leisalu called back a few days later and had already built versions of both the driver’s and customer’s app.

He’s now one of the cofounders of Taxify, which really took off shortly after he joined. A year into the business, big brother Martin who had so far held a supportive role also left his ‘day job’ at Fortumo and joined full time.

But the troubles were not over yet. In December 2014, Taxify raised a first round of €1.4M from investors and started developing and scaling very quickly. By March 2015, it was clear that if they keep up the same pace they would be out of money by the end of June. Revenues were still small and some countries were slow to pick up pace. “We had to cut the spending, let some people go and start raising a new round from investors who were less than willing to give us any more money. That was a very tough year,” Martin recalls.

Against all odds, they finally found a scalable model in the cities of South Africa and the company turned cash flow positive. Now, with the latest investment from Didi, they can feel “much more relaxed about spending”. Markus can finally consider actually visiting the countries they are operating in. And not just visit the offices, but get to know the places as well as the people. “What I’ve understood in my years in startup business is that good people are the same wherever you go in the world: they are open-minded, tolerant and… well, just normal.”

Going after the Big Fish

“My ambition from the very beginning has been building one of the biggest technology companies in Europe,” Markus is not shy to announce. And since the transport industry is ten times the size of the marketing sector of the whole world, this is where he sees his challenges.

“It’s only a matter of time until we break the regulations that have been limiting this industry in Europe for decades. There is simply no explanation as to why a company should pay 100 000 euros for an operating licence in a single city and then charge its customers 100 euros for a ride. It’s as if someone would charge you 200 000 euros if you wanted to become a programmer.”

The strict regulations have started to crumble state by state, with Estonia leading the way, yet they stay intact in many countries like Italy, Germany, Spain or our Scandinavian neighbours. The transport regulating office of London recently pulled operating licences for both Taxify and Uber in the biggest city of Europe.

“Uber makes €2 billion of revenue on its rides in the UK only, so probably making a few hundred million in commissions, therefore it’s no small business,” Markus explains their motivation in fighting for the change in regulations. At the time they started, he did not even regard Uber as a competitor as it only operated in a few European cities as a limo service. Things changed when Uber raised billions in investor capital.

Transport is usually considered to be a very local service. Markus brings a recent example when the Kenyan press proudly announced that a Kenyan company raised an extraordinary investment from a Chinese investor. That company was, of course, Taxify.

What to disrupt next?

Riina Einberg, who has experience from helping scale several new companies, claims that the challenges of this startup are different. “On one hand, it’s about sharing economy, using unutilised assets and allowing people to earn extra income in their free time, but at the same time it is about changing the future of urban transport. The ridesharing app and the platform for drivers is just a start. In just a few years it might end up with operating pools of self-driving cars or delivery services or both or who knows what − the whole industry is changing very fast right now.”

It’s obvious that the disruption has just begun as 70% of the cost of a taxi ride today comprises the driver’s salary. Markus is well aware of the social impact of the disappearance of jobs. In the long run, it’s inevitable: “Either building tall walls like some countries do or introducing basic income for all.”

Markus claims that many people simply have not realized yet that it is actually cheaper not to own a car. “I do not have a driver’s licence,” Markus laughs. “So I’m kind of stuck with what I do.”

In March 2019, Taxify changed its name to Bolt.

Article source: Invest in Estonia

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After graduating from university, Thomas Padovani spent three and a half years working at a start-up for online payments. During this time, the company’s turnover increased from two million euros to one hundred million euros and went to the stock exchange. But then, Padovani felt that the company wanted to push people into certain roles. The man sold his few shares and went to travel – including finding his way to Estonia.

Here was a company that dealt with processing payments. However, Padovani felt that he did not want to fulfil someone else’s dream.

Made in Estonia

“I sold the television and all the things I had and I came to Tallinn,” he described. Padovan had initially 10,000 euros. “I had no income or forecast for the coming year,” said a man who initially set himself up in Õismäe to live and to start his first company Adcash.

