Skype Motivates Estonian Start-ups, But is it Enough to Compete
What defines a start-up company? Is it drive? Is it the investors? Or could it possibly be the environment in which these companies grow? In the United States, entrepreneurs are considered some of the country’s elite. A formidable group, these people are revered as innovators tasked with developing “the next big thing.” Failure is an acceptable form of growth and is considered part of the learning process. Entrepreneurship has been embedded in our country’s fabric from the moment the Pilgrims landed on Plymouth rock with a bootstrapping mentality, hungry for change. But what happens when you live in a country that’s more risk averse? What factors play into your decision to quit your job and become an Internet entrepreneur? In a recent trip to Helsinki, Finland and Tallinn, Estonia it got me thinking: what happens when you’re an entrepreneur trapped in a relatively new startup environment? Can you succeed?
The first person I turned to was Antti Vilpponen, CEO and Co-Editor at Arctic Startup, a blog that solely focused on reporting about startups and growth entrepreneurship in the Nordic and Baltic countries. An expert on the Nordic and Baltic start-up scenes, Vilpponen described start-up culture in general as,
“Mostly, it’s a way of life. You know, there’s all of these stereotypes associated with start-ups, like bootstrapping or making cool things out of your garage, and I think it’s pretty universal no matter where you’re talking about them.”
Across cultures, entrepreneurs everywhere are hungry and most are willing to sacrifice in order to achieve their end goal.
If we assume that all start-ups are made up of the same basic ingredients no matter where they are founded, then why are the majority of successful start-ups located in the United States, Asia, and the UK? In a world where the Internet offers a borderless existence, where one entrepreneur in a basement can reach millions of people online, why does location matter so much? Start-ups and business in general is about relationship building and networking. It’s about sharing and selling ideas to your peers and investors in order to build your business. And let’s be honest, even if you’re based online, it’s hard to network with a group of peers and investors in a small village.
Aside from marketing and targeting a specific market, let’s look within the countries themselves and analyze their start-up environment. What I’ve learned from comparing Finnish start-up culture to Estonian start-up culture (and even American start-up culture), is that they are all in different stages of development. For example, Finnish start-up culture has come a long way in the past ten years or so. What’s been described as a high risk averse culture, where at Nokia’s peak around 2000, 4% of Finland’s GDP came from corporate mobile giant, Finland is now at a point where it’s becoming far less risk averse thanks mainly to this emerging start-up culture. Vilpponen explained that the Finnish start-up scene really emerged around the dot com era in the 90s and has continued to gain force.
Since then, the start-up scene has really emerged at a grassroots level. With a push from the Finnish government as well as private investors, start-ups and a more pro entrepreneurial attitude have really begun to sprout out of universities. And that’s a perfect place for it to start. In a place where college is completely public, students can experiment with ideas and network like crazy and eventually some even see start-up success. It’s kind of like a risk-free bubble where students can experiment with entrepreneurship without any of the standard risks normally associated with start-ups. For example, one of Finland’s most talked about companies, Rovio, the mobile gaming company responsible for the uber addictive Angry Birds iPhone app, was founded at the Helsinki University of Technology during a competition. Vilpponen went on to explain that Finland is growing as a networked country where the majority of entrepreneurs know each other or can meet each other. There are events and happenings that connect this country’s entrepreneurs. They may not be at the same level as the US when it comes to start-up acceptance and success, but they’re well on their way.
