Developments in the Estonian CyberTech startup sector in 2020

Continued growth

In 2020, CyberTech startups accounted for 5% of all startups in Estonia, but their share of taxes makes up over 8% of the sector's total. In 2020, the turnover of the CyberTech sector increased to 36,5 million euros from last year’s 31,1 million, constituting a yearly growth of 18%.

At the end of 2020, CyberTech accounted for almost 8% of the employees in the Estonian startup sector. Startup Estonia is proud that cyber security is represented in the top three Estonian startups with the largest number of employees. Veriff, with its 230 employees, is the third-largest employer in the entire Estonian startup sector after unicorns Transferwise (929 employees) and Bolt (684 employees). Veriff makes up 43% of the employees in the CyberTech sector. They are followed by RangeForce's 47 and Multilogin's 31 employees. Veriff was also the largest employment tax contributor in 2020 with 4 million euros, with the whole sector's tax contributions increased 44% to 16,7M eur. 

The Estonian startup sector is very open to global talent - diversity enriches and makes our sector more sustainable. In the CyberTech sector, the share of startups with foreign founders is over 50%. Marily Hendrikson, Cyber Security Project Lead at Startup Estonia comments: ‘’I am glad to see, that the CyberTech founder’s community in Estonia is so international and that our ecosystem is offering more and more value for entrepreneurs to establish their companies in Estonia.’’

To enhance diversity in the sector, Startup Estonia has been coordinating the Startup Visa program since 2017. This enables, among other things, founders from outside of the EU to start developing their business in Estonia. The Startup Visa for Founders initiative has enabled 18 CyberTech startups to move their business development to Estonia. 5 of those startups also generated turnover in 2020: TRAPMINE, Binalyze, Botguard, Cyber Struggle  and CyberCube Analytics. Numerous investments have also been raised by them recently, so we have high hopes for their continued success.

2020 brought good news to the Estonian CyberTech investment landscape, which will boost the sector for years to come. Two of them really made it big:  In June, Veriff raised an investment of 14 million euros to ramp up global growth and sales to enterprise customers, prior to larger B-series financing round planned in the future. Money was raised from both new and existing investors by NordicNinja VC, Change Ventures, Y Combinator, Mosaic Ventures, and Superangel VC. The new investment brings Veriff’s total financing to 20.2 million euros.

In July, RangeForce announced an investment of 13,6 million euros by four different investors. Series A round was led by Energy Impact Partners from the USA. Paladin Capital Group continues its long-standing support of RangeForce as a part of this round. The Series A also included Trind Ventures from Estonia, as well as a new contribution from Cisco Investments.

It is noteworthy, that while the average share of Estonian capital in investments into Estonian startups in 2020 was about 6%, then in the case of CyberTech, the Estonian capital ratio was 34%. This shows that Estonian investors feel more confident investing in the cyber security sector, as they are increasingly active in international cyber networks. It will certainly have a huge impact on the entire Estonian CyberTech ecosystem in the long run.

Today we have 29 different startup support organizations adding value to CyberTech startups in the Estonian startup ecosystem. Eleven of them have developed special cyber security-related services. Many of them are focusing on the early stages of startups, which is in line with the overall startup landscape in Estonia.  

Starting from 2020, Startup Estonia is focusing on enhancing the local CyberTech communities regionally. It is a truly grassroots community-building and long-term plan to future-proof the sector. On top of Tallinn, strong communities are developing in Tartu, Pärnu, and Narva. In 2019, the first cyber security, defense industry, and artificial intelligence accelerator CyberNorth was created in cooperation between the private and public sectors. With this, seven cyber security startups accelerated in 2019 and 3 cyber security startups in 2020.