Purpose gives strength - Estonian startup sector continues the year with steady growth

2022 has already revealed new challenges which will affect us now and in the long run. However, despite the hectic times, the Estonian startup sector is continuing the year on-course. Investments into Estonian startups have reached the 1B EUR benchmark, startups employ nearly 10 000 people and have paid 83,4 M EUR in employment taxes. Turnover of startups is marked by a robust increase of 68% versus mid-2021. Let's dig into the numbers for the first half of 2022!


To date, the Estonian Startup Database is home to 1442 startups. So far, 50 new startups created in 2022 have found their way into the database. 32% of the startups in the database have been active for 5 or more years. The largest sector in terms of active startups is Business software & HR with 258 active companies (18% of all startups in the Estonian Startup Database), followed by FinTech with 193 active startups (13%) and Consumer products & services with 156 active companies (11%).

Employment

The first half of 2022 is showing a significant rise in people working in the Estonian startup sector. According to the Estonian Tax and Customs Board, the employee count of Estonian startups has risen 36% in a year, from 7113 to 9692 people employed at the end of the second quarter of 2022. Compared to last year’s growth (the first half of 2021 compared to the first half of 2020) of 14%, the employment count increase has more than doubled, meaning that the sector is recovering from the turbulent times.

The current top employer is Wise with 1444 employees and 226 new hires this year, followed by Bolt's 1231 employees and 210 new hires, next up is Swappie with 592 employees and 179 new hires and lastly Veriff and Starship Technologies with 423 and 243 employees respectively. It is worth mentioning that the TOP5 employers take up 41% of the whole employee count of the Estonian startup sector.

In addition to the hefty increase in the employment rate, the total number of employees, who have worked in startups during the first half of 2022 for at least a day, is showing strong numbers as well. According to Statistics Estonia, 11 442 people have worked for Estonian startups during the first half of the year, meaning that every 62nd employee in Estonia has contributed to the growth of the startup sector.

The demographic indicators of Estonian startup employees are similar when compared to the past two years, although we can spot a slight increase in the number of female employees. 62% of employees working in startups are men and 38% are women (in 2020 first half 36% were women). Most of the employees in Estonian startups are relatively young: 45% of employees are between the ages of 21 and 30, while 41% are aged 31-40.

Employment taxes & salary

A successful first half of the year is reflected in the rise of employment taxes paid by startups and in the reasonable upswing in salaries. Statistics from the Estonian Tax and Customs Board show that Estonian startups have paid 83,4M EUR worth of employment taxes so far this year, which is 46% more than the employment tax contribution of 57M EUR at the end of the second quarter of 2021.

Looking at the employment tax contribution by sector, we can see that the largest contributors for the first half of 2022 were: FinTech (23,4M EUR), Transportation & Logistics (21M EUR), Business software, services & HR (10,3M EUR), CyberTech (6,7M EUR) and CleanTech (3,7M EUR).

The most employment taxes amongst individual startups were paid by Bolt with 13,8M EUR, Wise with 11M EUR, Veriff with 3,7M EUR, Starship Technologies with 2,1M EUR, and lastly Monese with 1,8M EUR. TOP20 startups with the most employment tax contributions constitute 58% of the whole startup sector’s employment taxes.

The statistics from Statistics Estonia show that the average monthly gross salary in Estonian startups over the first half of 2022 was 2840 EUR, which is approximately two times higher than the Estonian average. The average salary rate in startups has risen 6% compared to the same time last year (average monthly gross salary in first half of 2021 in Estonian startups was 2685 EUR) as the startup sector continues to provide one of the most competitive wages in Estonia.