While in Tallinn, Estonia, I learned Estonians are so proud of their start-up culture that they created an industrial park to house entrepreneurs. Something that’s totally taken for granted in the United States is considered a large accomplishment in Estonia’s young start-up environment. I asked Pirko Konsa, a Member of the Executive Board at the Tehnopol science park in Tallinn, Estonian his thoughts on why something like Tehnopol is so important, to which answered,
“Tehnopol business incubator provides quick and easy business setup with minimal risks. We provide business facilities suitable for start-up (furnished and equipped office, meeting rooms, secretary services, etc.) and business development services (including help in drawing business plan; finding money, partners or clients; mentoring business development; etc.). Incubator draws together start-ups that face the same problems and difficulties. If they are located in same place and see each other on daily bases they can more easily face these difficulties by sharing their experiences. So the social aspect is as important as our services.“
Places like Tehnopol act as the foundation for an accepting and networked start-up culture, which will hopefully foster more business and a more accepting environment, kind of like what’s happened in Finland in the past ten years. Like the Finns, Konsa describes the Estonian start-up scene similarly when he says,
“I would say that Estonian business culture is quite risk adverse. Because of our small community the failures are often outlined on public and can reflect the future of the certain entrepreneur. For instance in Silicon Valley the business attitude is definitely more open and the failures are accepted as a process of learning.”
Although still in its early stages, the Estonian start-up scene is growing. Besides Tehnopol, there is also the Estonian Startup Leaders Club founded in 2009, a group where entrepreneurs can come together and network with each other. Kristi Hakkaja, Managing Director for the Estonian start-up TaxiPal Ltd. also weighed in on the subject of networking and building a start-up culture in Estonia when she said,
“the start-up community has grown significantly in size and strength in the past five to seven years, and I am happy to have been a participant in this group. I do think that one of the key factors in enhancing the start-up mindset in Estonia has been the success-story of Skype and a few similar companies – people that decide to create a start-up have to have this irrational belief that they can conquer the world, and it is so much easier to convince yourself of such a possibility if there is at least one example to go by.
Skype has shown all Estonians that they have no excuse to whine that it is not possible to create something truly global from a fishpond like Estonia”
TaxiPal Ltd. is a mobile app developed so you can order a taxi from a reputable taxi company anywhere in the world, even if you don’t speak the language. This is clearly a global business plan, and when asked if the folks at TaxiPal Ltd. would have to leave Estonia to grow Hakkaja replied,
“One thing that is for sure, is that you cannot do global business while sitting at home no matter where you are. So yes, you definitely have to travel extensively and more importantly, establish international partnerships. Moving abroad closer to your market is also a good strategy, but if your market is more than one city and one country, then you cannot be everywhere. This is why at the end of the day it is important to be able to build up good sales and partner network, and this, I believe, can essentially be done from anywhere.”
Sadly both Kanso and Vilponnen agreed. Kasso stated,
“When it comes to some ICT products or solutions then the actual presence of the company is not so important. When it comes to finding partnership or additional funding (VC-s or angels) it is crucial to settle the business where your contacts or money is. Tehnopol shares this thought by having close cooperation with science parks around the world and business incubator option in Silicon Valley. If our start-up intends to move to certain market then we help him with soft-landing services in that target country. Most definitely moving is not the fate of Estonian start-up companies. The ICT competence in Estonia is still very high and the R&D departments mostly still remain here. When it comes to sales and marketing then the global business attitude does the trick and helps to grow more quickly.”
Vilponnen ended our conversation by saying,
“Be patriotic in your own time. Go where you can capitalize on your experience and your product.”
What I think he meant by this was that you may build your start-up company in your home country, but don’t feel bad about taking it outside the borders. This ties into my sentiment about building networks within countries to create a successful start-up environment. As of now, the largest start-up networks of entrepreneurs and investors exist primarily in the US, Asia, and the UK. Not only because our start-up cultures are best defined, but also because in these places exist the largest markets for Internet services.
Perhaps if nations like Finland and Estonia continue to put importance on their own start-up cultures and build more support networks within their countries (something that is already happening), they won’t have to travel as far to find what they are looking for. To answer my original question of whether or not a startup can be successful in a young and risk adverse culture, I think the answer is yes. When it comes to growing, sharing, and networking, both Finland and Estonia are moving towards a stronger presence. Will there ever be a time when the Finns and Estonians don’t have to look outside their own markets to make money? Based on pure size, probably not. But will there be a time when these countries will be able to share, network, and bounce start-up ideas off their fellow countrymen, which is an intricate part of building a business? Absolutely.