Estonian Startup Landscape in Q3 2023: The turnover of Estonian startups continues to grow, but the pace has slowed down.

Startup Estonia has launched a new website and integrated a brand-new startup sector data analytics tool – the Estonian Startup Ecosystem Platform. This new platform was crafted with Dealroom, a leading data analysis platform for high-growth companies and ecosystems. 

This fresh start comes with its share of excitement and exploration, spiced up with new features and, yes, the inevitable little glitches while moving from one database to another. November and December are our ‘getting everything just right’ months. In this phase, we’re fine-tuning data with the sector input. You might stumble upon a stray non-tech profile or one that’s missing – no worries, they’re on their way out or in. Also, all the future statistics insights will be according to the new data platform analytics, but all data about Q3 2023 was gathered based on the previous Estonian Startup Database.

The new platform is open to everyone and offers invaluable insights, from investment heatmaps to a year-on-year analysis of combined enterprise value and investment sources. This unified platform is also bridging the gap between Estonian startups and support organizations, creating a synergized value proposition unlike any other.

The Estonian Startup Ecosystem Platform will provide the Estonian startup sector with enhanced data analytics tools. Together, we’re not just building a platform – we’re crafting a community hotspot. Your feedback is our goldmine, and it will shape a comprehensive snapshot of our startup landscape, set to drop in February 2024. So, we’d love for you to have a look at Startup Estonia‘s fresh new website and dive into the Estonian Startup Ecosystem Platform, claim or create your profile, adjust and fill in useful data, and, most importantly, make it your new startup data home! All specific instructions are waiting for you at the end of the overview. 

Turnover & taxes

Based on quarterly data from the Estonian Tax and Customs Boards, Estonian startups generated a turnover of 1.69 billion EUR in the first nine months of 2023, which is an 11% increase compared to the same period in 2022 (1.52 billion EUR).  

Please note that all turnover data is published based on the quarterly data from the Estonian Tax and Customs Board and, therefore, is not comparable with the company’s financial year annual report data. 

The head of Startup Estonia, Eve Peeterson, acknowledged that difficult times in the economy are affecting the startup sector.

“Startups continue to grow, but the pace of growth has slowed down. This may not be bad because, instead of aggressive growth targets, more thorough consideration is being given to the next steps, and risks are being weighed more thoroughly, which ensures the stability and sustainability of the technology sector even in difficult times,” said Peeterson.

She added that the overall indicators are also affected by the fact that Estonian startups are becoming increasingly mature and that there have been several sales this year, which means that the indicators of these companies are no longer reflected in the startup sector statistics.

The top 20 revenue generators account for 74% of the total revenue, totaling 1.26 billion euros. The startups with the largest revenue were Bolt (904,9 million euros), Veriff (53.8 million euros), Swappie (47.8 million euros), Crezu (24.1 million euros), and Viseven (23.9 million euros). 

In the first nine months of 2023, Estonian startups paid 162,5 million euros in employment taxes, marking a 21%  increase from the same period last year when it was 134 million euros. The largest employment taxpayers were Bolt (27.3 million euros), Wise (26.1 million euros), Veriff (7.1 million euros), Monese (4.2 million euros), and Glia (3.7 million euros).

Employment

The Estonian Tax and Customs Board’s statistics show that Estonian startups employed 9,600 people locally at the end of the third quarter of 2023. This number was 9886 a year earlier, meaning the decrease in one year was 3%. 

“Startups have paid nearly a quarter more in labor taxes than last year, which points to their continuously significant and positive impact on our labor market, but it also indicates the growing pressure on wages as they try to retain existing people while also looking for cost-saving opportunities. In the current economic and political situation, it is very sensible. Startups do not differ from traditional companies, which critically review expenses during difficult times,” explained Peeterson.

A significant portion of the startup sector workforce is concentrated in the top 20 recruiters, employing 59% of all startup employees. The biggest employers among Estonian startups are still Wise (1896 employees) and Bolt (1287 employees), followed by Swappie (Eippa WSOperations OÜ) (461 employees), Veriff (307 employees), and Monese (240 employees).

Sectors

Based on the previous Estonian Startup Database, the largest sector in terms of active startups was Business Software & HR, with 265 active companies, equivalent to 17% of all startups. The 9-month turnover of Business Software & HR tallied 132,2 million euros. Startups in this sector paid a total of 18,6 million euros in employment taxes for the sector’s 914 employees. The largest contributors were Eurora Solutions (2,6 M EUR), Deel (2,5 M EUR), and Scoro (1,9 M EUR). Please note that Eurora Solutions filed for bankruptcy at the beginning of November and will not be included in statistics from Q4 and onwards.

The FinTech sector covers 13% (201 startups) of all companies in the previous Estonian Startup Database with a turnover total of 138,1  million euros (30% of startup sector). At the end of the third quarter, FinTech companies employed 2903 people and had paid 48.84 million in employment taxes during the last 9 months. The biggest employers were Wise and Monese.