Average monthly gross salary distribution by age suggests that employees aged 41-50 earn the most with 3505 EUR, but employees aged 31-40 are not far off with 3224 EUR. The largest average gross salaries by month were paid in Communication (3318 EUR), Business software, services & HR (3304 EUR), Transportation & Logistics (3273 EUR), CyberTech (3180 EUR) and FinTech (2972 EUR)

Turnover

According to the quarterly data of the Estonian Tax and Customs Board, Estonian startups generated a record-breaking 958M EUR in turnover in the first half of 2022, a 68% increase compared to the same period in 2021 (571M EUR). The TOP20 startups by generated turnover take up a colossal 74% of the whole sector’s turnover! Startups with the largest generated turnovers were Bolt with 467M EUR (49% of the whole sector!), Veriff with 32M EUR, Swappie with 25,7M EUR, Comodule with 18,6M EUR and Starship Technologies with 16,4M EUR.Please note, turnover data is published based on the quarterly data from the Estonian Tax and Customs Board and therefore is not comparable with companies’ financial year annual reports data.


Investments & Exits

The first half of the year has been extremely successful for the Estonian startup sector, attracting numerous large investments. Based on the crowdsourced database and the Estonian Startup Database, Estonian startups are increasingly attractive to investors as the total amount of investments reached the 1B EUR benchmark in the first half of 2022, more than quadrupling the sum of investments made in the same time period last year. Investment figures are heavily affected by Bolt's massive investment round (628 M EUR). In total, there were 44 new investment deals averaging almost 23M EUR each, 28 of those were worth at least 1M EUR. The biggest investment in the first half of 2022 was raised by Bolt (628M EUR), followed by Veriff (89M EUR), Starship Technologies (87,4M EUR), Glia (40,9M EUR) and Eurora Solutions (37,7M EUR). Please note that Skeleton Technologies investment (37,6M EUR) was not included in the calculation of total numbers as Skeleton Technologies is already a matured startup. Second half of the year has also started off really well as July has brought good news with Lightyear (25M EUR), Solarstone (10M EUR) and Certific (7,4M EUR) big investments, supplemented by smaller rounds.

During the first half of 2022, we have already seen three acquisitions in the ecosystem. FinTech startup EveryPay, a platform for receiving payments, was acquired by LHV Group. Stebby (formerly SportID), the largest wellness service marketplace in the Baltics, announced an exit from Funderbeam platform via management buyout and investment by Livonia Partners. Supervaisor, building technology to make streets safer with AI and computer vision, was acquired by Motive Technologies.

Estonian Startup Visa

Despite the hectic situation, the Estonian Startup Visa program continues to successfully attract talent from abroad and help startups seamlessly relocate to Estonia. Since the start of 2022, 733 global founders and startup employees have been granted temporary residency permits and visas to become part of the Estonian startup ecosystem. The top 3 countries for founders were Turkey, Russia and Iran, while the top 3 countries for employees were Russia, Brazil and India.

To date, 19% of the startups in the Estonian Startup Database are founded thanks to the Estonian Startup Visa. They contribute significantly to the development of the ecosystem. In particular, during the first 6 months of 2022, these startups paid 3,4M EUR in employment taxes, employed around 391 people in Estonia, and generated 38M EUR in turnover.

Acknowledgments of the Estonian startup ecosystem

Startup Heatmap Europe Report 2022, which analyzes the potential of European cities for establishing and developing successful start-up companies, named Tallinn among the largest start-up centers in Europe. Compared to last year, Tallinn climbed up three positions into 6th place. Tallinn excelled in Ease of Doing Business metric as founders rated Tallinn as one of the top places with most favorable business regulations. In the StartupBlink 2022 report, Estonia retained its 13th place compared to previous year and was marked as a country with a small population, but with an impressive startup ecosystem.

To sum it up, with resolving new challenges ahead, the Estonian startup sector is staying on course, visioned by the founders and implemented with the help of all the participants in the ecosystem.

Sources: Startup Estonia, Statistics Estonia, Estonian Tax and Customs Board, Estonian Startup Database, Funding of Estonian Tech Startups #estonianmafia
Data crunched by Eric Jakobson & Signe Reinumägi (Startup Estonia)
The blog post was written by Eric Jakobson & Signe Reinumägi (Startup Estonia)
Graphs by Zavod

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