A year later, Padovan rented an apartment in Rotermann Quarter, where the employees worked the day and slept at night. He also went to work there from Õismäe. With the first money, an extra property was bought at Kaupmehe Street. «We thought the money was burning and it was better to put it somewhere. If the company fails, we can at least rent the property out, »said Padovani.

At first, the business idea was: you have brands that come and say that they will give you a euro for every new customer. Adcash went to various advertising channels (websites, blogs, etc.) and said: “We will give you 70 cents for every new customer whom you bring to our partners.”

In this way, 30 cents left Adcash for mediating the service, which is the business model of the advertising network. At first it was very easy to do, but when a lot of new customers came up, it was necessary to develop an automatic solution.

«Imagine that you have thousands of advertising campaigns at the same time that need to be constantly changed to meet your needs. So we came to the conclusion that an automated advertising system needs to be developed, »said Padovani.

All technology has been developed in Estonia. The automatic solution also led to a new name – in 2011, the company that was named Cashtrafic was named Adcash.

The people of the Adcash Tallinn office came from every end – there are 19 nationalities in the sales team. According to Padovan, partly because Estonia is a safe country with good opportunities. “You can live here better than in Barcelona, Paris, Lisbon or London,” he said.

They currently have more than 3000 campaigns running on more than 100,000 websites around the world. Each campaign can be targeted very precisely through various parameters, the combination of which gives endless possibilities.

«You are on our website, it’s Saturday night, it’s foggy outside and the user is looking for information about football. What ad are you showing? »Asked Padovani.

Money does not get Adcash from displaying an ad, but when a person buys something, registers somewhere or somehow responds to advertising.

There are many ways to conquer the advertising market. «Extreme, such as the adult or gambling sector, or milder or travel, e-commerce, health. We chose entertainment, or videos and games, »explained Padovan, noting that their so-called boats include Rovio, Good Games, Ubisoft, and most other major gamers. The network consists of over 120,000 websites and over 3000 active campaigns each day.

Some ads lead to malicious pages. According to Padovan, it’s up to the big companies to decide whats bad or not.  Thus, Yahoo! Toolbar is a malware for Google because they are competitors.

«This kind of conflict of interest often happens in the IT world, because when we talk about Yahoo and Google, they are profit-oriented listed companies. For them, the most important thing is that you come in the morning, turn on your computer and they are your home page so they can make more money by showing you the ads, »he said.

According to Padovani, Adcash has no interest in making campaigns that may harm their names and interests. “At the same time, we have to realize that we have more than 3,000 campaigns on a daily basis and over 100,000 websites. Because of the volume of campaigns, there are still ads that push programs that continue to open pop-ups, »he said.

Four years ago, Adcash opened an office in Bulgaria because they were not able to recruit enough software developers from Estonia. There are many developers in Estonia, but similarly competing software companies will continue. In addition, the firm has offices in France and Mexico. The Estonian tax system gave the company an advantage because the costs were lower. So more money was left to be more aggressive in the market.

According to Padovani, he comes from a highly regulated country – if in France documents are asked to return after a month, then here you can register a company in two hours.

A quarter of Naxicap’s

At the end of September, Adcash announced that it had sold 25 percent of the company for 20 million euros. The process itself took a year. The goal was to increase our competitiveness. ”We are a strong company, but a partner is stronger. Naxicap (a French investment company – ed) manages two billion euros. He can buy with us and many companies for us, »said Padovani.

Adcash’s clients are in most large companies – those with 5000 to 100,000 euros per month for advertising costs. They also want to create a self-service environment for those who do not have enough money to spend. Padovani believes that a targeted advertising campaign would provide an opportunity to grow even in smaller businesses.

They just started advertising on mobile apps because it is a fast growing market. While in 2012, seven percent of mobile traffic came, then a year later 13 percent.

And of course, Adcash can’t get past Asia because many important things happen right there. eMarket estimates that, for example, in China, a small amount of money per person per year is spent – € 29.3 – but it is a huge market in terms of population size.

Original article in Estonian in Postimees 

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