Is Estonia Europe’s most entrepreneurial economy? Estonia ranks first in the number of startups per capita from 2011 to 2015. This country of 1.3 million people maintains consistent growth in many ways. Since its independence in 1991, with one exception in 2009 after the financial crisis. The secret to success might lie in the country’s approach to enterprise. In Estonia, it takes about 15 minutes to set up a company. In Finland, it could take months. This is just one of the moves Estonia took to motivate high rates.
At the national level, Estonian schools adopt entrepreneurship education at all earlier levels by introducing a program called “I am an Entrepreneur”. This program was launched by the energy company, Eesti Energia with the Estonian Chamber of Commerce. It targets 13–19-year-olds and aims to connect entrepreneurship education in the formal education system and in the non-formal system. There are more than 200 companies and more than 70 mentors involved in the program. In January 2017 Estonia launched a startup visa program to get more startups and employers to this growing startup hub. In the first month of the program over 50 applications came. This program’s success lies in part with Estonia’s reputation for innovation. Not only in technology development. But also in innovation on how the government passes rules and regulations to allow businesses to succeed.
One success story is TransferWise. In 2010 two Estonian friends, Kristo Käärmann and Taavet Hinrikus lived in the UK. From time to time they had to make cross-border money transfers. Kristo transferred money from Estonia to the UK and Hinrikus transferred money from the UK to Estonia while paying huge transfer costs. The potential for cheaper service in the money swap industry was found when the two friends started to pay each other’s costs. And that is how TransferWise was born. Today this money swap service firm is worth more than one billion dollars. That is a huge deal for any tech startup company. The company got investments from Sir Richard Branson. With this, he gave TransferWise even more credibility as a company.
Achievements of TransferWise
TransferWise tries to bring clarity to forex transfers around the world. And say that they take “a machete to the hefty fees that banks levy to send money across borders”.According to the TransferWise Future of Finance Report, the financial markets will look very different within a few years. Just in the past five years, the financial technology start-up companies have been innovating the finance sector. Cutting the traditional bank’s service fees and giving better service. This shook the banking sector. The future looks good for financial technology. The Guardian called TransferWise the “Robin Hood” of money trade. Not many firms that emerged from an old Soviet country have questioned the hundred years old banking sector.
But TransferWise is not the first multimillion-dollar firms that started in Estonia. The instant message and video call service provider Skype was developed in Estonia and the now Microsoft-owned. The company’s back-end development office is still situated in the capital of Estonia. Skype’s story isn’t that different from that of TransferWise. There was a clear demand for phone calls over IP and Skype answered that demand.
The success of innovative technological solutions in Estonia might lie in its history. Until 1991, Estonia was part of the Soviet Union where resources were little or gone. One of the investors in Skype, Steve Jurvetson, wondered how such a small group of people could build something so fast. It would take Microsoft much longer to develop products. Jurvetson said “I had the impression that maybe coming out of a time of Soviet occupation when computers were underpowered, you had to know how to really program, effectively, parsimoniously, being very elegant in sculpting the programming code to be tight, effective, and fast. [That’s] not like Microsoft, which has a very lazy programming environment, where programs are created that have memory leaks and all sorts of problems, that crash all the time and no one really cares – because it’s Microsoft!”.
Even Europe’s Hidden Entrepreneurs report says that “Aside from structural economic factors, the country has other drivers. First, Estonia has a long-standing history and culture of self-reliance and persistence. Stemming from living in the shadow of large, sometimes even hostile neighbors. As a result, Estonians pride themselves on the ability to be persistent and inventive, whatever the conditions. Second, in the last decade, Estonia has seen a number of success stories. These elevated views in the public eye. […] Third, Estonia is a very small country. This means that people with big goals are forced to think internationally from the start.”
Estonian technology reputation is noticed. But more and more startups come from Estonia. But there is an issue that Estonian firms face, lower salaries. In Estonia, this does not attract skilled ICT developers to meet their needs. But the Nordic countries give more salaries to skilled programmers. To overcome the challenge of getting talent from outside of the borders. The government set in motion the Estonian Entrepreneurship Growth Strategy. A plan to fix the lack of these skills by giving education in targeted fields.
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