Recap of 2019 in the Estonian startup sector
To recap the year in the Estonian startup sector, we've put together an analysis about the development of the sector, statistics about the biggest employers, investments, employment taxes paid, turnovers and more. We will also dig deeper into the demographics of the founders, employees and for the first time we will give an overview of the occupations in Estonian startups. Additionally, we also have comments from seasoned members of Estonian startup scene.
The biggest amount of new startups founded in 2019 were established in the Business software, services & HR sector (25 startups), the AdTech & CreativeTech sector (20 startups) and in the FinTech sector (19 startups). As there are a lot of newly detected startups, not all statistical developments over the years are comparable anymore. But we took that into account and looked over the Estonian Tax and Customs Board statistics since 2017. So all the information below is based on the updated calculations.
Now, without further ado, let's dive into the latest developments in the Estonian startup sector!
EmploymentThe statistics from the Estonian Tax and Customs Board show that at the end of the 2019 Estonian startups employed 5944 people locally. At the end of 2018, this figure was 4529, meaning that the yearly growth has been 31%. However, if we look at the total number of employees who have worked in startups during last year for at least one day, the number is even more significant. According to Statistics Estonia 7539 people had worked for Estonian startups during this period! And if we compare it with all people in the country who worked at least one day in 2019, we see that every 99th person in Estonia was somehow involved with startups!
The top 20 startups in Estonia account for an astonishing 57% of the new jobs created in the sector in 2019. Top employers in Estonian startups are Transferwise (893 employees), Bolt (499 employees), Pipedrive (391 employees), Veriff (305 employees) and Starship Technologies (186 employees). The top recruiters list of 2019 is quite similar. Veriff is at the top with 240 new hires in 2019, growing their team +370%(!), followed by Bolt (+233), Transferwise (+141), Pipedrive (+71) and Paxful (+67).
Demographics of Estonian startup employees
A closer look at the demographics of startup employees in Estonia shows that 36% of startup workers are women and 64% are men. The staff of our startups is relatively young: 52% of people are in the age between 21-30 and 36% are in the age between 31-40. The rest of the age groups have significantly fewer people - there are 2% up to 20-year-olds, 8% are in the age of 41-50 and 3% are aged over 51.
Statistics also show that over half of the employees, 55%, have higher education and 33% of employees have secondary or secondary vocational education. Interestingly the proportion of higher education among foreigners working in Estonian startups is above average (60% of foreign employees have higher education).
Approximately 22% of the startup employees have foreign citizenship (6% of them have EU citizenship and 16% non-EU citizenship), 68% have Estonian citizenship and there is also 10% whose citizenship we couldn’t confirm.
Occupations of Estonian startup employeesStarting from June 2019, all the natural and legal persons providing work in Estonia are required to register the people employed by them in the employment register. Therefore, for the first time, we had a chance to dig deep into the occupations of startup employees in Estonia. The occupational data in Estonia is based on the International Standard Classification of Occupations.
Based on this classification, almost half (45%) of employees in Estonian startups are employed under professionals major group. As professionals, 28% of startups employees are working as information and communication technology professionals and 12% of startups employees are working as business and administration professionals. Another big majority (17%) of startup employees are working in clerical support workers major group, in which 13% of startups employees are working as customer service clerks. Statistics also show that 12% of startups employees are involved in different managerial positions, 10% are technicians and associate professionals and only 2% of startup employees are involved in elementary occupations. There are also 14% of employees whose occupational group we couldn’t confirm.
Maarika Truu, the Head of Startup Estonia comments: “Startup sector statistics is becoming increasingly exciting, especially thanks to all of the new information we know now. Due to the obligation to employers to register their employees, we have a better understanding of what are the professions the people are employed in. The fact that 45% of the people are in the professional major group shows that we have high-quality jobs and employees in different areas.”
Digging deeper into the data of Estonian startup founders, it turns out that like in other countries, women are still underrepresented in the startup world. The proportion of female startup founders in Estonia is around 15%. According to the latest The State of European Tech by Atomico report, in the survey of more than 1,200 founders from across Europe found that 21% of founder respondents self-identify as female. The gender diversity of founders varies across the regions. According to the survey responses, the UK and Ireland have the highest gender diversity, while France, the Benelux and Southern Europe have the lowest levels.
While combining all of the data, we count that around 30% of the founders of Estonian startups are foreigners. The average age of founders is currently 35 years old. Most of the founders in Estonia have higher education (52%), with 32% having a masters degree or doctoral degree and 20% with a bachelor's degree or professional higher education.
Although the proportion of female founders is still relatively low, we saw quite a lot of female-led startups getting funded last year: Snackable AI, led by Mari Joller (1,27M EUR); Clanbeat, CEO Kadri Tuisk (1,1M EUR), Cachet led by Hedi Mardisoo (300K EUR), Zelos led by Johanna-Mai Riismaa (250K EUR), FoodDocs with the power duo Katrin Liivat & Karin Repp (200K EUR) & Gelatex led by Mari-Ann Meigo Fonseca (120K EUR).
Hedi Mardisoo, CEO of Cachet adds: ‘’The diversification of founders is the defining aspect of 2019. In addition to strong new female founders, several leaders from the banking sector, politics, event marketing and public sector have started their journey to become an entrepreneur. This shows the maturity of the startup ecosystem.’’
