That startup fever

Feb 5, 2013
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Vladimir Funtikov, a 26-year-old Estonian businessman, already has behind him successful studies at university and the launch of several small technology companies, including Creative Mobile, which produces games for smart phones. Now he’s come up with a crazy idea: playing on cell phones should be taught as a subject at university because, among other reasons, his company – with offices in Tallinn, St. Petersburg, New York, and London employing 60 people – can’t find enough skilled developers and programmers. 

An article that presented his idea in Aripaev, the biggest Estonian newspaper, drew a lively and amused response. But in Estonia they are used to hearing such things, especially from tech entrepreneurs. Since Skype got off the ground here, local businessmen think big, and globally.

Estonia has become a kind of petri dish for companies that want to take on the world, in part because of an unusual entrepreneurial culture grounded in, for instance, a functioning electronic state administration and the openness of politicians to new ideas and technologies. For example, President Toomas Hendrik Ilves last year, as the first head of state on a Twitter account, engaged in a debate with American economist Paul Krugman about the nature of Estonia’s economic success. Or take the trial period, ending this month, for teaching programming as a new subject for pupils in the early grades of primary school.

Restart,a popular radio program on tech companies, recently presented this year’s 10 new, small Estonian companies to watch. Creative Mobile took second place. Ranked first was Transferwise, a website for international money transfers without bank charges. Erply, which supplies logistical and purchasing programs to companies, came in third. Among the other adepts are a social network aimed at engineers of the technical disciplines and a company developing software for more precise weather forecasts for coastal regions.

When I reported two years ago on small, feisty Estonian companies, I talked to their managers – for instance those from Erply or with the boss of a site with virtual fitting rooms (Fits.me). I was surprised by how confidently they spoke about their products’ chances in the most demanding markets of Western Europe and the United States. To think up something, polish it up, and then look for development money from investors in London or New York was, for them, nothing special.

Of course, not every Estonian is born with a laptop in his or her hand and such self-confidence, but the business culture that developed there after the success of Skype and continues thanks to the company’s development center, which still employs around 400 people, is incredible.

The government supports it all, because the Estonian economy can clearly thrive long term if it is an engine of ideas and innovation instead of, say, falling into the cheap labor-outsourcing trap that has swallowed too much of Eastern Europe. In addition, a small country can build its own image on the success of tech companies.

According to the World Bank’s Doing Business survey, Estonia is also the best place in post-communist Europe to start a company and do business. Worldwide, the country is in 21st place (while the Czech Republic stands at 65). It’s worth noting that the electronic state administration not only accelerates transactions but also dramatically reduces opportunities for corruption.

In the enthusiasm over the underlying climate that buoys the Estonian technology industry,The Wall Street Journal reported last year that Estonia has the most startups per capita in Europe. That sparked a wave of speculation about why Estonians are so enterprising and so successful. Some cited the individualistic nature of these northern people hardened by the Soviet occupation. Others said Estonians got used to doing things themselves as much as possible during the Soviet era. But besides the influence of e-government and Skype, nobody has come up with some other convincing argument.

Personally, I tend to think that a certain degree of stubbornness emerged from a combination of a historical Protestant work ethic, the survival of a small nation in the face of adverse historical conditions, and a wager on open business by a group of young politicians. Soon after the restoration of independence in the 1990s, they had a vision of where they wanted to lead their country.

But don’t worry, the Estonians are not robots, they’re just people. Otherwise, ninth on the list of the most promising startups wouldn’t be flirtic.com, a dating site done a little differently.

Martin Ehl is the foreign editor of the Czech daily Hospodarske noviny, where this column originally appeared. He tweets at @MartinCZV4EU. He recently won the prestigious Writing for Central Europe journalism prize, awarded by the APA – Austria Press Agency in cooperation with Bank Austria.

About the Author

Martin Ehl

Transitions Online (www.tol.org) is an Internet magazine that covers political, social, cultural, and economic issues in the former communist countries of Europe and Central Asia. The magazine has a strong network of local contributors, who provide valuable insight into events in the region’s 29 countries.
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