The third-largest sector in terms of startups was Consumer Products & Services (181 startups), with 721 employees. The sector’s total revenue in I-III Q was 70 million euros, and employment taxes paid were 5.93 million. The largest employer was Swappie.

130 startups (8.5% of all startups in the previous Estonian Startup Database) are in the horizontal DeepTech sector. As of the end of 2023 Q3, these deep technology companies collectively employed 1504 professionals, contributing 23.3 million euros in employment taxes during the first 9 months. Notably, their combined turnover for this period reached 117.5 million euros. The most prominent employers in this sector were Milrem Robotics, with 186 employees, and STARSHIP TECHNOLOGIES, employing 162 individuals. 

Startup Visa

The Estonian Startup Visa continues to foster the growth of Estonia’s startup ecosystem, with 276 startups in the database benefitting from it. This accounts for 18% of all startups within the previous Estonian Startup Database. At the end of Q3, these startup visa-affiliated companies collectively provided employment to 388 individuals, contributing 7.3 million euros in employment taxes during the first three quarters of the year. Furthermore, these startups achieved a turnover of 77.4 million euros in the same period, underscoring the program’s continued dedication to driving sector growth. 

Funding & exits 

According to the data from the crowdsourced database and until the end of Q3 utilized Estonian Startup Database, Estonian startups have signed 45 funding deals for 147,3 million euros in the first 9 months of 2023, with 23 startups receiving funding of more than a million euros. However, when compared to the same period in 2022, there is a notable decrease in funding figures. In 2022, during the first three quarters, the total investment volume was an impressive 1.2 billion euros, involving 59 funding deals. It’s worth mentioning that 2022 was significantly impacted by Bolt’s massive 628 million euro investment round.

The largest investments in the first three quarters of 2023 were raised by Binalyze (17,7 M EUR), Funderbeam (36M EUR), RangeForce (17M EUR), Planet42 (14,1M EUR) and EFENCO (12,3M EUR). Please note Skeleton Technologies‘ investment (50M EUR) was not included in the calculation of total numbers as Skeleton Technologies is already a matured company.

The fourth quarter has also started off really well, as October and November have already brought good news with 7 big investments (over 1 M EUR), supplemented by smaller rounds.

Five acquisitions took place during the first nine months of 2023: Change, Snackable, Ignium, Autolevi, and Voog.

Summary

Estonia’s startup landscape showcases remarkable strengths with impressive turnover figures. However, the decrease in funding deals marks some of the sector’s challenges in securing and retaining substantial funding. The employment tax contribution from startups has notably increased, indicating their positive impact on the local workforce. Even though there are challenges representing the changes in a broader economic landscape, Estonian startups are adaptive and navigate the seas of sectoral and individual changes. Still one and a half months to go until the end of the year, so let’s do it! 

Instructions for making the most of the Estonian Startup Ecosystem Database

Startup and support organization experience keys:

If you are a startup or part of the wider ecosystem, claim or edit your profile, tinker with the details, and make yourself at home. If it’s yet to debut, roll out the red carpet yourself.

For a step-by-step guide, there’s a handy chatbot at the bottom right corner waiting on the homepage, ready to assist.

Full experience keys:

Our new platform is an open book (so visible to everyone) with every bit of info ready for the ecosystems’ perusal. Craving the full experience, please create an account for the full set of keys to this kingdom, including the nifty advanced filtering that lets you navigate the data sea with ease. 

Use refined filters to seamlessly decipher key trends within the Estonian Startup Ecosystem, from investment heatmaps to a year-on-year analysis of combined enterprise value and investment sources, to name just a selected few.

With a unified platform, we’re bridging the gap between Estonian startups and support organizations, creating a synergized value proposition unlike any other.

How it’s done?

The Dearoom platform streamlines and controls data collection, ensuring real-time updates with the latest algorithms/AI. No fuss, just automated perfection. See more on the platform how the data is collected: https://ecosystem.startupestonia.ee/where-the-data-comes-from

What’s Next:

Your feedback is our goldmine, and it will shape a comprehensive snapshot of our startup landscape, set to drop in February 2024. Together, we’re not just building a platform – we’re crafting a community hotspot. So, check out the Estonian Startup Ecosystem Platform and Startup Estonia‘s fresh new website, and most importantly, make it your new startup data home!

If something catches your eye or puzzles you, just drop us a line. We’re all ears and ready to perfect this journey with you and the new startup data analyzing place to be – the Estonian Startup Ecosystem Platform.

Startup Estonia connects and supports Estonian startups and develops the sectoral ecosystem. The Estonian Business and Innovation Agency implements the Startup Estonia program. SmartCap implements the activities of the Startup Estonia research accelerator. The Startup Estonia program (project number EU50651) is financed from the resources of the European Regional Development Fund.