Employment taxes, salaries & turnover
The clearest impact of Estonian startups on our economy is the increasing sums of employment taxes paid. While in 2017 startups employment tax contribution was 36M EUR, it increased to 53M EUR in 2018 (+48%) and to 77M EUR in 2019 (+46%). The biggest contributing sectors are: FinTech (22,6M EUR), Business software, services & HR (17,8M EUR), Transportation & Logistics (9,8M EUR), CyberTech (5,5M EUR) and DeepTech & SpaceTech (4,6M EUR). The largest contributors among startups last year were Transferwise with 11,1 MEUR, Pipedrive with 7,8M EUR, Bolt with 7M EUR, Veriff with 2,8M EUR and Starship Technologies with 2,7M EUR.
According to Statistics Estonia the average monthly gross salary in Estonian Startups is 2347 EUR which is 68% more than the Estonian average at the end of III quarter 2019. Employees aged between 31-50 earn the highest average monthly gross wage (ca 2840 EUR). We also see that the average monthly gross wage of foreign employees is 2499 EUR.
In 2019, Estonian startups generated 395,4M EUR in turnover, which is 9% more than in 2018 (363,8M EUR). In 2019, the biggest turnover belonged to Business software, services & HR sector (106,7M EUR) followed by AdTech & Creative Tech sector (65M EUR) and FinTech sector (46,8M EUR).
Moonika Mällo, Startup Sector Monitoring Manager at Startup Estonia comments: “Over the years we have seen that the top 20 startups in Estonia create more than half of the turnover in the sector (66% in 2019). Most of them are in scaling or product/market fit phase, over 5 years old and will likely mature in the coming years. Almost half of the startups in our database are less than 3 years old and for those, it will take time to scale up. The next years will show if and how this pattern will continue.”
Investments (based on crowdsourced database & Estonian Startup Database)
According to the crowdsourced database and Estonian Startup Database 266,4M EUR was invested into Estonian startups in 2019. Even though the total investment amount in 2019 is smaller than in 2018 (330M EUR), we see the total number of deals increasing significantly. In total there were 73 new investment deals in 2019, which is almost double compared to 2018 (40). Also, 30 deals in 2019 were at least 1M EUR or more, compared to 2018 when the same number was 20.
Gerri Kodres, founding partner of United Angels VC and winner of ‘’Wise Wallet of 2019’’ at Estonian Startup Awards 2019 comments: ‘’The fact that in 2019 the number of investment deals almost doubled means that not only there was more active VC funds and angels in Estonia than ever before, but also that the quality of startups ready to receive the funding was considerably higher than we have seen in the previous years. Also, the increasing number of larger deals shows that the industry is healthy and more companies are reaching later rounds. Additionally, in 2019, we saw a number of startups with experienced founder teams such as Salv, Pactum and Supervaisor coming out of stealth and raising €1M+ investment from high-quality investors already in their first round. After the initial success of Skype, it is now the new generation start up companies such as Transferwise, Pipedrive, Bolt and others that have started to produce the new wave of experienced founders, creating the virtuous cycle in the ecosystem.’’
According to the latest The State of European Tech by Atomico report, founders are becoming more likely to make investments back into the ecosystem, leading to the increased sophistication of the investor pool. To prove that, the report also brought out the top 15 most active angel investors who all happen to be founders. We are glad to see Taavet Hinrikus in fifth place with 22 angel investments from between 2015-2019.CEO and cofounder Transferwise Taavet Hinrikus comments: "Angel investors form a critical part of any successful ecosystem. Looking back a dozen or so years ago, there were very few angel investors in Europe, and even fewer founders turned angels. For TransferWise, it was a huge coup to get the likes of Max Levchin (founder of PayPal) and David Yu (then the CEO of Betfair) to invest in our seed round. Besides the credibility, it gives startup teams lots of experience to tap into for problem-solving as you grow. European startup ecosystem is maturing and startups are getting more attention from investors nowadays. Last year I invested in four #EstonianMafia startups (Supervaisor, Skyselect, Pactum, Zego) and enjoy paying it back this way and helping the current generation of founders."
Bring it on, 2020!
Cofounder of Bolt and president of Estonian Startup Leaders Club, Martin Villig expects steady growth and diversification of the sector: ‘’Startup sector keeps growing at a steady rate of 25-30% a year. To accomplish that, the regulations of the sector have to be supportive. Our startup sector has to stay open to global talent and global investors and keep working together with the legislators as we have with the new Commercial Code bill, which would attract even more foreign investors to Estonian startups. ‘’
Sten Tamkivi, CPO of Topia and Vice President of Estonian Startup Leaders Club adds, that the Estonian startup sector has never done better and the myths connected with the sector have no basis whatsoever: ‘’Estonian startup sector has reached a point where we can’t talk about it as an economic niche or a bubble. The sector is performing better than ever, but there are still opinions that the sector is burning investors money. If we look at the turnover made and the increasing amount of employment taxes paid, it is obvious that the myths have no basis.’’
As the data about the sector keeps getting more and more extensive, Startup Estonia will keep on bringing you updates from our startup ecosystem. Next up, we will dig deeper into the stats connected with our Startup Visa program in two weeks. Stay tuned!
Sources: Startup Estonia, Statistics Estonia, Estonian Tax and Customs Board, Estonian Startup Database, Funding of Estonian Tech Startups #estonianmafia
Data crunched by: Moonika Mällo (Startup Estonia)
Blogpost written by: Moonika Mällo & Sander Sillavee (Startup Estonia)
Graphs by: Kristjan Prik (MadeBY)
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