Estonia: Tech’s New Innovation Hub

Every once in a while in this space, we talk about places turning heads with their budding entrepreneurial communities and technological innovations. Lately, Estonia is popping up on the radar screen.

Estonia, a Northern European country with the highest GDP per person among former Soviet republics, is earning a reputation as a startup country and is being pegged a viable competitor to Israel in this category. (See: Israel, Barcelona, & High-Tech Glory.)

The Baltic nation, despite being one of the least populous places in the European Union, is churning out more startups per capita than any other country in the region, according to The Wall Street Journal. {complink 5029|Skype Ltd.}, the software company that made Internet phone calls popular and now is being acquired by {complink 3426|Microsoft Corp.}, laid the groundwork for this trend and tapped into a large pool of software and hardware engineering talent.

A Soviet-era focus on sciences, military, and research certainly has helped the country recreate itself as an attractive technology center. But, according to the video below, other factors have come into play the last few years. Namely, the economic crisis has “encouraged” many people to shape alternative business ventures; the country is integrated culturally and economically with many Western companies; and citizens have an open and liberal mindset as well as a strong command of both English and Russian.

But, it's not just plugging away within its own borders. The country as a whole has wowed some European leaders. As the EU pushes its Innovation Union 2020 vision — a strategy for driving financial support for research and innovation in Europe and turning innovative ideas into products and services that create growth and jobs — European commissioner for research, innovation, and science Maire Geoghegan-Quinn earlier this month applauded Estonia for its ambitious R&D goals.

Local tech startups have grabbed the international limelight as well. For instance, GrabCAD — a CAD engineering services marketplace that started in Estonia and has relocated to Boston — has recently received venture capital funding and has gotten some love from Seedcamp, a startup incubator program that helps companies get early-stage funding.

Another Estonian company, Garage48, which organizes startup events and encourages teams working on low budgets to quickly turn ideas into working services and prototypes, is taking its local know-how to other parts of Europe and Africa.

And the Estonian Development Fund (EDF) has extended its reach and is forging a relationship with India. EDF, in conjunction with the Embassy of India in Helsinki, has launched a background study to vet Estonian-Indian business opportunities and develop a contact network to explore other possible public and private match-ups in the two countries.

So, while Estonia will likely always be too expensive to be a manufacturing hub and will have to concede those opportunities to its lower-cost Central and Eastern European neighbors, the country appears to be going after tech's more brainy, idea-generating side. And, as Estonia's tech superstar Skype has proven, it takes only one great idea to get you on the map.

6 comments on “Estonia: Tech’s New Innovation Hub

  1. AnalyzeThis
    October 5, 2011

    Really interesting article, Jennifer… I can't say I've ever thought of Estonia as a tech hub…

    But the truth is there's kind of an untapped supply of engineering talent in the former Soviet republics. While obviously many of these talents are employed, many of of them are under-utilized or have the potential to be working on more mainstream, dramatic projects.

    I think in the future we'll see more exciting companies emerging from this region. At present time, there aren't as many legitimate options for talented software engineers especially: in America, a talented software engineer/hacker will likely get snapped up by Facebook or Google. In Russia? They're more likely to be recruited by an organized crime ring to run malware scams or something.

    Anyhow, a very educational piece… thanks!

  2. DataCrunch
    October 5, 2011

    I have dealt with a number of companies from the former Soviet Bloc, specifically Romania, Ukraine, and Poland and have been pretty impressed in my dealings with them as it relates to technology acumen.  Although I haven’t directly dealt with any Estonian companies (except for being a Skype user), I am sure there are talented people and companies in Estonia and other former Soviet Republics.   Since there are many former Soviet Bloc countries, it will be a challenge for anyone country to stand out.   But no doubt there is a highly educated resource pool in that region.

  3. Anand
    October 6, 2011

    “the economic crisis has “encouraged” many people to shape alternative business ventures”

    Its is really interesting to know that economic crisis is encouraging innovation in Estonia. Crisis throws up challenges, and challenges throw up oppurtunities. I think Estonia is converting challenges posed by economic cirsis into oppurtunities. I hope other european nations also who are reeling under recession pressure will convert this crisis into oppurtunity.

  4. Jay_Bond
    October 6, 2011

    This was a very informative article, and I never thought of Estonia being a tech hub. It does make sense that this former Soviet country would be at the forefront of innovation compared to other countries in the same area. Estonia has a high GDP, they are not landlocked like a few other former soviet countries, and they are close to Helsinki and St. Petersburg.

    As you said, Estonia might be too expensive for manufacturing, but there is no shortage of young engineers and entrepreneurial minds to help this small former Soviet member become an important part of technology. If you use Skype as an example of things to come, Estonia should have no problem surviving in the tech world.


  5. Jennifer Baljko
    October 7, 2011

    Thanks everyone for posting a comment. Right, it's kind of an odd little place and doesn't necessarily conjure up the image of a tech center. But, like you said, tapping potential in unlikely places is something the electronics industry has long done. It's one of its strengths. 

  6. t.alex
    October 7, 2011

    Very interesting. I guess this is the first time i have heard of this country as a tech hub. Investments from overseas will definitely pour in. Soon to be a major alternative to Isreal.

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